The Road to Profitable Ride-hailing
February 21, 2020 | Company Blog
Peer-to-peer ridehailing services took the mobility world by storm when they arrived in cities, delighting customers with a convenient, inexpensive way to get around. While popular and growing, the services are notoriously unprofitable for the businesses operating them, and increasingly for drivers also. This is due in part to the inefficiency of the peer-to-peer model — it floods cities with vehicles so that a convenient ride is always at hand. As a result, vehicles are empty most of the time, frustrating cities with clogged streets and leaving drivers to compete with one another for travelers.
Is it possible to remedy this with a business that can satisfy both drivers and travelers? It is, with fleet orchestration that dynamically balances supply and demand to make sure that vehicles are utilized such that empty miles are minimized, and that drivers receive a fair wage. Getting there requires overcoming some important challenges and Bestmile, with our fleet orchestration platform, has helped upstart ridehailing service deliver profitable services using professional drivers and private fleets. Here are three key challenges that must be overcome.
Critical to profitable ridehailing is the balance of supply and demand. It all starts with service design, which involves using realistic demand data to accurately determine the fleet size, locations, capacities, and schedules that will meet defined metrics for vehicle/driver utilization. Getting service design right in advance of deployment shortens the road to profitability.
Carrying more paying customers per vehicle increases utilization and revenue. Offering a positive passenger experience will drive adoption. This means providing accurate pickup times, ride times, and wait times. Balancing the tradeoffs between trip convenience and vehicle utilization is tricky. Understanding the acceptable passenger experience outcomes that will maximize revenue per vehicle also accelerates profitability.
Peer-to-peer ridehailing companies have been called software companies, not mobility companies because they don’t own vehicles. Whether mobility providers can or want to develop their own software for all or part of a ridehailing business is important to determine.
Are any mobility providers delivering the kind of services that answers these challenges with paid drivers and a private fleet without breaking the bank? Yes. U.S.-based Alto offers just that in Dallas, Texas. The founders realized that safety is a key factor in peoples’ mobility choices and decided to use professional drivers and 5-star safety-rated vehicles as a competitive advantage. Alto used Bestmile’s Fleet Orchestration Platform to design the service and to continue to optimize the service as it grows. Launched in early 2019, Alto has delivered more than 100,000 rides and recently announced plans to expand into additional cities in Texas and California.
Fleet orchestration is the key to Alto’s efficiency. The Bestmile Platform receives ride requests in real time, sends missions to drivers based on the optimal vehicle location within set criteria for ride times and wait times, while taking into account future demand based on historical and real time data. The platform also includes optional customizable driver and traveler mobile apps and a dashboard for fleet monitoring. Alto decided to develop its own mobile booking and payment app, using Bestmile’s Booking API, in order to offer value-added features — passengers can select the music, temperature, desired conversation level — what Alto calls the “vibe.”
Most importantly, the operations of Alto are profitable. While the company invests heavily in marketing and in expansion, on a per ride basis it makes money, which is attracting more investment, enabling the service to grow even faster.