Corporate Finance

Does Uber Usage Nick Business Travel Budgets?

The average cost of a ride using the suddenly popular service is higher than for traditional taxis.
David McCannFebruary 27, 2015
Does Uber Usage Nick Business Travel Budgets?

Uber-growth company Uber shifted into overdrive in 2014, ascending to the status of worldwide phenomenon in what seemed like no time. Now its presence is being felt in corporate coffers.

In the third quarter of 2014, Uber accounted for 3% of business travelers’ incidental expenses, according to Certify, a vendor of expense-reporting software. Just one quarter later, that share expanded to 5%. As a percentage of total taxi rides, Uber usage has tripled from 11% in January 2014 to 33% in January of this year.

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In a 2013 promotion, Uber offered rides in a Delorean like the time-traveling one from the "Back to the Future" films.

In a 2013 promotion, Uber offered rides in a DeLorean outfitted like the time-traveling one from the “Back to the Future” films.

To the extent business travelers are using Uber’s taxi and ride-sharing services to replace traditional taxi rides, there’s a modest hit to travel budgets. While the upstart is commonly considered a less-expensive alternative, the average amount expensed for an Uber ride in the fourth quarter was $32.48, according to Certify’s data, compared with $30.58 for traditional cab rides, or a difference of 6.2%. (The comparison does not, though, take into account that the average Uber ride may be longer.)

Road warriors who make several ground-travel excursions during a short business trip could also spend more on Uber than they would pay for a rental car. That holds true for traditional taxis as well, but younger business travelers may be likely to prefer arranging for rides through an Uber app on their mobile phones that connects them with what essentially is a social network of drivers.

Indeed, Uber was expensed 127% more often in the fourth quarter than the most-frequently expensed car rental company, National.

Uber isn’t the only travel-related sharing service that’s streaking in popularity among the corporate crowd. Airbnb bookings for business travel rocketed ahead by 600% in the fourth quarter over the third quarter, although still accounting for only 0.24% of total lodging bookings. The average per-trip spend for Airbnb was $696 compared with $293 for hotels, Certify reports, although those numbers reflect the lengthier average stay in Airbnb rentals.

Meanwhile, costs for big-ticket business travel items were up substantially last year. The average airfare paid by business travelers on Delta, the most-expensed airline, climbed by 5.8% from 2013. The news was even worse on the lodging front, where the average bill at market-share leader Marriott was 6.7% higher.

The average cost of a business traveler’s visit to Starbucks, the most-often-expensed restaurant, grew by 4.6% over the prior year’s level, from $9.59 to $10.45.

“A stronger economy is positive for companies, yet for a variety of reasons, food, hospitality and transportation prices are on the rise. That’s squeezing corporate budgets, which might result in more discretion with travel this year,” says Robert Neveu, CEO of Certify. “Still, upstarts like Uber show that there is potential for new travel-related services to challenge longstanding vendors.”

Photo: Ed g2s, CC BY-SA 3.0. The image is unaltered from the original.