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The top four questions to ask before investing in microtransit

  •   4 min read

As public transportation ridership declines and traffic congestion reaches an all-time high, transit leaders are looking to build a new on-demand solution, especially in the wake of COVID-19.

Dillon Twombly

Chief Revenue Officer, Via

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The world is undergoing a transportation revolution as cities, transit agencies, private companies and even universities expand their commitment and investment in microtransit

The idea of developing a custom on-demand public transit network has its appeal anchored in an age where traffic congestion is at an all-time high and transit ridership continues to fall, a trend that’s only been intensified in the wake of COVID-19. Overall public transportation ridership in the United States declined by nearly 5 percent over the last decade, driven by a cumulative 15 percent decline in bus ridership over the same period, according to KPMG’s Accelerating Mobility Study.

The reason may be that the appetite for on-demand ride hailing has reached a fever pitch, and when managed improperly, cities are paying the consequences. A traffic congestion study commissioned by Uber and Lyft actually revealed the companies account for up to 14 percent of vehicle miles traveled in some cities, a reason why cities like New York are passing legislation directly aimed at how often cars cruise without passengers

The growing interest in microtransit, however, has transportation leaders blending the best of both worlds by leveraging technology to build the public transportation of tomorrow. By recognizing that a new generation of riders want to travel on-demand, cities can build a better version of the bus — one that operates dynamically, without routes and schedules, but still promotes safe, shared trips to cut down on congestion. Plus, the flexibility that microtransit affords is more important than ever before in being able to adapt quickly as municipalities support their communities as they return to work and new routines. 

Before pulling the trigger, however, decision makers should ask themselves the following questions:

What are the specific goals?

Before doing anything, it’s important to frame the challenges that microtransit is going to solve. What is the pressing need for this type of service? King County Metro in Seattle invested in microtransit as a first-and-last mile link to five of its light rail transit hubs where parking and alternative means of transit were both sparse. In Newton, Massachusetts, city leaders were specifically interested in increasing mobility for the city’s senior population, so they developed a program catering to residents over 60-years-old. In Abu Dhabi, the city’s public transportation authority was interested in supporting healthcare workers during COVID-19 with free on-demand rides to hospitals. 

Whether it’s increasing public transportation ridership, decreasing congestion, reducing the number of vehicles parked at local transit hubs, or giving residents or essential workers a more accessible way to travel, it’s important to have measurable goals before launching your microtransit service.

How will you use the on-demand transit data?

Investing in new mobility technology via a public-private partnership can help provide more convenient paratransit, eliminate transit deserts, create first-and-last mile connections to transportation hubs, and replace underutilized and inefficient bus routes — all while improving the environment by getting people out of private cars and away from single-occupancy vehicle trips.

For each dollar spent in operating costs per trip across all modes and all transit systems, an average of 19.2 cents are recovered through fares.

Beyond the visible benefits, such partnerships also generate a treasure trove of data, giving transit authorities and operators a completely new vantage point into their communities’ specific needs. This data can support an array of new applications, like help leadership make major improvements to their overall transit system, understand where to shift resources to better serve riders, where to put a protected bike lane, or what low-income neighborhoods should have the most affordable public transit. It also has the potential to aid in contact tracing during a health crisis, and ensure vehicles meet sanitary and safety requirements that can help communities curb the further spread of COVID-19. 

However, not every mobility technology company has always taken a collaborative approach to sharing rider data with cities and transit operators. 

Public transport authorities and operators (PTAs/PTOs) should partner with companies that will share robust data to help inform important decisions, faithfully comply with regulations, and protect customer privacy. As the transportation landscape continues to evolve, finding a mobility partner that is actually willing to share data to improve public transit is just as important as finding one that is serious about data security.

How will you measure microtransit’s ROI?

Transportation professionals already know that operating quality public transit is an expensive endeavor. For each dollar spent in operating costs per trip across all modes and all transit systems, an average of 19.2 cents are recovered through fares, according to Boston Consulting Group’s 2019 report, On-Demand Transit Can Unlock Urban Mobility

Microtransit can enable a more efficient allocation of resources in areas with under-performing fixed routes, low population density or logistically difficult to serve areas. Providing a sufficient return on investment, however, is about much more than simply evaluating the farebox recovery ratio. 

On-demand microtransit networks address a huge variety of underlying community issues, so it’s important to measure ROI through a broader lens. Efficient transportation provides residents reliable access to jobs, shrinks cities, improves quality of life, and helps eliminate things like food deserts. 

You shouldn’t have to live in Manhattan, or be lucky or rich enough to live near a subway line or well served bus line, to have access to high quality, convenient, and affordable public transportation. Cities and transit agencies are increasingly turning to technology to facilitate their mandate of providing accessible and equitable transportation to the rider populations they service.

What happens if you do nothing?

Public transportation ridership, along with the associated revenue, continues to decline, leading to increasingly challenging budget and transit situations for many cities. This trend, underpinned by demographic changes in public transit ridership and usage along with changing rider expectations is one that cities are increasingly trying to reverse. Microtransit and the accompanying data, flexibility and digitization it allows give the public sector one of many tools it can use to blunt these declines. 

For most cities, the do-nothing scenario ends with more congestion, more vehicle emissions, and less equity for residents. Good public transportation is about so much more than traffic; it’s about impacting job opportunities, safety, and overall quality of life for residents. When doing nothing is no longer an option, it’s time to consider what’s next. 

This article was updated from its original version, published on Nov. 1, 2019.

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