Uber City Pass
Last time we took a deeper look at how Uber should partner to better address the needs of travelers.
Here we’ll dig into one specific initiative: the CityPass concept, a book of fixed rides within a designated city border, geofence.
For my sake, I hope they’re listening (you too Lyft!) and my last rental car shuttle to the airport netherworld, was my last.
Problem & Background
While Uber grows in popularity, in travel there are some hurdles to faster adoption. With rental cars booked in advance, Uber is out of the running before travelers board their plane. For some airports the taxi line at baggage claim and force of habit, has Uber out of sight and out of mind.
Rental Car Bundles Shut Out Uber, for most leisure travelers rental cars (along with hotel parking, insurance, fuel, potentially tickets) are a necessary evil. For many OTA customers, the rental car decision is made months in advance of arrival to their travel destination; completely shutting out Uber as a ground transportation alternative.
Taxis Win At The Airport, despite great strides by Uber with airport pickup regulations it’s still an arena where taxis win big. At the “point of sweat” when they land, most travelers would rather walk to the taxi line, in plain sight, than fire up the Uber app and wait for a driver to navigate the airport traffic lanes for a pickup.
Hotels Account For Most of OTAs Revenue, this is a volume business and margins are shrinking. OTAs make next to nothing on airline ticket bookings (and some even have to pay to display them). The cost to display flights are a loss leader to capture Hotel bookings, alone or as bundles, where Expedia earns a booking fee and 25% commission - this accounts for 70% of revenue. All other travel services are included to ensure they’re the one-stop shop for all travel needs.
OTAs Earn Little From Rental Cars, some charge just a booking fee and others like Priceline charge 9% commission. For a $300 weekly rental, the OTA makes $27.
Ahead of the business rationale is the Must-Have User experience, the genesis of that Magical Moment which will grab new users and hold existing users; which makes Uber that addictive part of their life that they just can’t live without.
Michael is 32 and flies 5 times a year for leisure. He takes taxis to and from his home airport and usually does the same for his destination airport. For some trips where he’s exploring, he rents a car, but apart from a few day trips it usually sits in the hotel parking lot for $50/day. When he arrives to his destination airport, he turns off airplane mode, grabs his bag and then starts reading signs to find “ground transportation.” Once he’s out of the terminal, he hops in the taxi line since it’s in plain sight.
When Michael books a trip to Paris on expedia.com, he notices an Uber “City Pass” book of 10 Uber flat fee rides in the checkout flow, just above the rental cars. He thinks about the cost and hassle of renting a car, parking, and driving in an unfamiliar city and relief washes over him as he clicks the buy button for his Uber 10-pack and even schedules roundtrips to Charles de Gaulle Airport. Flights, hotel, and now ground transportation, they’re all locked in and he booked ahead and saved.
When Michael lands in Charles de Gaulle Airport, he turns off airplane mode, grabs his bags, clears customs and receives a rich notification from Uber that his driver is nearby. Michael selects force touch on his iPhone 7 and it opens the Uber app to the map so he can find his ride; moments later he’s in his Uber and on the way to his hotel. As they pass the long taxi line of exhausted tourist, he thinks “love Uber!”
First offer discounts to change behavior and change the mindset that for trips to major cities it makes more sense to use Uber CityPass over car rentals. Then continue to use offers, although less rich, to make Uber/Lyft the new norm for city travel.
lower cost than car rental: no parking fees, fuel cost, potential tickets
remove uncertainty of taxi prices (and Uber prices)
less hassle than car rental: accidents, driving stress
Pricing, Packaging, and Launch
The CityPass pricing and packaging is similar to the Uber Flat Fares, which were tested this year in select cities. The launch will take place in the same cities: Chicago, Los Angeles, Miami, New York, Boston, San Francisco, Seattle, San Diego, Washington D.C., with the addition of London and Paris. Again this is an extension of the Flat Fee test, and price adjustments will be considered after availability of more data. When compared to rental cars and hotel parking, there’s plenty of room to increase price.
Example City, San Francisco
5 pack: $5 fee to unlock $8 flat fares = $5 + $40 = $45 ($9/ride)
10 pack: $10 fee to unlock $7 fat fares = $10 + $70 = $80 ($8/ride)
20 pack: $20 fee to unlock $6 fat fares = $20 + $120 = $140 ($7/ride)
Terms and Conditions Apply
Each CityPass ride is only valid for rides totaling $30 or less, and limits may be lower in some cities. If the ride costs more than the allotted amount, riders are responsible for paying the flat fare plus whatever amount which exceeded the maximum
Uber CityPass is valid in participating cities, during the trip duration. If the trip duration exceeds 30 days, the Uber CityPass is valid for the first 30 days of the trip. Any time during the trip, additional CityPass packs can be purchased but the same initial duration applies.
Additional CityPass Purchases
If travelers use up their rides while on a trip, we’ll offer an extension to their Uber CityPass. The important point here is that we’re changing behavior and proving that they can get around a city without a rental car; that Uber is a safer, less stressful, less expensive option to renting a car while traveling. Uber does not pay Expedia a commission for these additional CityPass options since the transaction occurs through the Uber app.
In return for listing Uber CityPass flat fares in the checkout flow, above rental cars, Expedia receives the following terms:
Six month exclusive for Uber CityPass, no other OTA, Airline, Hotel, including AirBnB. Why? partnership goodwill, sometimes there are no direct metrics for a decision and there’s some work on the part of Expedia, in my experience an exclusive period smooths out potential bumps in the road to a happy partner.
10% commission on Uber CityPass packages booked through Expedia - same as rental cars (again, this is marginal revenue for Expedia).
Decisions Which Require Further Analysis
Pricing adjustments. Additional data includes a comparison of flat fares to what would have been the unbounded ride fares for these rides. For example compare the 10 pack rate ($8/ride) to what these rides would have been as normal UberX rides. Use this to adjust future pricing.
Analyze Expedia data and survey their customers to understand more about rental car and travel patterns. For example, how many Expedia travelers select rental prior to arrival?
What’s the price sensitivity and what’s the best pricing across customer segments.
Which cohorts and user segments make sense for this initiative? For example, we’ll start by not targeting the bargain traveler who books compact cars and stays outside of the city.
Rideshare companies like Uber and Lyft are addictive, habit forming forces that are changing our cities, how we think about car ownership, and moving from A to B. But there’s still one major blindspot with travel use cases. Uber and Lyft are losing at the airport and OTA partnerships offer a great way to change consumer behavior, to grow riders and rides from airports and in destination cities. Be it through referral bonuses, coupons, ads and other promotions, there’s a cost to changing consumer behavior and a City Pass concept of flat fares for travelers is a great way to offer riders inexpensive, low risk alternatives to car rentals, parking, and local cabs. Hopefully, the airport car rental shuttle, hotel parking valet lines, and shady local cabs will no longer be the travel norm.