Ground Monitor 2019

GROUND MONITOR REPORT Global Business

Consulting WELCOME TO THE GROUND MONITOR 2019

This report, analyzing the factors that WHO WE ARE will impact how you buy ground transport services, is produced by the American Express Global Business Travel and Expense (T&E) Global Business Consulting team at Travel (GBT) is the world’s leading Management: American Express Global Business business partner for managed travel. Analyzing and benchmarking clients’ Travel (GBT). It is one of a series The Global Business Consulting (GBC) T&E processes. Managing T&E projects designed by our consultants and team at GBT works with companies and related to online booking tools, expense analysts to help you optimize your organizations to help them create travel environments, card payment solutions, travel policy and program. programs tailored to achieve specific integration between client systems and The team has analyzed seven years of goals. Our extensive capabilities and GBT systems. Optimizing the T&E GBT car rental data, combining it with results-oriented approach allow us to environment based on agreed KPIs, key macroeconomic variables including build and implement strategies that supporting clients with maintenance of local GDP, inflation, and employment streamline processes, deliver savings, T&E tools. rates to predict how car rental costs will improve compliance and reduce risk. evolve into 2020. Business Intelligence (BI) We base our approach around six and Data Advisory: To complement the car rental rate strategic consulting solutions that help modeling, GBT experts around the Providing differentiated insight plus clients implement a best-in-class travel world have contributed insights on local actionable recommendations by management program: factors, including regulatory issues, analyzing client travel behavior and that affect how you source ground performance using GBC’s proprietary Supplier Management – Air, transport. The local view includes analytics, GBT’s rich supply of T&E Accommodation, Ground Transport: information on topics including data, and powerful BI and visualization rideshare and rail, where relevant. As Targeted analytics to evaluate your tools. Through data advisory, we can well as impacting cost, these factors travel program with KPI (key help you to make informed decisions in will have implications for the traveler performance indicator) reviews of your your travel management activities. We experience and for how you fulfill duty supplier contract management, travel utilize the datasets available to us to of care obligations to your travelers. spend, traveler behaviors, compliance identify behavioral trends, enhance and more. traveler experience and generate Traditionally, ground has not always savings, delivering value throughout featured fully as part of managed travel Change Management: the organization. programs. By offering insights into Advising on strategy, predictive analysis ground providers and a global basis for of impacts linked to expected changes, GBC Travel Program Management: making price comparisons, this report communication, program design and Clients benefit from an experienced, is designed to help you take a more training plans. Piloting implementation single point of contact to provide a strategic approach to buying ground of change programs, including holistic, strategic approach; driving transport. Additionally, the price organization, technology and processes. day-to-day activities with project predictions will support your ownership, operational support, conversations with suppliers. Program and Process Optimization, escalation management and process Policy Design and Review: The Ground Monitor concludes with five improvement, deploying savings considerations for travel buyers, aimed Assessment and benchmarking of opportunities and efficiency initiatives. at helping them incorporate ground deployed end-to-end travel processes, within their managed programs. Given including mission order, booking, For more information, visit: the diverse and particular nature of validation process and accounting https://www. ground, one report cannot cover all the interface. Project management and amexglobalbusinesstravel.com/ specifics as they affect your business. integration support when implementing corporate-travel-services/global- For strategic advice, configured for your new technology solutions, such as business-consulting/ travel program, please get in touch with single sign-on and HR feeds. our Global Business Consulting team.

Joakim Johansson Vice President, Global Business Consulting

2 AMERICAN EXPRESS GLOBAL BUSINESS TRAVEL GROUND MONITOR REPORT 3 Managing Global Trends in Ground

Unlike air and hotel spend, ground transportation is often overlooked. But it’s a sector on which travel buyers need to keep a watchful eye – not least to keep up with their travelers.

Ground is one of the most innovative Making ride-hail part of the program Mobility is a moving target and fast-evolving areas in travel, with Travelers are increasingly making Innovation defines the dynamic ground disruptive new platforms and players app-based ground transport, such as transport sector – but regulation plays emerging all the time, from almost ride-hail, car clubs and ride share, part an increasing role. Around the globe, every corner of the world. It accounts of their travel toolkit. Corporations have local authorities have tightened legal for a significant – and less visible – kept pace with traveler behavior by controls over ride-hail providers. Higher ‘‘proportion of corporate travel budgets. including ride-hail services, such as fares are the immediate consequence. Lyft, Uber and Didi Chuxing, in policy. In Most business trips begin and end with GBT’s experience, many corporations In the longer term, regulatory concerns ground segments: it’s a core part of the allow travelers to use approved ride-hail about congestion and the environment traveler experience. And it’s a sector in services, but do not mandate their use. will drive innovation in the direction of which the traveler is increasingly setting green transportation technologies. the agenda. As they become comfortable with Hundreds of cities across the world ride-share, it is likely corporations will operate congestion charging and low Car rental rates steady move rapidly to allow the use of other emission zone schemes, which have Car rentals are a major focus for app-based services. Car clubs offer spurred the introduction of low and Ground Monitor 2019: this remains a tremendous flexibility: a driver can pick ultra-low emission vehicles, key topic of interest for GBT clients. The up a car and use it for a period as short autonomous vehicles and bicycle-share Monitor’s predictive model draws on as 30 minutes. Another factor that will schemes. Over time, Mobility as a seven years of client data to generate spur adoption: car clubs are often Service (MaaS) platforms will emerge price forecasts. backed by big car rental companies. to allow travelers to easily manage the These companies have brands, systems growing set of ground services from Looking at the price forecasts, and and interfaces that are familiar to travel their smartphones, from ride-hail and combining them with insights from GBT buyers. The car rental companies electric scooters to local rail services. subject matter experts, the traditional already pitch their fleet management car rental model appears to be under propositions to travel buyers. Will travel buyers embrace MaaS? As pressure across much of the world. Integrating car clubs into the program with ride-hail, this is a decision likely to Costs are rising but the car rental does not feel like a big step. be driven by travelers. The best companies are restricted in their ability outcome for the program – in terms of to respond by raising rates: Ride share may be a less attractive productive, happy and safe travelers overcapacity – and competition proposition for travel buyers. Traveler – will be for buyers to provide the between the rental companies – means safety is one area of concern; privacy is required policy and safety rules. there is little scope to push up Average another, particularly where travelers Daily Rates (ADRs). need to talk business or take part in calls while on the move. As with the adoption of ride-hail, this may be an area in which travelers lead and the corporation ends up following while finding ways to manage the situation.

4 AMERICAN EXPRESS GLOBAL BUSINESS TRAVEL GROUND MONITOR REPORT 5 Argentina Chile LATIN AND Following almost two years of With solid domestic demand and Americas CENTRAL AMERICA recession, modest economic growth is renewed activity in the mining sector, expected to return to Argentina later in Chile is projected to continue its strong The big story for Latin 2019.3 The shallow recovery will see car growth to 2020.5 Despite rising demand, and Central America is rental rates largely remain stable, with strong competition between the ride-hail. Across the predicted growth of less than 1%. international brands and home-grown region, ride-hail companies are car rental companies should keep rates experiencing double-digit Challenging driver conditions make stable through 2019 and into 2020. Canada growth. Providing convenient NORTH AMERICA ride-hail an attractive option for The Organization for Economic Ride-hail is flourishing, as indicated by and affordable mobility in international business travelers. The As elsewhere, ride-hail has grown Cooperation and Development (OECD) Lyft’s $24 billion valuation in its March countries that often suffer from sector has grown strongly. In 2018, rapidly in recent years. Intense After almost a decade predicts economic expansion of just 2019 initial public offering. However, poor or overcrowded Argentina became Uber’s fastest competition between providers, of low-to-no growth, car under 2% for Canada in 2019.1 This one decade on from the launch of Uber, infrastructure, they offer an growing territory in the world. Looking including global players like Uber and rental providers in North modest growth means car rental the industry is under increasing attractive option for ahead, regulation may push up fares, Cabify, has reduced scope for fare America are experiencing rising companies, despite facing rising fleet regulatory scrutiny, which is putting international business travelers but the sector will continue to grow. rises. This may change following the demand. Costs are rising, too, and labor costs, are unlikely to be able upward pressure on prices. Initiatives who do not want to rent and introduction of tighter licensing as new technology and safety to put up ADRs more than 1%. coming into force in New York in the drive themselves. controls for ride-hail drivers, introduced features – such as rear Brazil first months of 2019 included a $2.75 by the government in 2018 in response cameras, sensors and collision- Economic growth, driven by household Ride-hailing options will at last become congestion fee for pick-ups in the As the ride-hail sector to protests by taxi driver unions. consumption, should gain momentum prevention automatic breaking available across Canada by Q4 2019, busiest areas of Manhattan and a continues to expand, fares are through 2019.4 The tourism sector, an – make cars more expensive to following a decision by the government minimum wage rule for ride-hail drivers. expected to remain stable important driver for car rental rates, will Mexico buy and maintain. Travel buyers of British Columbia late last year to through 2019 and into 2020. In the face of regulatory challenges, underperform as visitors are deterred Several factors suggest that car rental can expect modest rate rises as allow ride-hailing companies to operate One area to watch: increased ride-hail companies continue to by political uncertainty and high crime rates should rise strongly. The OECD car rental companies seek to in the province. regulation may push fares up in innovate. In the last year, Lyft and Uber pass on these costs. the longer term. rates. Overall, rates are predicted to predicts the economy will grow by introduced loyalty programs to rise by only 0.75%. almost 3% by 2020.6 Inbound tourism, United States personally reward frequent corporate often a key influence on car rental rates, Intermediate cars – larger than In some countries, safety Given the congestion and difficulties US car rental companies are thriving riders. MaaS is another area of interest is healthy: Mexico is the region’s top a compact and smaller than a concerns could mean parking in cities, many business despite ongoing disruption in the for these firms. Lyft, for example, rolled destination for US tourists and is receiving standard – are the predominant corporations may want to limit travelers to Brazil will prefer to use ground transport industry. The sector out a multimodal transportation app in record levels of visitors. However, the car rental type in North ground transportation options ride-hail services rather than rent a car. achieved record revenues of $30 billion a handful of US cities that allows dominance of lower cost suppliers that America, suggesting that to vetted chauffeured services. Competition between the four major in 2018.2 This year looks to be travelers to request a shared car, find a business travelers are using players in the ride-hail sector (Uber, 99, operate with tight profit margins should profitable, despite slowing GDP growth scooter or bike, as well as see nearby these vehicles for longer Easy Taxi and Cabify) should restrain keep cost increases to a minimum. restricting the rental car companies’ public transit options. distance driving. fare rises. ability to push up rates. As elsewhere in Latin America, ride-hail For trips within cities, ride-hail is an important option for business is a popular option, and volumes travelers. The sector is very competitive continue to rise across North in Mexico with the world’s biggest players America. However, the sector’s – namely Uber and China’s Didi Chuxing expansion is meeting – squaring up against each other. opposition from traditional taxis, leading to increased regulation and higher fares.

Car rental rate forecast change (%)

-1% -0.5% 0 +0.25% +0.5% +0.75% +1%

Canada +1%

United States +1%

Argentina +0.75%

0 Brazil +0.75%

Chile +0.75%

Mexico +0.75%

Source: Global Business Consulting.

6 AMERICAN EXPRESS GLOBAL BUSINESS TRAVEL GROUND MONITOR REPORT 7 Spain United Kingdom AFRICA AND Despite forecasts for moderate Modest growth is predicted for the UK THE MIDDLE EAST economic growth, car rental companies economy through 2019, as Brexit South Africa will not be able to raise rates.12 For one, uncertainty and concerns about global the rental sector in Spain is driven by economic prospects weigh on Car rental rates in South Africa are Europe, forecast to rise by 2% though 2019 and leisure, so changes in business activity forecasts. Costs will rise for car rental have less impact on prices than companies as Vehicle Excise Duty rises into 2020, outpacing predicted elsewhere. The industry is highly again, limiting the scope to cut rates economic growth over this period. competitive, featuring the major global beyond the forecasted 0.5%. Middle East & Africa brands plus numerous local players. The ride-hail sector is flourishing in There is also an excess of capacity, The ride-hail sector received a boost in South Africa, with homegrown following a period where the rental 2018 when the courts overturned the platforms emerging to challenge the players renewed and expanded their Mayor of London’s suspension on Uber. global brands such as Uber. Prompted fleets. Together, these factors suggest by concerns about passenger and EUROPE Other UK cities were waiting on the that rates will fall by 2.5%. outcome of the trial before deciding driver safety, ride-hail platforms how they would treat ride-hail services in released security alarm and incident Europe’s car rental Enterprise CarShare. They also try to Ride-hail options are available across their jurisdictions. Car clubs, such as reporting features last year. companies are contending persuade companies to outsource Europe: as is the case elsewhere, London’s Zipcar, have operated in the UK with rising fleet and fleet management to them. these disruptive providers are since 2000. With rental by the hour and United Arab Emirates maintenance costs, driven by the getting more attention from the ability to return cars to any rental bay, The UAE economy is predicted to increasing technological Despite Europe’s excellent railway regulators and this could lead to car clubs offer flexibility and convenience. maintain a healthy growth rate sophistication of cars and network, cars remain central to higher fares. approaching 4%, driven by the active tightening environmental rules. ground transport. Business business and tourism sectors. However, Operating on tight margins, these travelers, however, may use them in Looking ahead, disruption will car rental firms will not be able to companies want to increase different ways, influenced by continue to define the ground sector, increase rates. For one, a period of fleet ADRs. However, with an economic increasingly complex environment underlined by rival auto manufacturers expansion means there is excess slowdown predicted for Europe, schemes that differ from one city to Daimler and BMW teaming up to capacity in the country. The rise of rates are forecast to decline the next. Rather than rent at origin launch a $1 billion mobility ride-share players eCar and uDrive is slightly in most countries.7 and drive into a city, business partnership to explore ridesharing, further dampening prices. Finally, travelers may prefer to travel by train charging and parking services. softening in the important oil and gas Seeking new revenue streams, car and rent a car that complies with sectors0 means rates are forecast to fall rental companies are increasingly local regulations at their destination. by a decisive 3.5%.Signaling the combining classic rentals with car longer-term growth potential for sharing: examples include ride-hail in the Middle East, Uber offerings such as Sixt Share or recently acquired regional leader Careem for a $3.1 billion.

Car rental rate forecast change (%) Benelux Germany Nordics -5% -4% -3% -2% -1% 0 +1% +2% +3% +4% +5% Growth slowed across Belgium and the With the economy slowing, it is perhaps The Nordics region is set for solid Netherlands in 2018 and is predicted to not surprising that car rental rates in growth through 2019 into 2020, though Belgium remain sluggish through 2019.8 Car Germany are predicted to decline by the rate of expansion is predicted to -4.5% rental companies in this region face the 1.5% through 2019 and into 2020.10 moderate in Norway as the boost from France +1% same upwards cost pressures as Another dampener on rates in Germany 2018’s oil price rises diminishes.11 elsewhere. However, the economic is the strong competition between Despite a positive economic picture, car Germany -1.5% background – and competition from rental car companies, including big rental rates are forecast to decline other modes of transport, including rail global brands such as Europcar and slightly, by 2% in Norway and 1% in Italy -2% and ride-hail – means rental rates are Hertz. To drive up revenue, providers Sweden, as corporates migrate to predicted to fall by 4.5% in Belgium and are upgrading their fleets by adding alternative modes of transport. Netherlands -2.5% by 2.5% in the Netherlands. premium models, such as SUVs and automatics. Look out for new Acriss The strong sustainability culture found Norway -1% France codes – with higher prices – and in many Nordics-based companies may increased location surcharges at influence some business travelers to Following almost two years of Spain -2.5% airports and railway stations. adopt services like car clubs and slowdown, government reforms are carpooling. This focus on % gaining traction and the economy is Sweden -1 With low margins on traditional rentals, sustainability is also likely to see growing.9 Car rental rates in France will rental firms are moving into corporate Nordic companies among the leaders in United Kingdom % be stable, predicted to rise by only 1%. -0.5 mobility, an example being Sixt’s the adoption of MaaS. The growing popularity of car club corporate car-sharing services. Switzerland +2.5% services such as Zipcar and carpooling services including BlaBlaCar will impact South Africa +2% the ability of car rental firms to push up prices significantly. United Arab Emirates -3.5%

Source: Global Business Consulting.

8 AMERICAN EXPRESS GLOBAL BUSINESS TRAVEL GROUND MONITOR REPORT 9 Asia Pacific

China India ASIA Economic growth is expected to slow India’s fast-growing economy, with the through 2019, hit by weakening IMF predicting GDP to expand 7.5% in The Ground Monitor does domestic demand and exports being hit 2019, will drive demand for business not provide car rental by US tariffs.13 However, GDP will still travel.14 As with China, visitors will tend rate forecasts for China expand in excess of 6%, stimulating to rent chauffeur-driven cars from big and India. There is not sufficient demand for business travel. Car rental brands, including Avis and Hertz, rather data to support the analysis due is not part of the business traveler’s than attempt to drive themselves. to the prevalence of chauffeur experience: visitors to China are drive and ride-hail in these deterred by difficult driving conditions, India’s major cities have fast-developing countries. Instead, the Ground large distances and unfamiliar signage. metro rail systems but business Monitor offers observations on For intercity journeys, China’s high- travelers tend to prefer using ride-hail how ground transport is speed rail network offers a strong services. This sector has expanded developing in China and India, alternative. Within urban areas, rapidly, grown by rising demand for and what it means for travel ride-hailing is a safe and convenient transport and the relatively poor state buyers and business travelers. option. China has the world’s biggest of much of the urban transport ride-hailing sector, led by Didi Chuxing. infrastructure. Competition between Concerns about passenger safety led to large providers Ola and Uber, and local the introduction of inspections and car service providers, keeps fares low. tighter licensing of drivers and vehicles. Ride share is not prevalent on account of safety concerns. China is a laboratory for ground Australia transport innovation, with a While the OECD forecasts robust combination of factors – including growth for the Australian economy congested roads, concerns about overall, car rental rates are predicted to pollution, massive demand for fall by 1.5%.15 The mining industry has a transport and high smartphone strong influence on rental rates in penetration – spurring experimentation. Australia: changes in productivity The country hosts a large number of quickly feed through to demand and digitally-enabled mobility start-ups, price, and this effect is felt especially including ride-hail, bike-sharing and strongly in the mining communities of ride-sharing companies. New South Wales, Queensland and

Western Australia. 0

Ride-hail is an important ground transport option in Australia, with many corporations allowing this in policy. Car clubs, allowing drivers to rent a vehicle for a period as short as 30 minutes, are an increasingly popular mobility option for business users. Responding to well-established local services like GoGet, the global car rental brands have introduced car clubs at their locations in major cities.

Car rental rate forecast change (%)

-2% -1.5% -1% -0.5% 0 +0.5% +1% +1.5% +2%

Australia -1.5%

Source: Global Business Consulting.

10 AMERICAN EXPRESS GLOBAL BUSINESS TRAVEL GROUND MONITOR REPORT 11 Bringing ground The into the program Methodology

Optimizing your ground program: top tips and best practices

Ground transportation is a core • Rental cars remain central to Forecasting requires a lot of good data. component of the travel experience, but ground transportation. Travel In the ground transport sector, where few corporations today include ground in buyers should monitor spend for many local factors influence the their managed program. Ground Monitor ancillaries and on-top costs (for availability and cost of transport 2019 concludes with five considerations example, refueling or damage options, the specialist knowledge of to help travel buyers take a more waivers) and agree with rental car subject matter experts is also required. strategic approach to ground. suppliers that restrictions are in place: everything should already For the car rental rate predictions, GBT be included in the agreement. built up a data picture from the • Ground is an afterthought for many Buyers should meet regularly with city-level, aggregated to the country programs, but it makes a big impact key suppliers to ensure they are level, and specified one car type on travel buyers and travelers. fully informed about changes in (economy / standard), priced in local For one, ground is complex: fleet, service and technology, and currencies, so the data is stable enough while air, for example, is globally understand how any changes will for statistical forecast. standardized, ground is local. impact their program. Travelers have a lot of autonomy The GBT model used seven years of when it comes to arranging ground • More ground options become GBT’s own aggregated car hire data. transportation, which means a available all the time. Travel buyers Macroeconomic variables, including lot of this spend is invisible. This need to be ready to include new local GDP, inflation and rate of autonomy can also make ground modes in policy and to merge employment were also factored into stressful for the traveler: in an or combine different products the model. unfamiliar city, getting a taxi from (for example, rental car and fleet the airport to downtown can be an management). Adjustments in Predictions generated by the model ordeal. A managed approach to procurement could be required: were then reviewed and adjusted by ground will mean more visibility on inventory that is currently managed GBT experts around the globe. These costs, better value for money and by different buyers may in future be experts also provided additional insights improved travel experiences. included in one tender. into local factors that may impact traveler and travel buyer choices. • The ground sections of any trip • Travelers tend to take the lead can pose significant risks to the when it comes to ground. In a traveler. Almost 1.25 million people fast-evolving sector, travel buyers die in road traffic accidents every need to keep a close eye on traveler year, and tens of millions more are behavior so they are not caught on injured. 16 Travelers are also more the back foot when travelers adopt at risk from theft and assault when a new mode or mobility platform. using ground versus other modes. Today, that could mean car clubs or There are compelling traveler safety e-scooters. Looking ahead, it may reasons for buyers to make ground entail adopting a MaaS platform. part of their program.

For more advice on how travel buyers can optimize ground transportation in their managed program, please get in touch with GBT’s Global Business Consulting team.

12 AMERICAN EXPRESS GLOBAL BUSINESS TRAVEL GROUND MONITOR REPORT 13 ABOUT AMERICAN EXPRESS References:

GLOBAL BUSINESS TRAVEL 1. Canada – Economic forecast summary (November 2018). Organization American Express Global Business Travel (GBT) is the world’s leading for Economic Co-operation and Development (OECD). business partner for managed travel. We help companies and their 2. 2018 Revenue, Cars in Service Snapshot. Auto Rental News. employees prosper by making sure travelers are present where and when it 3. Argentina – Economic forecast summary (November 2018). OECD. matters. We keep global business moving with the powerful backing of 4. Brazil – Economic forecast summary (November 2018). OECD. 17,000 travel professionals in more than 140 countries. Companies of all 5. Chile – Economic forecast summary (November 2018). OECD. sizes, and in all places, rely on GBT to provide travel management services, 6. Mexico – Economic forecast summary (November 2018). OECD. organize meetings and events, and deliver business travel consulting. 7. Europe Economic Forecast. Winter 2019. European Commission. 8. Belgium – Economic forecast summary. OECD (November 2018) Learn more at amexglobalbusinesstravel.com Netherlands – Economic forecast summary. OECD (November 2018). 9. France – Economic forecast summary. OECD (November 2018). American Express Global Business Travel (GBT) is a joint venture that is not 10. Germany – Economic forecast summary. OECD (November 2018). wholly owned by American Express Company or any of its subsidiaries 11. Norway – Economic forecast summary. OECD (November 2018). (American Express). “American Express Global Business Travel,” “American Sweden – Economic forecast summary. OECD (November 2018). Express” and the American Express logo are trademarks of American 12. Spain – Economic forecast summary. OECD (November 2018). Express and are used under limited license. 13. China’s growth set to slow to 6.3 percent in 2019, more stimulus seen: Reuters poll. Reuters, 17 January 2019. 14. World Economic Outlook Update, International Monetary Fund. January 2019. 15. Australia – Economic forecast summary. OECD (November 2018). 16. Road Safety Facts – Association for Safe International Road Travel.

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