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Road bike rental research
Hello! Thank you for your question on the road bike rental market. I understand that you would like information on the market size for road bike rentals, information on the major players in the market, predictions on how the market will change in the near future, and information on the target customer of the road bike rental market. The short answer is the market share for road bike rentals in 2015 was $9.9 million. A deep dive of my findings will provide you with the rest of the information you requested, as well as how I arrived at the market size.
METHODOLOGY
To begin my research, I searched for recent industry reports, which would provide me with the most reliable information about the market size of road bike rentals. This led me to the National Bicycle Dealers Association's Industry Overview 2015. This is where I was able to find the data to calculate the approximate size of the road bike rental market. The report said that the total revenue for all bicycle sales and rentals was $6.2 billion in 2015. Of that total, 0.8% was generated by bike rentals. I multiplied $6.2 billion by .008 to get the total revenue for bike rentals, which was $49.6 million. The report also said that the road bike segment represented 20% of the total market. I assumed that this would apply to the rental market as well, so I multiplied $49.6 million by .20 to get $9.9 million as the total revenue of road bike rentals.
Once I determined the market size for road bike rentals, I moved into finding who the major players are in the industry. I found that bike share programs are becoming bigger factors in the marketplace, with rental companies losing market share. This is discussed further in the section "BIKE SHARE."
I used several annual reports for bike share companies and rental companies to determine what the future of bike rentals looks like. It appears that the market for bike rentals, and bike share programs in particular, is strong and will continue to grow through 2021. However, bike rental companies will need to alter their business model somewhat to compete with bike share programs. This is discussed further in the section "MARKET PREDICTIONS."
Finally, I analyzed the Industry Overview 2015, revenue numbers for bike rental companies, and the Bay Area Bike Share Casual User Report to determine the target customer for this market. This is discussed further in the section "TARGET MARKET".
BIKE SHARE
Based on a recent study by the National Association of City Transportation Officials, " there were over 28 million bike share trips taken in 2016, a whopping 25 percent increase over the prior year." This is a trend that is likely to continue as more millennials enter the work force and are more likely to choose an environmentally friendly method of commuting. Studies have shown that, "Millennials are more environmentally and socially conscious than older generations" and 30% of millennials do not have any intention of purchasing a car in the near future. Increasingly, this generation is choosing ride share, mass transit, and bike share programs to get to and from work: "they’re turning to a new set of services that provide access to products without the burdens of ownership, giving rise to what's being called a 'sharing economy.'"
Due to the increasing popularity of bike share programs, owners of bike rental shops say, "their business has unquestionably been hurt by competition from" bike share programs. In fact, one bicycle rental shop owner said, "he's lost $60,000 in sales over the past year due to DecoBike competition...'We never had a loss in (rental) numbers ever from the previous year until DecoBike came in.'" This is a major concern in the rental bike industry and will be a factor in market share in the future.
When researching who the major players are in the rental bike industry, I discovered that out of the top 10 revenue-generating road bike rental companies in the United States, there are six ride share companies. The top slot belongs to Citi Bike, a ride share program in New York City, that generates over $40 million in revenue. I have put together a spreadsheet that shows the top 17 companies in the United States that are strictly bicycle rental or ride share companies. There are many more bicycle companies that rent bikes as a part of their business, but their main revenue comes from bike sales and repairs. I did not include these on the spreadsheet. You can see the details of each company on the spreadsheet, but the 18 companies I included in my research are:
In addition, some of the rental bikes also rent out mountain bikes, so not all of their revenue comes from road bikes, but if you take the numbers in the Industry Overview, you can assume that approximately 20% of rentals are for road bikes for those companies that rent more than one type of bike.
MARKET PREDICTIONS
As mentioned above, bike share programs grew by 25% in 2016, and according to the District of Columbia Development Plan, its bike share program is projected to grow from $5 million in 2016 to $8.1 million in 2021, which is a growth rate of 12.4%. This is a conservative estimate, though, because bike share programs are cropping up everywhere. Currently, there are 55 bike share programs in the United States, most of them part of larger systems: "The country’s largest systems generate the vast majority of all bike share rides, with the five biggest systems (Citi Bike in New York, Capital Bikeshare in Greater Washington DC, Citi Bike in Miami, Divvy in Chicago, and Hubway in Greater Boston) generating 85% of all bike share trips."
According to the National Association of City Transportation Officials, there are only 13 states that currently do not have bike share programs. The industry is expanding quickly, having had only 4 systems in 2010, and is expected to continue to grow steadily over the next five years: "A number of U.S. cities, such as Detroit, New Haven, and New Orleans, have either selected vendors or are planning to launch systems, and many existing systems are also rolling out major expansions ."
What this means for the traditional rental bike business is that the rental shops are going to have to fight for market share. Although city officials believe that bike share programs do not target the same market as traditional bike rental shops, the numbers tell a different story. In San Diego, a county grand jury found that "77 percent of DecoBike's ride sharing is for recreational use," even though the administrative manager for DecoBike says, "we do have quite a bit of local ridership," meaning they are targeting local commuters and leaving the tourist market to the bike rental shops.
Traditional bike rental shops are already getting creative on how to compete with bike share programs. One of the ways they are doing this is by teaming up with technology startup companies that have created apps to help people rent bicycles from bike rental shops. The most popular app of this kind is Splinster, "a bike rental platform for renting bikes from individuals or existing bike rental shops." These apps will allow bike rental shops to target upcoming visitors and secure rentals before they arrive, thereby taking bike share options out of the equation. Even if bike rental companies do not use this technology, it is clear they will need to change their business model if they want to compete with bike share programs.
TARGET MARKET
Bike share programs tend to market their product to young urban professionals commuting to and from their work places who are already avid bike riders in their personal lives: bike share programs, "seem to attract a particular profile of user: male, white, employed and … younger, more affluent, more educated and more likely to be already engaged in cycling independently of bike-sharing." While bike share services are trying to "diversify ridership beyond the white, middle- to upper-class men who often dominate cycling’s demographics," it is unlikely they will change their models much because they are seeing so much growth with what they are already doing. In fact, the Bay Area Bike Share Casual Users Report shows that only 5% more men are likely to use bike share than be a "casual rider" who is more likely to rent a bike from a traditional bike rental shop.
As of the most recent report, 17% of bicyclists are leisure riders. This is the demographic that rental bike shops should target. Leisure riders are those who ride during vacations or who rent a bike to tour the town for an afternoon. In fact, nearly all the top bike rental shops on the spreadsheet I created, are located in tourist destinations. This includes rental shops in St. Augustine, Florida; Tucson, Arizona; Grand Canyon, Arizona; Nantucket, Massachusetts; New York, New York; San Francisco, California; and New Orleans, Louisiana. Based on the data in the Bay Area Bike Share Casual Users Report, bike rental shops will need to develop marketing plans that target tourists who are between the ages of 20 and 34 years old, are well-educated, have an income between $25,000 and $100,000 per year, and are visiting from another state or country. Local riders will likely choose bike share over rentals because they are more likely than visitors to have a membership for the bike share program.
CONCLUSION
The road bike rental market is becoming more complex with the proliferation of bike share programs in major cities. However, there is still a market for road bike rentals through traditional rental shops for tourists and other casual riders. To capture their share of the market, though, traditional bike rental shops are going to have to make use of technology and refine their marketing tactics to target their ideal customer if they want to compete with the bike share programs.
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