New modes of transport are trying to change the way we travel. But are they really a match for Austria’s time-tested infrastructure?
Austria’s trains and buses are almost always on time, and Vienna’s public transport system is the envy of cities the world over. Vienna’s cabbies drive spotless Mercedes-Benz taxis.Citybikes are convenient and free for the first hour. When it comes to transportation, commuters want predictability and convenience. They have come to expect high standards, and they get them.
In Austria, the government has steadily invested in expanding the country’s transportation infrastructure to improve our daily commutes. But innovation and market liberalization could be about to change how we travel.
Here, we look at how technological disruption and new market entrants have begun to affect the way things happen on the ground, from hailing taxis and renting cars or bicycles, to distances by bus and train. How people choose to travel will, in the long term, affect the economy and society as a whole.
Taxi vs. Uber – all Hail the Sharing Economy?
New York has its iconic yellow cabs. London’s taxi drivers have “the knowledge of London,” the entire city map in their heads.
In both cities, cabs can be hailed on the street. In Vienna, riders need to find the nearest taxi stand, or call a dispatcher for pickup. If Uber offers that pickup service for less, do Vienna’s taxis have a future?
Price matters to passengers, and this is where Uber has an edge over taxi drivers bound by government-mandated tariffs. According to the 2017 Taxi Price Index compiled by Carspring.co.uk, which compared the cost of a three-kilometer trip in 80 cities, Vienna was 60th and Graz 49th, more expensive than New York or Hong Kong. Enter Uber.
Hailed for its flexible fares and friendly, 5-star-review-seeking drivers, Uber’s disruptive ride-sharing model has circumvented the structured fare model by operating as a middle man between passengers and car service companies. As one of the sharing economy’s pioneers, Uber claims it has turned thousands of car owners into empowered business people. Critics argue these newly minted entrepreneurs are really “binge-driving” cabbies, who, encouraged by the Uber app to pick up ride after ride, earn less and without benefits – than the drivers employed by taxi companies.
Uber has come under pressure around the world including in Austria, for its business model, amid claims it is undercutting licensed taxi services. The embattled company has survived a series of scandals and legal challenges globally, so it remains to be seen if local critics, or a recent EU court ruling, could ban the behemoth from Austrian streets, or force it to change the way it does business.
Citybike Wien vs. Obike, Ofo & Co – Still Learning how to Share?
Citybike Wien is one of the world’s oldest bike-sharing systems, started in 2003 by outdoor advertiser Gewista. Citybike has grown consistently, and now offers around 1,500 bicycles from 121 docking stations and claims more than a million rides a year.
But since last year, Citybike has faced competition from the Peking-based Ofo and a Singaporean startup oBike. While both charge for the first hour – with Citybike Wien the first hour is free – the two new comers offer a free-floating bike-share system unfettered to kiosk stations. The bikes can be unlocked with an app. The two companies’ yellow and green bikes doubled the number of shared bikes available in Vienna almost overnight.
Naturally, what’s convenient to some is a nuisance to others, and the usual growing pains associated with tech disruptors have been evident here as well. Supporters welcome the availability of bikes in underserved districts. Critics argue they are clogging side walks and bike racks. Private bike-sharing businesses possess an incomplete knowledge of the different markets they enter and, in true startup fashion, figure things out as they go along. As Ofo and oBike arrived in Vienna only last summer, it’s too early to tell what impact they will have in a city which already boasts an unrivaled public transportation system. Citybike will likely retain existing users with its reliable and virtually free rides, while its tech competitors, charging between 50 cents and one euro per half hour, will vie for convenience-seeking customers.
Rental Cars vs. Car2Go & Co – Success Can’t be Shared?
Far less controversial are car-sharing apps. In a city like Vienna, which offers an extensive public transportation system, car-sharing can eliminate the need for occasional drivers to buy a car. While traditional rental companies with locations near airports and train stations appeal to foreign travelers and locals with specific needs, apps like Zipcar and Car2Go offer primarily a young, urban demographic. A 2013 survey by Zipcar found that 30% of its U.S. users were millennials (18-34 years old), who want to have easy access to a car in the city.
An early entrant in the car-sharing market, Zipcar, a subsidiary of car rental giant Avis, was never able to get a foothold in Vienna. While its app offered hassle-free booking, vehicle pickup was limited to designated locations. Success arrived with Daimler’s Car2Go and the BMW-Sixt joint venture Drive Now, which entered the Vienna market (in 2011 and 2014, respectively). With large vehicle fleets and affordable prices (Car2Go costs between 31 and 38 cents per minute, depending on the model, while DriveNow charges between 25 and 38 cents per minute), their “free-floating” car-sharing apps let drivers pick up and drop off rides almost anywhere within city limits.
In January, Sixt sold its stake to BMW, and there is speculation that car manufacturing competitors Daimler and BMW may merge their carsharing ventures
ÖBB vs. Westbahn – Behind Schedule?
Technological innovation is not the only driver behind change. In the case of passenger rail transport in Austria, politics is the main change agent. The European Union bets that opening up national markets to private competitors in 2023 will create a more customer-friendly and efficient railway sector.
The Austrian government, which owns the ÖBB (Austrian Federal Railways), has not been too keen on embracing the single market, although that may change with the business-friendly ÖVP (Austrian People’s Party) now heading the coalition government. The only test case for privately owned passenger railway operators in Austria is the WESTbahn, which runs two trains a day per hour starting December 2017 on the busy Vienna–Salzburg route, where the ÖBB runs trains about every half hour. The holding company has been directly and successfully competing with the ÖBB since 2011, positioning itself as a service-oriented and budget-friendly alternative (WESTbahn charges 26.50 euros for a Vienna-Salzburg ticket. ÖBB prices vary, but tend to be higher without a Vorteilskarte (advantage card). While commuters generally welcome transportation choices, it remains to be seen what liberalization would mean for customers in less populated, underserved areas.
In any case, the ÖBB has not been stuck in its tracks. It has invested heavily in upgrades to trains, terminals and network expansion, with the result that Austrians travel the most kilometers by train compared to citizens of all other EU member states according to a 2017 Schienen-Control Report. These investments have led to heavy debt of more than €20 billion, but Austria’s longstanding focus on public transportation may ultimately help it thrive in the face of the sure-to-come competition.
Postbus vs. Private bus Operators – Flixbus, Regiojet and Hellö
Competition has already come to bus transportation. The state-owned Postbus has long had competition from private companies, such as Dr. Richard, which has helped serve Vienna’s outer districts. Family-owned Blaguss fulfilled Austrians’ appetite for tourism by bus. Now, a foreign, techy-sounding brand is taking over major European bus routes. Flixbus, a German company established in 2011, has been taking advantage of technological innovation and a young demographic’s appetite for budget travel to seize a sizable share of overland bus travel in Western Europe. Meanwhile, Czechia’s Regiojet has the lion’s share in bus travel in Central and Eastern Europe.
Flixbus offers a comprehensive booking app, and success led to a quickly expanding network – first in Germany and then across Europe. In Austria, the budget bus company acquired the ÖBB’s loss-generating Hellö, which served Italy, Germany, Czechia, Slovenia, Hungary, Slovakia, Croatia, and Bosnia and Herzegovina. Blaguss, realizing it couldn’t compete, now operates under the Flixbus name in Central and Eastern Europe, as Flixbus is highly competitive on the price front by offering extremely affordable tickets for overland trips starting at just 5 euros. This means that, similar to hotel or flight booking apps, customers now have more choice and thus access to cheaper fares. And while cheap tickets are the main selling point, the extra comfort offered by free Wi-Fi, extra leg room and, potentially, free onboard movies adds to the appeal of traveling long distances by bus
More Questions Than Answers
Technological innovation undoubtedly has answered the needs of predominantly younger customers, providing changes to how they commute and travel. Where changes could be more deeply felt in decades to come is in the liberalization of public transport systems. Austria’s reluctance to embrace EU rules may be warranted – but, given the Alpine Republic’s excellent track record in building its public transportation network, it is likely more than capable of holding its own in a competitive market.