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The Uber-effect: The rise of and risks for travel spend.

BlogCategory managementTravel and FleetTravel and leisure+-

When it comes to cost effectiveness of business travel finding the right price is essential. With an influx of cheaper methods of transport becoming available it seems only inevitable that business travellers and their companies will look to take advantage of those lower prices offered by the likes of Uber and Airbnb. If a business can find a more cost effective option, then surely it goes without saying that it would be swiftly be adopted? Well, that still depends on a number of different factors, not least of which is risk.

Uber is a company that has not been without controversy with concerns raised about its alleged ‘dirty tactics', the legality of its app and its use of surge pricing at peak hours.

But, it isn't just these factors that need to be considered. Insurance is another grey area and questions need to be asked around how far are employees or the business protected?

Saying all this though, Uber is such a popular service among the general public that it is certain to filter over into business use even if that comes outside of pre-arranged travel contracts. To get on top of that potential area of maverick spend, procurement must address this issue right away.

Indeed, a recent study by Certify, a software analysis company, found that in the first quarter of 2016, 46% of all ground transportation transactions for business travellers were for ride-hailing services, compared with 40% for car rentals and 14% for taxis. A clear indication of just how popular companies like Uber and their rivals are becoming in the corporate travel space.

Uber itself does have a corporate arm, which carries out background checks, car inspections and has a commercial liability insurance in place, which should help ease some fears.

But, procurement executives should also keep an eye on the next moves made by Uber's more traditional rivals.

There is no doubt that statistics currently look pretty worrying for traditional cabbies. For example, the OC Register, which looks at taxi statistics in the Orange County, California, found that before Uber and Lyft sprung up in 2013, there were 1,576 cabbies registered through the Orange County Taxi Administration Program. That number has since dropped to fewer than 800 drivers, the lowest count locally in a decade.

To survive they will be forced to evolve and that could mean either lower fares or them spotting a gap in the market that Uber may have missed. If they don't, they will be sure to die off but if they do then business travellers and travel category managers could see cheaper fares for some time to come.

Sophie Dyer
Posted by Sophie Dyer

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