Tuesday 15 January 2019

GUEST BLOG: Ground Transportation Extras: a Billion Dollar Problem

Taxis, ride hailing, and chauffeured services often fail to show the full cost of trips when travellers book. A variety of extras on top of base fares can more than double the ride cost. Plus, the soft costs of employees’ time add even more to companies’ burdens.

Ride companies know many of these hard costs, but often fail to mention them up front. When suppliers add them only at the end, travel buyers lack price certainty.

Blacklane’s analysis shows 11 hidden costs that can add well more than $1 billion to annual U.S. travel expenses.

1.      Chauffeur extras. Chauffeur companies may charge 25% - 40% above base rates for several fees. While travellers understand safety, international arrival, parking and fuel fees, these should logically be built into rides’ upfront costs. Others, such as administration, surface transportation and processing, give guests no discernible benefit. Taxes often don’t appear in price estimates either.

2.     Airport fees. Ride services may not include what local authorities charge for airport access or airport parking costs. London City Airport, for instance, charges £15 to park for 30 minutes to two hours. These can increase the costs of an airport transfer by up to 40%.

3.     Gratuities. In London, 79% of travellers tip their taxi driver, with an average gratuity of 19%.

4.     Surge pricing. A 2015 analysis of nearly 50 million UberX sessions showed that more than one in five times that a passenger considered riding, fares exceeded the base rate due to high demand. The mean surge price was a 14% increase above the base fare.

5.     Employee fraud and forgetfulness. More than half of travelling employees admitted that they round their taxi fare up by an average of 25%.

6.     Employee manual expense handling. According to the Global Business Travel Association, it takes around 20 minutes to complete an expense report. Ground transportation costs may require employees to fill in receipts, make paper copies and convert currencies. This extra time can make a taxi ride cost the company an additional 13%.

7.     Fraudulent taxi charges. In an experiment in Athens, 400 taxi passengers indirectly let drivers know that they were unfamiliar with the city. Half of them mentioned that they would need a receipt for employer reimbursement. Simply mentioning a fictitious employer who covers the ride costs increased the average fare by 6.7%, from a higher likelihood of drivers’ dishonest charging behaviour.

8.     Traveller downtime. Travellers often wait for taxis and ride-hailing vehicles to arrive and then spend unproductive time in vehicles. Combined, we estimate an additional 10% burden to companies on top of base fares.

9.     Road tolls. Some bridges, tunnels, and highways, charge tolls. The Dublin Port Tunnel, for example, costs up to €10 during peak times. We estimate that road tolls can add up to 10% to base fares.

10.    Credit card charges. Even in major markets including London, ride services add surcharges that may range from 3% to 10% of base rates to pay with credit cards.

11.    Guaranteed flat rates. To determine flat rates, chauffeur companies typically build a buffer up to 5% higher than distance-based pricing would cost.

Ride services know the extras they charge their customers. This gives them a choice: show travellers all-inclusive prices or advertise low base “rates” that hide full amounts. The majority choose the latter for at least one hidden cost, luring travellers and companies with artificially low prices.

Travellers and corporate travel managers, however, can avoid these hidden extras. By using a company with guaranteed all-inclusive fares, travellers and companies receive cost certainty, eliminate ride fraud and increase productivity.

Sascha Meskendahl, Chief Revenue Officer of Blacklane, wrote this post. The company is exhibiting its chauffeur and airport concierge services at the Business Travel Show 2019 at stand B310. For a full analysis on ground transportation hidden costs, download Blacklane’s white paper. Please register for a free visitor pass at www.businesstravelshow.com

1 comment:

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