Who is the Villain in this Disruption Story?

http://priceonomics.com/who-is-the-villain-in-this-disruption-story/

by sebg • 13 years ago

51 46 13 years ago

sebg• 13 years ago

Key paragraphs =>

"This week, Forbes reports that “Airports are the next big battleground in the sharing economy” as the startup FlightCar, which competes with the car rental industry at airports, faces a legal challenge.

The city and county of San Francisco has sued FlightCar for running a rental car company without certification from the airport. "

joshdance• 13 years ago

"Regardless, if FlightCar does succeed in disrupting the rental business at airports, then the money that airports once derived from rental companies will need to be replaced. Nationwide, car rental fees account for about 14% of airports’ revenues - a figure that is higher in small airports with less retail and ground transportation options. SFO took in $94 million from car rentals in the last fiscal year."

mchannon• 13 years ago

I always understood the reason for rental cars costing so much on-airport was to pay for the high-density construction on prime real estate to accommodate them within a reasonable hike of the airport gates. SFO's train system (10 minutes to the rental car center!) cost a lot to build and costs a lot to maintain, so it's fair for brand name rental agencies to shoulder that cost.

FlightCar, and to a lesser extent the other off-airport rental companies (who still run shuttles from the rental car center), don't burden the airport with space in the multistory garage on the airport property. As such, they shouldn't be subject to taxation by the airport.

SFO's an interesting case because it exists completely beyond the boundaries of the city and county of San Francisco, with FlightCar's property even further afield in Burlingame. I fail to see how they could even have standing.

Patrick_Devine3• 13 years ago

They do burden the airport to some degree though. The airport allows off-airport rental agencies to drive their giant billboard buses onto the premises, and also provides a curbside for them to load and unload passengers.

Clearly FlightCar doesn't burden an airport in the same way, however they do to some extent. Maybe if the airport worked with them and provided some portion of short term parking for their customers for a cut of the price it could be beneficial to both parties?

pogo2• 13 years ago

The degree of "burden" that FlightCar imposes on SFO is irrelevant to SFO's ability to charge a fee to FlightCar. SFO owns a platform and nobody is entitled to use it without paying, even if such use costs SFO nothing. (Which is not the case here, since FlightCar rentals are displacing car rentals that would otherwise pay a fee to SFO.)

Someone2• 13 years ago

According to Wikipedia "SFO is owned by the City and County of San Francisco but located in adjacent San Mateo County". That should give them standing.

JonFish85• 13 years ago

Couldn't you replace the word "Airports" with pretty much any other business?

[Entertainment companies] are less fearing change than trying to maintain their funding system.

[Cell phone companies] are less fearing change than trying to maintain their funding system.

[Game companies] are less fearing change than trying to maintain their funding system.

Isn't that what holds back a lot of companies--why change if they're making enough money as it is. In some ways, I feel like that's the big thing that held Sony back and let Apple dominate the MP3 player market.

EDIT: This is just a comment on the headline, not anything in the article -- just to be clear!

lhc-• 13 years ago

You can, but the difference is that those are all private companies, so if they have to find new funding, its their own responsibility to do so or fail. Airports are part of our public transportation infrastructure, and any new source of funding they find will result in higher costs for everyone except FlightCar users, because all the costs from rental companies will get spread out elsewhere. A public company like that has much different pressures (for example, they likely would not be allowed to fail if they have trouble finding a revenue source people like, and can always fall back to taxes) than a private company which is on its own.

macspoofing• 13 years ago

Airports are part of our public transportation infrastructure, and any new source of funding they find will result in higher costs for everyone except FlightCar users, because all the costs from rental companies will get spread out elsewhere

Alright, pass those costs on. What's the alternative? We live with a less efficient system because we're used to car renters subsidizing everyone else?

gojomo7• 13 years ago

SFO should charge based on actual passenger or vehicle impact, not business model. Charge every dropoff or pickup equally, if need be.

mathattack• 13 years ago

I would think "Space plus dropoff" is good. If Avis has a parking lot in the airport parking lot, they should pay more.

zanny5• 13 years ago

How do you charge people to stop at the terminal without severely crippling an already saturated people drop off / pick up pipeline?

What would probably work better is a toll ticket just to enter the airport complex via the main gate. Airports (almost always) have front gates to lock the entire compound if necessary, add a toll booth.

gojomo7• 13 years ago

You answered your own question.

The visit toll could be collected electronically, via transponder or a bill mailed to the car's registered owner, to require no slowing or stopping of traffic.

They could also allow free or cheaper visits at the far end of the SFO 'airtram' (where the existing rental car center is located).... the differential could even vary with congestion.

If they want to throw a bone to occasional, casual flyers and friends on pickup/dropoff duty, let each license plate have 1 free visit each N days. (Though, the logic and fairness of charging every visit equally based on its congestion impact is strong.)

There are better ways to meet any legitimate concerns of SFO than to force new services into the old rental-agency cookie-mold.

vitd• 13 years ago

I was thinking about this business from a traveler’s point of view. If I drop my car off and it has a built-in GPS, doesn’t that just give the renter a map to an empty house to rob? I realize not all cars have built-in GPSs yet, but it won’t be long before they all do.

zanny5• 13 years ago

You can find someones house without needing their cars GPS. If Flightcar lists a persons name anywhere, you know then if they are on a flight and probably not at home.

Though it could make sense to recommend wiping your gps before loaning your car if it does keep a memory of recent trips.

mikeash4• 13 years ago

And if the rental company is doing their job at all properly, the info they collect gives you a giant flashing arrow pointed straight at a prime suspect. It's going to take a fair bit of work to be able to pull off such a scheme without getting caught, and there are probably easier ways to make money with that much effort.

lovemenot2• 13 years ago

Disruption is not a TV drama. That there is no obvious villain, is not an argument in support of the status quo. The issue is inefficiency. Why take two cars into the airport when I can just fly-and-go? The inefficiency of storing empty vehicles for longish periods of time increases costs on market participants and on the public. How the burden of disruption will be distributed amongst incumbents and new players is surely an important question. But the article appears not to care that efficiency improvements may be held hostage to such negotiations. Conflating whether to allow FlightCar with how best to allow FlightCar and its ilk.

jljljl3• 13 years ago

The efficiency argument actually has very little to do with the story. I doubt anyone (including the airport) disputes the benefit of increased ride sharing.

The point is that FlightCar is offering the same or competing services as an Airport rental car agency without paying the same use fees as a rental car agency. This has less to do with efficiency and more to do with them exploiting loopholes to avoid paying the same costs as more established rental companies. They benefit from the increased rental demand, cab stands, and private roads produced by the airport, but don't pay for it.

If their entire business model is dependent on not paying the airport fees, it's probably not as disruptive as they claim.

lovemenot2• 13 years ago

I am not familiar with this story in detail. Yet on the face of it, these services are not directly equivalent. Without knowing details of their implementation, it is clear that in principle, FlightCar has the potential to be disruptive, by the usual definition of the term. This is because it utilises assets more efficiently: land, labour and vehicles. The airport's existing financial arrangement is not really relevant since FlightCar could, presumably with some operational difficulty, operate outside of the boundaries of the airport. What you see as a loophole, I view as an indicator of a business model which became broken by technology and a trend toward more responsible use of scarce resources. You may not like it, and public opinion may even be with you, but I don't see how this is not classic disruption.

hardtke• 13 years ago

Keep in mind that many localities utilize car rental taxes at airports to subsidize public bonds unrelated to the airport. This a particularly good way of paying for publicly financed stadiums. Airport Car rental taxes are popular with local voters because they don't actually tax local voters. Hotel taxes are also popular for this reason.

mikeash4• 13 years ago

I can't feel sympathetic at all to the idea that this car rental company should somehow avoid these fees.

This is not a story of potentially overbearing or obsolete regulation such as that faced by companies like Uber and Airbnb. This is simply a property owner controlling activity on their own property. The fact that airports are usually owned my governments is completely incidental here. You'd no doubt find the same sort of fees at a privately-owned airport. If you want to do business on somebody else's property, you play by the owner's rules, end of story.

redthrowaway• 13 years ago

Yeah, I think this is a great idea, but they should pay the damned airport fees. They derive exactly the same benefits from the airports being there that traditional car rental companies do, so they should shut up and pay the piper.

AsymetricCom• 13 years ago

I hate how they default to a completely out of scope argument: but we're providing a valuable service by putting unused cars to work. No, you're providing yourself with paychecks. The operations of your business are only a subset of that.

It's the same kind of un-scoped reason that leads to conclusions like trickle down theory. They think because they're proving a service that someone can presumably benefit from, that gives them a blank check to consume as much as they can to provide that service, thus completely negating the positive impact of their business through crock-pot philosophy. Obviously, there is no sound logic in this line of reasoning. Obviously, they're not going to argue that they should pay more since they don't have a fleet to maintain. "Invisible" hand?

The solution is quite simple really: there is no simple solution. If you're going to displace a business you can't replace them with something less then what they were and expect to make more money than they did, at least not in a sustainable way. It's simple thermal dynamics.

This is all a subset of issues born of cargo-cult thinking, techy buzz words and such that give businesses respect they simply co-opted by using the word/technology in marketing materials. More bubbles, more start up trends, more 'combinators separating uninformed people and their money without providing real value and expecting to get their @#$% &*!! for doing us the favor.

gojomo7• 13 years ago

Actually, they don't derive the same benefits. They have no cars or counter on-site.

Also, it's likely a majority of their drop-offs and pick-ups aren't even people renting cars! Instead, they're locals, who've dropped off their car at a remote lot for maybe-renting. Why should such a person be routed out through the remote rental-counter-center, when they're not a car-renter? They're most like any other local arriving via cab or limo, so that's the airport-usage-fee that should apply.

fitandfunction• 13 years ago

Agreed.

The obvious move for FlightCar is to partner with nearby garages, and offer a valet service to drive passengers to their terminals. To sweeten the deal, FlightCar might offer to wash or do basic maintenance (oil change) on the car for an added fee.

The passenger gets

  - convenience of getting dropped off at terminals (vs. walking from airport parking)
  - convenience of taking advantage of car "dead time" to get cleaned / serviced
  - some money (from the rental), to boot

gojomo7• 13 years ago

That's already what FlightCar is doing: their facilities are all off-airport, in another city 5 minutes away.

The valet drop-off/pick-up service (and air-travel-related marketing) is what SFO thinks entitles them to the rental agency fees... even though the drop-off/pick-up is indistingushable, in terms of impact, from having a friend drive you.

gojomo7• 13 years ago

A private company couldn't write tickets, and likely couldn't discriminate against private cars that just happen to be hired (but otherwise indistinguishable from the private cars delivering other customers).

SFO has been granted a monopoly on land, waterfront, and airspace by several levels of government, and is owned by the public, so this reductionist "the owner can do as they damn well please, social welfare be damned" analysis doesn't apply.

robryan2• 13 years ago

The key point I think here is the transportation of people from the airport to the car lot. An airport should absolutely be able to put a fee on this. If customers were able to make their own way to an offsite lot I don't see what the grounds for a fee would be though.

DanielBMarkham• 13 years ago

"...Unlike the story of ride sharing apps and the taxi industry, this story doesn't seem to have an easy villain..."

I'm getting lost in the premise here. Does every story of disruption have to have a hero and a villain? This seems to be a rule of how these things work in the author's eyes? Why the heck is that?

I own a car. I park the car. If I allow other people to use the car, the location the car is parked has nothing to do with anything. If it did, would we start allowing different fees depending on where my car was when I loaned it to somebody? That's crazy.

There's not a villain. There's a broken revenue model for airports that doesn't work anymore. That's good -- things keep changing and we wouldn't expect everything to remain stable forever. Airports need to change like everything else. Creative change that gives us all more of what we want more efficiently is a good thing. We need lots more of it. It doesn't have to fit into a good-guy/bad-guy narrative.

Like I said, I have no idea what the point the author is trying to make here.

Who is the Villain in this Disruption Story?

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