NYC Citi Bike pedaling through an uphill battle

June 16, 2014

Ever since its inception, New York City’s much-hyped Citi Bike program has hit roadblocks. In its second year now, the problems seem far from over for the bike-share program. New York City is now asking Alta Bicycle Share (which oversees the entire bike-share program through its subsidiary) to pay up $1 million to cover the parking revenue lost from the spaces occupied by its docking stations.

The bike-share program took off in 2013 under a contract with Alta Bicycle Share, which would maintain the network of bikes and docking stations, and receive revenue through rentals and sponsorship in return. Former Mayor Bloomberg envisioned running the program independent of public money. Alta anticipated huge profits since the program was expected to be a hit with bikers, making it a self-sustaining operation.

Image by drpavloff

Citi Bike is a hot mess

However, the road has always been bumpy one for Citi Bike. Its launch was delayed due to operational problem in its software, and now Bixi, the company that designs the bikes and supplies supporting technology, has filed for bankruptcy. The incident was followed by the resignation of Justin Ginsburgh, director general of Citi Bike.

Even after selling more than 400,000 passes and 6 million trips, the program has not tasted the success it had hoped for.

Citi Bike has many structural problems, one being the annual plan’s low cost, as well as its sole sponsor. Other snags like the inconvenient process of getting short-term membership, unreliable credit card readers and a time-consuming signup process have also resulted in some bad reports. High maintenance charges do not help either. (The need to manually change batteries every night led the company to hire a subcontractor, increasing operational costs.)

The weather too, had a big role to play in bringing down the number of bike rides from as high as 30,000 times per day during summers to as low as 1,230 in winters across the city. The unusually low temperature resulted in revenue loss, with sales plummeting to $4,000 in January against daily revenue of $250,000 during summers.

Hurricane Sandy also damaged the equipment and prolonged the problem.

The loss of revenue caused Alta bicycle to slash its spending on infrastructure and maintenance, resulting in poor condition of the equipment with less number of broken docks and bicycles being repaired.

What can revive Citi Bike?

Experts have offered suggestions that could bring CitiBike back on its feet, or in this case on its wheels. Raising public money and increasing annual rates is one of them. Although it is not seeking federal money, Citi Bike has approached the de Blasio government to discuss raising the annual membership fee from $95 to $140.

Having multiple sponsors (instead of just Citigroup) is another solution. Since the mayor’s office doesn’t intend to bail out the program, Citi Bike is eyeing sponsors to rescue it, many of whom have shown interest in funding it.

Despite its fiscal woes, in terms of health outcomes and safety, Citi Bike has been an unqualified success. Kickoff of the program was accompanied by grave predictions of a tripling of bike deaths in the city, but not one Citi Bike-related death has been reported. Even the New York Daily News, often a critic of the program, touts the program’s returns in the form of slightly lowered obesity rates and improved cardiovascular health.

“If it’s not working, it’s because there hasn’t been either the right partners, the right structure, the right overall commitment from all parties. Point is, it’s solvable,” says Kevin P. Ryan, founder of Gilt and member of the partnership.