A high percentage of the global population is stranded at home under a lockdown.

Most industries are badly affected and global economies have slowed down.

Severe restrictions have brought nearly all travel to a standstill.

It’s no surprise that Travel, Hospitality, and Ride-Hailing industries are the hardest hit by the COVID-19 crisis.

Baring a few examples, most of the ride-hailing companies depend on the transit of people for their revenue stream, and movement restrictions globally have become a stress test for the sector to manage their OpEx. 

Some of the key factors that have impacted the ride-hailing economy are:

• Big cities, which form the bulk of business for ride-hailing companies, have seen the biggest decrease in business on account of lockdown.
• Air travel ban, both, international and domestic, has dried up demand for ride-sharing.
• Organizations across the globe are enabling work from home or leaves for employees. Office commute forms the biggest chunk of the ride-hailing business.
• In certain geographies, ride-hailing companies and drivers attached to ride-hailing platforms preferred to stay off road to avoid the possibility of infection

The impact has been a multi-layered one for the sector, from laying off internal employees, temporarily suspending driver contracts, to off-loading business portfolios in an effort to generate cash, and exiting from geographies that may see an L shaped recovery.

What the future looks like

The road ahead will not be limited to coping up with the current crisis and its impact – the industry will have to look at the situation from a futuristic perspective. The segment will see a slower ‘business as usual’ phase due to travelers’ lack of confidence in using ride-share even post COVID. 

Some of the challenges that the ride-hailing industry will have to address are: 

• Pressure on liquidity and earnings
• Dependence on single avenue of income
• Driver-Partner fulfillment disruption
• Demand for change in policy and regulations 
• Pressure on marketing spend

To negate the immediate impact and to sustain cash flows, ride-hailing companies are looking at diversifying their lines of business, with the leaders already having a foot in the door in the food delivery business. They are using the opportunity to expand their portfolio, and entering into the last mile delivery of essentials by onboarding corner shops and forming tie-ups with e-commerce platforms. 

Some of the measures or developments that will address the three main operational parameters. i.e. new revenue streams, change in policy and regulations, and driver-partner fulfillment for ride-hailing will be:

• New partnership models between e-commerce and ride-hailing for intra-city same-day delivery services 
• Security schemes for driver-partners with broader cooperation between the platform companies and the regional authorities 
• Increase in investments and need to speed development for autonomous vehicles programs

Reinventing is the key

While the technology companies behind the ride-hailing economy have always been prompt and proactive, and living truly by their reputation of being disruptors, the challenge they face is not being profitable even in ‘business as usual’ scenarios. Most companies are in an infant phase with an average tenure of not more than 3-4 years, facing increasing pressure from investors. 

The road to recovery is a ‘U’ curve for the ride-hailing economy. Organizations need to relook their business strategies from an outside-in perspective by addressing the core business operations’ needs. They need to rebrand themselves as ‘Convenience as a Service’ providers by expanding their business portfolios through services that touch the consumer’s changing needs.

It’s time they also revalidate their efforts on non-core business support functions. What that means is, they should look at offloading non-core business KPIs to 3rd party specialist service providers through long term strategic partnerships. Only then, the journey to being ‘profitable’ will be less bumpy for the ride-hailing economy.

Raj Gaikwad
Solutions Manager for Consumer Business Unit at Digital Operations and Platforms in Wipro

Raj Gaikwad is a Solutions Manager for Consumer Business Unit at Digital Operations and Platforms in Wipro. He has more than 14 years of diverse experience working in the outsourcing industry and specializes in creating winning solutions for clients in Travel, Hospitality and Public Sector vertical.