In the book Transportation Transformation, I stated that several megatrends will necessitate the transformation of urban mobility from one that is centered around the privately owned vehicle to one that is offered as a service, combines multiple modalities, and promotes sharing. The pandemic forced many of us to work from home and have goods delivered there, in the process causing us to rethink our our mobility needs and practices. Work-related mobility deserves important consideration because about 30% of daily urban trips pre-pandemic were related to commuting. Many of the practices that will emerge from this rethinking will have their roots to the changes we made during the pandemic and could lead to a new normal for urban mobility.
A few days ago, I was catching up with two colleagues. They are both senior professional services executives and neither has relocated during the pandemic. We were discussing the impact the pandemic is having on their daily business activities. Are they productive working from home? Do they find their remote interactions with their clients and their teams as effective as their pre-pandemic in-office interactions? They both said that while they can see themselves working from home a few days per month, they were anticipating a return to the office because they miss the richness offered by the in-person experience for collaboration, mentoring young employees, and certain aspects of management. They also believe that in-office presence will continue to be important for their career advancement. Many of my colleagues’ views correspond to employer and employee survey results (and here) regarding the return to the worksite. Realizing the impending change, some corporations are updating their work from home policies while others change the office environment itself. Today office occupancy in the US remains much lower than pre-pandemic.
Telework describes the ability to work full-time remotely, including from home, made possible by utilizing a variety of communication channels and technologies. It is different from telecommuting which describes the ability to work remotely for part of the workweek. In other words, my two colleagues want to be telecommuters but not teleworkers. During the pandemic many of us were forced to telework and most had a greater variety of goods delivered to our homes (goods that required quick delivery such as groceries, restaurant orders, and medicines, to goods that could take longer to delivery such as clothing or toys). Combined with health considerations globally we saw the emergence of three transportation-related trends. First, public transportation systems saw dramatic drops in ridership. Second, on-demand mobility services companies involved in passenger transportation also faced a dramatic drop in ridership, whereas mobility services companies involved in goods delivery saw huge demand for their services. Third, after a temporary drop in sales early in the pandemic, automakers, particularly in the US and Asia, saw strong demand for new vehicles, while auto dealers also saw strong demand for used vehicles.
As economies re-open some of us will have the option to telework, while others will have the option to telecommute. I analyze three alternatives relating to where we choose to work and their implications to cities, mobility services companies, and automakers.
Increasing adoption of telework
The broad adoption of telework will mean that commute to work trips will decrease, but employees will likely seek larger houses to accommodate their workspace and need for out-of-home recreation, e.g., access to hiking trails. This will cause city-dwellers to either move to the suburbs or to lower-cost cities. We are already seeing such urban migration in the US. It is particularly evident in cities such as San Francisco and New York. Residents of large European cities and large Asian cities are also starting to consider similar moves though we are not yet seeing evidence of urban migration. Such population movements will lead to the growth of certain mid-sized cities, as we are currently seeing in the US with Austin and Nashville, and the need and opportunity to reimagine urban spaces in others (and here), as we are seeing in Paris.
- City: With the need to commute to work decreasing due to telework, the demand for public transportation will shrink substantially. As a result of reduced ridership, public transportation systems will be forced to further decrease their service. With suburbs developing further to offer more services, e.g., shopping, or entertainment, and certain parts of cities getting reconfigured to shorten the distance between residence and services, the mobility patterns will also change further leading to further cuts in public transportation service. The continued reductions in the public transit service will impact particularly those who can’t afford to own a vehicle or utilize on-demand mobility services. The public transportation systems model that was designed to connect residential centers with the city center where typically jobs, shopping, and entertainment are located will prove unsuitable for the new patterns for people and goods mobility. While the public transportation systems of many European and Asian cities are in a better position to cope with this change than those of American cities, they will still require significant transformation if telework becomes a dominant trend in their areas. As travel to city centers decreases, mobility-related revenues such as parking revenues and demand for curb space by logistics companies will also decrease.
- Mobility Services: Companies providing on-demand goods delivery will continue to greatly benefit from the increasing adoption of telework, whereas the passenger transportation business associated with commuting will suffer. One bright spot for on-demand passenger mobility will come as public transit agencies seek to partner with them to alleviate the problems that will arise from reduction in public transportation service and offer service where there was little to none before. For example, microtransit can be used to serve a city’s less popular routes. Such partnerships can be combined with subscription-based models enabling the subscriber to frictionlessly move between on-demand mobility and fixed route/fixed schedule public transportation.
- Automakers: Working from home will decrease the need for multi-vehicle households as people start to feel comfortable getting by with a combination of multimodal shared mobility, owned micromobility modalities, and maybe one privately owned vehicle. Opportunities will arise from consumers that move to suburbs or to cities with mobility alternatives except privately-owned vehicles. Another opportunity under this alternative will come from consumers that want to acquire new vehicles that are friendlier to the environment, including zero-emission vehicles, and vehicles will higher levels of driving automation for safety reasons.
Telework’s anticipated impact on transportation and logistics can act as the best incentive and opportunity for cities, companies offering on-demand mobility of people and goods, and automakers with a long-term vision to collaborate and transform urban mobility.
Increasing adoption of telecommuting
As organizations prepare their post-pandemic plans, several are starting to offer their employees a hybrid option that combines telecommuting for part of the week with onsite work the rest of the time. If most employees do not choose to telecommute on the same day, e.g., Friday or Monday, and will not travel to work at the same time, then telecommuting will result in less crowded public transportation vehicles, reduce the congestion due to ride-hailing, and privately-owned vehicles, and lead to faster and more comfortable commuting. If we further assume that some employees may choose to spend fewer hours at the worksite when they commute there, then, based on analyses we have conducted, we expect even a move to telecommuting will improve work commutes.
- City: Broadly adopted telecommuting will lower the demand for public transportation but not dramatically enough to cause them to reduce the pre-pandemic service levels. There may even be an opportunity for transit agencies to work with unions to establish work schedules and contracts consistent with the new demand patterns that will emerge. With demand holding steady, if the cities initiate longer-term urban planning efforts, then there exists an extraordinary opportunity for their public transportation authorities to reimagine how to utilize their transportation infrastructure and rolling stock resources to achieve the goal of providing safe, convenient and affordable transportation with a great consumer experience in the new urban environments.
- Mobility Services: As the world economies restart their growth, we expect that the on-demand passenger transportation will return to at least the pre-pandemic levels. Demand for various types of goods delivery services will continue to increase as more households adopt them and household that already use them continue to employ them. We also expect that in the not-too-distant future the ground transportation modalities used for on-demand mobility services will be augmented with drones of various form factors, including flying drone taxis.
- Automakers: Telecommuting will prove neutral for automakers. New vehicle demand will be driven primarily by the desire to acquire vehicles that utilize climate-friendly technologies and incorporate higher levels of driving automation.
This alternative will offer to cities, mobility services companies and automakers a longer period to determine the best strategies under which to collaborate in order to transform urban mobility since particularly for the first two constituencies the revenue drops will not be as dramatic, and the privately-owned vehicle sales not as robust as they are expected to be under the case where telework is broadly adopted.
Return to the pre-pandemic commute practices
While to date it remains largely a US phenomenon, it is not yet clear how many people have moved away from their home cities permanently and how many intend to return post-pandemic. Companies will play a big role in this decision. Some have already signaled that they will allow employees to work remotely without any change in benefits, others will require benefit adjustments, while a third category indicates they will return largely to their pre-pandemic worksite practices.
- City: Urban migration, combined with the acquisition of vehicles by people who pre-pandemic were heavy riders of public transit, will negatively impact public transportation systems even in the absence of telework or telecommuting options. We expect many of these consumers to continue using their recently acquired vehicles instead of going back to public transportation modalities. Some of this trend will be attributed to health safety concerns, but also to the sunk cost associated with acquiring the personal vehicle. The impact may be a little different for cities like New York and Boston where parking is expensive, but not for smaller cities where people have been moving to. A survey conducted in February by Morgan Stanley in Europe showed that over 50% of those surveyed indicate a preference to switch away from public transportation for at least some period. The survey also showed that by 2022 some drivers expect to be driving their own vehicles more than they were in 2019 either because of where they have moved due to the pandemic, or because of health considerations associated with public transportation.
- Mobility Services: Large mobility services companies with a national footprint will be less impacted than cities and most likely will see a demand increase. Frequent pre-pandemic users of such services will likely return even if they acquired a vehicle during the pandemic because they tend to value convenience over affordability in their transportation choices. We also see this alternative as an opportunity for mobility services companies to acquire as new customers the consumers that abandon public transportation and embrace other forms of multimodal mobility.
- Automakers: People who decide to remain in the cities to which they moved during the pandemic may offer an opportunity to automakers to market vehicles equipped with new powertrain technologies and driving automation levels. In addition, consumers that post-pandemic remain concerned about health safety represent an attractive segment because they may be interested in acquiring additional vehicles for members of their household.
Under this alternative, the cities will be in a tough spot both from the loss of revenues but also due to the potential of increased congestion, pollution, and other factors impacting the urban quality of life. For this reason, for the short-term, they will need to develop strategies for re-acquiring such lapsed customers and acquiring new ones by applying data-driven techniques to understand their post-pandemic transportation needs and promote their new mobility plans. But as is outlined in Transportation Transformation, for the long-term they must take the initiative and demonstrate strong leadership in creating strategies, making the right investments, and offering incentives that will cause mobility services companies, and automakers to collaborate and transform, as appropriate, in order to usher new mobility. Over time, the competition for talent could shift to places that offer the best support telework.
Office work and, depending on how digitalization and automation continue to advance, other types of work have changed and with them our commute practices and patterns. While it will take some time before we can determine which of these patterns become permanent, the broadening adoption of working from home in the form of telework and telecommuting allows us to consider three alternatives and their impact on work-related commuting. We see these alternatives playing an important role in the way the longer-term urban mobility scenarios first described in Transportation Transformation will unfold and evolve differently depending on geography being considered since transportation and work practices are geography dependent.