Innovation and reprioritisation will help ride-hailing service providers weather the Covid-19 crisis

After a challenging 2020, ride hailing services are unlikely to get much respite in 2021. Credit: Snapic_PhotoProduction / Shutterstock.

The Covid-19 pandemic has caused significant problems for ride-hailing service providers worldwide. With many countries still in extended lockdown and the global economy at a standstill, companies like Uber, Lyft, and Grab have seen bookings drop sharply. For example, in Q3 2020, Uber’s bookings were down by 53% from the same period of the previous year. With performance is expected to improve gradually in 2021, these firms will continue to face several pressing issues. To navigate the current crisis, they must examine their business models and capabilities and ensure they are relevant to the changing market.

Reduced demand for transportation is a concerning factor for ride-hailing service providers

One of the biggest impacts of Covid-19 on consumer behavior has been the reduced need for on-road transport due to widespread lockdowns and fear of contracting and spreading the virus when using mass transit services.

The global tourism industry has been hit hard by the international travel restrictions put in place to combat the spread of Covid-19. According to the United Nations World Tourism Organization’s (UNWTO) World Tourism Barometer, international arrivals declined by 74% in 2020, mainly due to low virus containment, low traveler confidence, and travel restrictions.

A shift from their core business model will help ride-hailing companies survive

Companies like Uber and Grab have been working to offset their core taxi business’s collapse by increasing their on-demand delivery operations, including food and grocery deliveries. Uber’s food delivery business increased gross bookings by 135% year-on-year in Q3 2020 and is one of the fastest-growing food delivery businesses globally (excluding China).

The pandemic has forced industry players to either halt or reprioritise technology investments such as autonomous driving. For example, Uber sold Advanced Technologies Group, its self-driving business unit, to Aurora Innovation in December 2020. This type of reprioritisation allows companies to focus on their core business and reduce R&D costs.

Embracing sustainable ways to manage shared mobility is paramount

After a challenging 2020, ride hailing services are unlikely to get much respite in 2021. While larger firms will take the brunt of the impact, these firms will shift their business model from core taxi operations to other on-demand delivery services. They will also be cheered by the news that 70% of all global destinations have eased Covid-related travel restrictions, according to the eighth edition of the UNWTO Covid-19 Related Travel Restrictions report, published in December 2020. UNWTO chief Zurab Pololikashvili predicts that global tourism will rebound in the third quarter of 2021.

The gradual reopening of cities worldwide will boost economic recovery and should improve bookings for ride-hailing companies. Similarly, the easing of travel restrictions and ride-hailing companies’ commitment to making passenger commutes safer will ensure steady growth of on-demand transportation in 2021.

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