Ground Insights

How will COVID-19 affect ground transportation - from rental cars and rideshares to high-speed rail?

Many ground transportation suppliers, from rental car companies, chauffeur-driven suppliers and taxis, to ride-sharing platforms, and other technology/mobility providers are experiencing drops in travel to as low as 95% or more versus 2019.

At the time of this writing, there is a little uptick in shuttle business bringing employees back to work in their offices as some companies have begun the transition away from working from home. Rental car companies are faring a little better than others in the ground space. In Asia, the rental car business is coming back, and in both the US and EMEA they are seeing an increase in leisure business. Rental companies are not receiving government financial support like the air industry. Some chauffeur-driven suppliers were able to benefit from the SBA and PPP, but not all. With very high fixed costs and its capital-intensive nature, the ground transportation industry cannot sustain an ongoing lack of transactional volume for an indefinite period of time, particularly with corporate travel still significantly down.

What does this mean for travel managers?

Ground transportation is one of the areas that can and should be managed as we move into the new future of travel. Corporations are looking to bring employees back to work, but public transportation (like subways and public busing systems in major cities) is not considered safe enough to protect employees' health. Most business travel via airplanes has essentially come to a halt, and depending on the different health & safety protocols adopted by the airlines, many travelers could refuse to fly for the foreseeable future. Going forward, both corporates and ground suppliers will have to share responsibility when it comes to protecting travelers from COVID-19.

Currently, companies are exploring options to help employees come back to work safely and to start opening up business travel. For employees that are transitioning from working from home back to going into the office, health and safety are likely their biggest concerns. Some employees can drive to work, but that can be expensive when parking costs and gas are figured into the total cost. In addition, many employees in major metropolitan areas may not have a car and/or travel by public transportation, so some companies are exploring bringing back employees using chauffeur-driven vehicles like shuttles and busses. However, as always, duty of care is extremely important and difficult to ensure with no industry-wide standards.

Many travelers that are starting to take business trips again and would normally fly may now opt to use ground transportation on certain city pairs that are up to 8-10 hours apart. For example, on trips between Chicago, Detroit, St. Louis, Indianapolis, and Cincinnati, or on the East Coast between New York, Washington DC, and Boston it may become more commonplace to drive your own car, get a rental car or work your way to your next destination in a chauffeur-driven vehicle with Wi-Fi.

If travelers opt for ground transportation in lieu of flying, it will have to be highly vetted - and there are many challenges when it comes to vetting. First, as of this writing, Hertz and Advantage rental cars have both declared bankruptcy. The longer the virus impacts travel volumes, the more stress will be put on the financial stability of rental car companies, chauffeur-driven companies (sedans, SUVs, busing), taxis and TNC’s such as Uber and Lyft. The chauffeur-driven segment will be rapidly changing depending on how much governmental support that the SBA and the PPP loans continue to provide to the small businesses which make up the majority of the industry. Going forward, we will likely see more bankruptcies, suppliers going out of business, and consolidation, making vetting even more challenging than it is under normal circumstances.

How can you ensure you're fulfilling Duty of Care requirements?

Deep vetting for Duty of Care and Duty of Health and Wellness is now non-negotiable. Unfortunately, it is not uncommon for economic downturns to have negative effects on supplier service and safety levels. The forecasts currently reflect that pre-COVID-19 business levels will not be seen for several years. There also may be setbacks on the road to recovery if there are new waves of COVID-19 infections that delay the opening of the economy. There are different considerations for different types of ground transportations, but your travelers need to know that you're taking every opportunity to ensure their health and safety as they get back on the road.

Deep vetting will consist of checking a supplier's financial stability, understanding their driver training process, ensuring that they are performing background checks on drivers when applicable, and now, what type of cleanliness and safety protocols they are enforcing in the wake of COVID-19. This type of vetting will not only have to be done for all existing suppliers, but also for any new suppliers you're considering adding to your ground strategy. The challenging component of this vetting is that it needs to be consistent and ongoing.

There are mobility management solutions that offer booking solutions and high-level vetting of all suppliers and verification of Duty of Care and Duty of the Health and Wellness processes. For example, GroundScope in the UK is vetting all chauffeur-driven vehicles, sedans, limos, buses, SUVs, taxis, and black cars. They are checking to ensure that drivers are wearing a mask, drivers’ temperature, and making sure the social distancing protocols are upheld. SummitQwest, based in Ohio, has similar protocols with continuous vetting on an ongoing basis, plus they also audit pricing to ensure there is no overcharging. However, it's important to also verify that these solutions and your own suppliers that they are indeed doing what they claim when it comes to cleanliness and safety protocols. Verification of the processes should be paramount to putting any traveler in a vehicle. There is no global, industry-standard, so the onus is largely on the travel manager to review the safety protocols and develop a process to verify that they are carried out on every trip.

If you do not currently have a ground component of your travel program, now is the time to source one. Many suppliers are trying to cover basic fixed costs and are willing to answer RFPs to ensure business from the coporate travel sector.

Ride-Sharing

Going forward, duty of care and duty of health and wellness will be the TNCs biggest weakness, their ability to fulfill these requirements is not currently verifiable. Our own internal survey suggests that the COVID-19 protocols are not being adhered to. As for duty of care, there is no drug and alcohol testing for drivers or fingerprint background checks. Furthermore, because they are public companies and (at some point) will have to demonstrate profitability to their investors, they will not be able to continue operating without significantly raising prices.

Rental Cars

Rental car suppliers' pricing is currently aggressive for most suppliers. It is a very good time to go to RFP. Some of the rental car suppliers may want to renegotiate existing corporate contracts. Most likely, they will look at client agreements that were under-achieving before the virus. This will be a moving target depending on how long the path to recovery takes.

Chauffers

Chauffeur-driven suppliers are still pricing business at pre-COVID-19 levels, meaning it is also a very good time to go to RFP for chauffeur-driven suppliers. Busing services are currently being hit the hardest. When sports teams start to travel again, employees begin coming back to the office (which requires shuttles & buses), or when the group travel business picks back up, there could be issues with vetting buses and or drivers. The trajectory for chauffeur-driven vehicles will depend on what the overall travel industry recovery looks like.

We may see some of these companies (particularly the TNCs) make significant changes to their business models. For example, Lyft is dabbling in rental car service in California on a very small scale and has aligned with Sixt rent a car, offering rental car services with Sixt in select markets.

Should you be shifting to rail?

The high-speed train was already gaining market share (mostly in Europe) before COVID-19 and the pandemic is likely to accelerate that trend. The train industry might well emerge stronger than it was pre-COVID-19. Here are the five reasons why you should shift to rail on routes and in markets where it's possible to do so.

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Travelers may feel safer on a train. Social distancing is easier, there is more flexibility to add capacity, block middle seats, and it is easier to move around and give each passenger the necessary space. Also, in a train, the circulation system pulls in air from outside (rather than re-circulating it throughout the cabin), and on some trains, windows can even be opened for fresh air.

Tolerance for longer trips will increase. A recent UBS study reveals that four hours may now be a widely accepted journey length for a train trip in Europe, versus two-three hours before the pandemic. In China, the acceptable trip length may even be as high as six hours.

The fare gap between air and train may increase. For the most part, the train is cheaper than flying nearly everywhere around the world. There are, of course, some exceptions, e.g. the Eurostar from Paris-London. As governments may want to push travelers to take the train, they may continue to decrease taxes. For example in Germany, VAT on the train has decreased from 19% to 7% since January 2020, while air taxes have increased - widening the fare gap between the two. We expect this trend to continue.

Countries all over the world are investing in high-speed trains. Despite already having the largest network in the world by far, with 35,000 km of high-speed train tracks, China is currently building 6,000 additional kms. Countries like Morocco, Saudi Arabia, Turkey, and Iran also have significant rail developments in the works. European countries have less investment in the sector (with the exception of Spain), yet their networks are already long and high-performing.

The train is also becoming more and more popular as a more sustainable mode of travel. On average, the train is 20 times more efficient than a flight. However, this figure is much higher in countries like Sweden, Austria and Germany, where the electricity used by high-speed trains is “clean," e.g. coming from renewable energy sources. This may be the best argument in favor of the train. Both travelers and corporates alike have started to recognize the importance of maintaining some of the sustainability gains that are a direct result of the COVID-19 pandemic, and they will likely build sustainability initiatives into their return to travel road maps.