January 7, 2021

After COVID-19, the taxi industry isn’t going anywhere. Here’s why.

Karl Schulte

If you’ve read the news at all in the last six months, you might have noticed a trend in the coverage around the taxi industry. In the eyes of the media, taxi businesses are struggling to stay afloat and on the brink of ruin. 

While COVID-19 has created significant challenges for the taxi industry, both in the US and abroad, I’ve also heard similar claims made by the media during my 30+ years of experience in the industry. Newspapers have a tendency to exaggerate certain aspects of the industry, but the reality is quite different. I’m here to tell you that the need for for-hire vehicles and taxis is bigger than ever.

Where taxi ridership is strongest

Let’s start with the facts around ridership over the past decade. 

According to industry analyst Bruce Schaller, between 2012 and 2018, the for-hire vehicle market more than tripled in size! Here’s what that looks like:

Source: Bruce Schaller

This growth has come from popular transportation network companies (TNCs) like Uber and Lyft, but Schaller’s research reveals a few important insights:

  1. “TNC ridership is highly concentrated in large, densely populated metro areas...In suburban and rural areas, however, taxis serve slightly more riders than TNCs.” (Schaller)
  2. Taxis account for 87% of trips for people without a smartphone.
  3. Taxis account for over 50% of trips for people with disabilities. This rider group also makes twice the average number of rides compared to non-disabled riders. 
Taxis account for 87% of trips for people without a smartphone.

Not only are more people booking rides with for-hire vehicle services, but there are millions of Americans who exclusively book their rides with taxis. This data suggests a strong demand for ridership in the future for taxis, and this is before we look at an ongoing trend that I think is the biggest opportunity for taxi companies for the next 30 years. 

The Big Opportunity for Taxi Companies

America’s population is getting older. The US Census has projected that American adults over 65 will outnumber children under 18 by 2034. In terms of raw numbers, that means that there will be over 70 million seniors in America by that time. 

Source: US Census Bureau

This trend is interesting because over 75% of people over 50 have never booked a TNC trip. What’s also interesting is that the number of children under 18 in the US will increase as well, just not as fast as older adults. Both of these groups will need access to for-hire transportation – one group will be too young to drive but will still need to get around, and the other group will not want to risk getting behind the wheel all the time. 

But it doesn’t mean that these riders are guaranteed. Taxi companies have to continue to focus on the timeless principles of reliability, timeliness and safety for riders, especially when they’re dealing with senior citizens. 

Taxi companies have to continue to focus on the timeless principles of reliability, timeliness and safety for riders.

Reliability

Riders want to use a taxi service when they need it, which is why reliability is important for taxi providers. Taxi companies have done a very good job of being reliable and scheduling operations around rider needs, with some of them choosing to operate 24x7. 

It’s no surprise that taxi companies have more ridership in suburban and rural areas. In my experience, the smaller the city, the longer it takes for TNCs to pick up riders because they don’t have as many drivers in their network. Since there’s no management overseeing operations for TNCs in these markets, reliability remains a constant issue that they face.

Riders also expect proactive issue resolution from their transport services. TNCs tend to be reactive with issue resolution and often adopt impersonal and automated issue resolution methods. Taxi companies, on the other hand, are proactive and resolve rider issues in a direct and personal way. More taxi providers need to take a direct and personalized customer service approach since it will continue to be a key differentiator to acquire new riders and retain them. 

Timeliness

Riders expect taxis to show up exactly when they ask for them. In my experience, that has meant arriving as quickly as possible for on-demand calls within 20 minutes or less for on-demand calls, and on time for pre-scheduled calls. 

This can be a challenge for smaller taxi providers with a fleet size of five to ten cabs. Many small providers continue to manage their operations on pen and paper and direct their fleet over the phone. 

This is where adopting a dynamic dispatch software platform can be a major advantage for providers: platforms like Mobile22 can increase fleet utilization and efficiency and reduce wait times for riders. 

Safety

Riders expect a smooth and comfortable ride every time they get in a taxi. They don’t wish to be jostled around in the backseat on account of rash and unsafe driving, and they hope that their conversations with drivers are professional. During the current COVID-19 crisis, riders also want reassurance that their health is not at risk by getting in a taxi. 

Companies need to keep all of these needs in mind when they optimize their services for safety. They should also reach out to their riders for feedback and make sure that they’re providing safety measures that riders want.

Let’s also not forget what safety in today’s context looks like.

COVID-19 is the taxi industry’s biggest challenge

I’ve seen the taxi industry go through several twists and turns over the last 30 years, but COVID-19 is another kind of challenge entirely. The media is right to fear for the future of taxi companies. 

However, companies that get through this crisis will emerge much stronger on the other side. They’ll be more resilient to fluctuations in rider demand and they’ll be able to take advantage of the growing ridership trends that I’ve discussed. 

How can companies get through the crisis? At Green Cab, we’ve adopted a few strategies that may be useful for your own operations -

  1. Reduce unnecessary capacity
    Ridership isn’t coming back to normal anytime soon. In the early days of the pandemic, we reduced our fleet capacity to 30% of normal levels. While that % has gone up, we still adjust it on a weekly basis based on what we see happening on the ground.
  2. Streamline operations
    Now is the best time to refactor your backend, upgrade your dispatch, or revamp your mobile apps. Since ridership won’t pick up for at least the next six months, you can fix or upgrade your current technologies to be more efficient, so that when rider demand returns to normal, you’ll be able to service it better than before.

    One way you can do this is by partnering with a company like Mobile22.
    They can bring you over to their platform and provide you with marketing support that you can use to attract new riders to your fleet.

  3. Add additional sources of revenue
    Taxi companies nationwide have proven resourceful and added additional revenue streams to their business like delivery and logistics. At Green Cab, we’ve partnered with over 60 businesses to handle their delivery needs. Consider adding delivery services to your business if you haven’t already to reduce your reliance on transporting people, especially during these uncertain times. 

Convinced?

If you’re a taxi owner and read this post all the way through, I hope you’re convinced that the future of driver-for-hire vehicles and taxis is bigger than ever and growing. If companies can hunker down and weather the COVID-19 storm, they’ll be able to take advantage of ongoing ridership trends in a post-COVID world. 

Taxis remain an integral part of our country’s transportation networks and they’re a key segment of a large and ever-expanding industry. It’s up to us to do our best to keep them running in our local communities.

Karl Schulte is the VP of Transportation at Zerology. He is the President of the Wisconsin Coordinated Transportation Cooperative (WCTC) and leads the COVID-19 Task Force in Wisconsin. He has over 30 years of experience in Wisconsin’s taxi industry and formerly managed operations for over 20 Wisconsin communities.

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