Think your commute this morning was bad? Spare a thought for people in Manila who endure the “worst traffic on earth” every day. Waze found out it takes an average of 45.5 minutes to commute from home to office in Manila, longer than the 42.1 minutes travel time in Jakarta.
Manila’s horrendous traffic is blamed on a combination of factors, with the sheer volume of vehicles topping the list. That’s to be expected – if bus and railway systems are overcrowded and deteriorating, people will opt for cars.
Uber and GrabCar make it easy to order cars and they’re comfortable too, persuading many to just order a ride and leave their own vehicles in the garage. Yet there’s a debate about whether these tech-based transport companies actually cut the number of cars plying on the streets since they often take only one passenger at a time. Good thing the solution doesn’t stop with them.
We know one startup in the Philippines that claims it can do more than Uber or GrabCar – U-Hop. “U-Hop because everyone deserves better,” reads its tagline.
Similar to Uber and its ilk, the company allows commuters to book rides through its website and app. It doesn’t own the vehicles, but partners with the owners or operators. However, unlike Uber, U-Hop makes use of shuttles, which can seat seven to 12 passengers per trip.
Shuttles are a popular mode of transport among Filipinos. The problem is, oftentimes, lines at terminals are too long.
On U-Hop, commuters book a ride, are picked up at a common point, and then dropped off where they intend to go. The system chooses the passengers who will ride together in a trip – matching those with the same route and same pick-up time.
“U-Hop will reduce the number of vehicles on the road by promoting a 1:7 ratio of car and passengers, rather than 1:1. It’s also good for the environment because it reduces carbon emissions,” founder Marvin Dela Cruz tells me.
At the moment, U-Hop takes on a B2B model: it deals with large enterprises, such as call centers, which provide shuttle services as a form of benefit to their employees. Say, a company has a dozen employees who need to be fetched, then U-Hop will allocate two shuttles for that firm.
All trips are scheduled in advance, and fares are paid the same way. Prices are fixed at PHP 693 (US$17.5) per passenger a week or PHP 2,970 (US$75) a month. That’s equivalent to PHP 99 (US$2.50) for a roundtrip each day, way cheaper than a roundtrip by taxi or a normal shuttle.
Two-pronged business model
You may think: why compare U-Hop with Uber when one’s an apple and the other is an orange. Hold that thought. U-Hop also offers an on-demand service using cars, though this is not activated yet pending approval of the company’s application for a government license.
Once available, the cars will function the same way as Ubers do: when users book a ride, the car picks them up at their location and takes them to their desired destination.
Marvin says U-Hop will be more affordable than Uber or GrabCar. Fares of the two usually surge during rush hours (the surge could go as high as five times your normal fare for Uber and twice for GrabCar). In Manila, where a lot of families don’t even have enough for food, those add-ons make it almost impossible for them to avail of the services.
In contrast, U-Hop rides cost PHP 20 (US$0.42) plus the metered fare at any given time. Passengers also have the option to purchase unlimited rides for only PHP 499 (US$11) a month.
“Mass transportation is what the Philippines needs to solve traffic. And we are providing just that because we cater to the masses. So few are able to afford other transport apps. Now that there’s U-Hop, convenient, cheap, and safe transport isn’t only for the rich,” Marvin reckons.
Passengers may pay for their rides using several options: credit and debit cards, cash, or their reloadable NFC-enabled membership cards.
Passengers and U-Hop vehicle operators are all registered “members” of the U-Hop community.
Passengers need to download the app and register for free using their email or Facebook accounts. They will be asked to submit pertinent documents such as ID and proof of billing before their registration could be approved. If they lack documentation, they will be asked to visit a U-Hop office first. It’s the usual KYC (know your customer) process.
Shuttle operators, for their part, are required to pay a one-time membership fee of PHP 150,000 (US$3,180) as well as a PHP 75,000 (US$1,590) for hardware – both of which could be paid in instalments. Hardware components include an NFC-enabled tablet, a GPS device, and a security device to be installed in the vehicle.
The membership fee may seem expensive, but Marvin says it’s actually economical if you look at the long-term benefits. In exchange for the fee, U-Hop covers the shuttle operator’s fuel expense and the driver’s pay, and guarantees the operator a monthly income for as long as he/she is a member of the company.
On the other hand, car operators providing the on-demand service do not need to pay a membership fee, while the security device is optional for them. That brings their one-time charge to around PHP 37,000 (US$785) only. Car owners will not be provided the guarantees that shuttle operators enjoy, but they would take home all of the metered fare paid by the rider, while U-Hop will pocket the fixed PHP 20 (US$0.42) charged on top of that fare.
Safety is paramount
Marvin explains all their membership procedures boil down to one key thing: safety. Registered passengers are issued NFC-enabled membership cards, which they swipe every time they ride U-Hop. “If something bad happens during a trip, then we would know right away who is on board,” he says.
In the meantime, the GPS and security devices installed in the vehicle are linked to U-Hop’s control center. The whole system tracks the vehicle’s location, movement, speed, and even fuel consumption. All data can be accessed through a dashboard that also receives real-time notifications about any abnormal activity. U-Hop would know if a vehicle crashed or deviated from its supposed route. It would know how fast it’s traveling and how much gas it has consumed. It would know every detail – even whether or not the engine is running or if a door is open. U-Hop can review vehicles’ travel data in a day’s, month’s, or year’s time.
But wait, it gets better. Once an emergency is detected, U-Hop can also stop the vehicle’s engine.
“The chance of harassment, robbery, or theft is reduced to almost none. We haven’t seen that kind of innovation here,” Marvin boasts.
Moving at a snail’s pace
Marvin knows what he’s talking about, having been in the transportation industry for 15 years. Prior to founding U-Hop, Marvin owned a car rental company.
For someone who’s been in the business that long, you’d think he’d be jaded about the traffic situation in the Philippines. Yet I’m surprised when he tells me, “It’s not hopeless.”
“Through private initiative and discipline, it can be solved,” he continues. “The only problem is the bureaucracy.”
U-Hop’s application for a Transport Network Vehicle Service (TNVS) license – the same that Uber and GrabCar hold – hit a snag over a misunderstanding about the company’s business model. Marvin wouldn’t dive into the details, but in a nutshell, he says, “it’s taken us four months so far just trying to explain to the government how we work.”
Nevertheless, he says they are close to reaching an agreement with the government and confident their license will be issued this month. Marvin clarifies that their shuttle service is licensed to roll, and the TNVS only covers their on-demand service, which hasn’t been activated yet.
A ready consumer base
The question now becomes: how profitable is the business? Since its launch in July, Marvin reveals the startup has booked close to US$1 million in revenue, both from fares and membership fees.
At the moment, U-Hop has 550,000 registered passengers, and the number is expected to hit 1 million by the end of the year. “Imagine having 1 million members using the shuttles. At US$2.50 per passenger daily, that’s US$2.5 million daily revenue for the shuttle service alone.”
U-Hop’s member base is also a boon in more ways than you’d think. “Our members will not go to U-Hop just for the shuttles or on-demand cars, but for anything – a yacht, a chopper, for travel and hotel packages, for food, a massage, or laundry service. We have 15 other products lined up for launch within a year. Great things will happen,” Marvin says, his voice trembling with excitement.
U-Hop has six offices in major cities in the Philippines and will serve a total of 27 cities by end of 2015. Marvin is optimistic that by mid-next year, U-Hop will be able to expand to 10 countries in Asia, providing the same services.
We will be wherever Uber and GrabCar are, and I tell you, we’re going to be stronger, better.
U-Hop is one of the startups selected to participate in the upcoming Tech in Asia Arena pitch battle. Visit the Tech in Asia Jakarta conference on November 11 and 12 to see the pitch.
What do you think of U-Hop’s business model? Do you think it has what it takes to conquer the ridesharing space? Drop us a comment below.
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