The final component of creating the financial model is determining the revenue streams,
namely, defining membership fees and user pricing. Most publicly funded systems require
some combination of advertising, sponsorship, membership fees, and tax revenues to cover
their operating costs. In this case, the general recommendation is that operators be paid by
the government, based on service-level agreements, and not directly from revenue streams,
as it helps with transparency of the system and gives the government some control over
performance. Private operators providing bikeshare outside of a public-private partnership
(i.e., permit program, MOU, etc.) cover their operating costs through trip fares, user deposits,
and investment funding from venture capital and other private firms. The long-term
profitability of this approach has yet to be proven.
For publicly funded systems, the utility bikeshare provides is often more important than its
revenue potential. Government funding for capital costs and operations makes sense in light
of the fact that bikeshare is part of the larger public transport network. In Europe, the US, and
many other cities in the developed world, public transport is generally subsidized.
What the city invests, the city has a chance to receive a return on; but for private operators
running bikeshare as a business, their revenues are typically theirs to keep. The financial
model for a publicly-funded system, however, must be clear on where any revenue generated
through the system will go, and this must be defined in the contract. In Chicago, revenue
generated from advertising and sponsorship of the Divvy bikeshare system is invested into
cycling infrastructure projects, Divvy community ambassadors, staffing for Vision Zero
initiatives, and other areas and projects related to active transportation that benefit more
than just Divvy users.[52]
While annual membership and user fees provide a stable revenue source, they rarely generate
enough revenue to ensure that the system is financially self-sustaining. Capital Bikeshare
comes close, with an approximate 97% farebox recovery, and Chicago’s Divvy system recovers
80% of its costs from user fares. Smaller cities like Boulder, Colorado and San Antonio, Texas
recover closer to 35% of their costs at the farebox. The gap between system revenues and
operating costs is covered in different ways, and often depends on the structure of operations.
Nonprofit systems are typically sustained through sponsorships, federal and local grants, and
advertising. Private operators (as part of a public-private partnership) fill the gap with public
funding, sponsorships and/or advertising, or with investment funding from private firms, a
source which has been prevalent among startup dockless operators. Several publicly-procured
station-based bikeshare systems—including New York City, Tampa, and Phoenix—have been
able to operate on private funding and earnings, without any public funding.
7.3.1 GOVERNMENT FUNDING
Government funding can be used to cover capital costs—which means the government owns
the assets—and is sometimes used for operating costs. Not unlike many public transportation
systems, bikeshare systems often have difficulty covering operating expenses from
membership and usage fees alone. Because of this, subsidies may be necessary to cover
operational expenses and can come in the form of earmarked funds for sustainable
development, innovative initiatives, or even specifically for bikeshare.
Earmarked funds from specific revenue sources, such as parking fees or congestion charges,
are preferable to general operating budgets of the department managing the program. Parking
fees and congestion charges monetize the negative impacts that cars have on the city, from
the road space they take up to the air and noise pollution they cause. Redirecting that money
to support a sustainable transport option seems logical as a cross subsidy to the system.
Barcelona is notable for being the first city to use 100% of the net revenue from on-street
parking fees to finance its public bikeshare system, Bicing.
Governments can, however, choose to use the general budget or specific transportation budget
to fund the capital investment in bikeshare. This was the case in Mexico City, where 100% of
the capital investment for Ecobici came from the city’s general budget. Given the level of
political will needed to make this happen, the bikeshare system gained legitimacy inside the
government. General tax revenues may be needed if earmarked funds are not an option. Most
station-based systems in China are supported completely by government funds, while a
private sector company serves as the operator.
7.3.2 SPONSORSHIP
Sponsorship—sharing the system’s image and brand with a sponsoring entity, as with Ford
GoBike (in the Bay Area of California) and Santander Cycles (in London)—can help provide
funding to cover investment costs. In most cases, sponsorship includes some degree of
branding or naming rights, such as with Citibike in New York and Miami or Just Eat Dublinbikes
(sponsored by mobile ordering app Just Eat), or having the company’s logo placed on the
stations and bikes, such as with Bike Rio in Rio de Janeiro (sponsored by bank Itaú) or Divvy in
Chicago (sponsored by healthcare provider BlueCross BlueShield). Different parts of the
system can be valued separately for sponsorship. In Taiwan, Taipei’s YouBike and Kaohsiung’s
Cbike systems have sponsors, bicycle companies Giant and Merida, for the bikes themselves.
Rio Tinto sponsors the BIXI system in Montreal and only has a small logo on the map boards.
Even if a sponsor actually pays for the assets, the sponsor does not retain ownership. Usually,
the entity responsible for securing the sponsorship will own the assets.
Sponsorship can offset capital costs, operational costs, or both. However, sponsorship can
limit the advertising potential of the bikeshare system, so the implementing agency should
assess which is a more favorable investment. Bikeshare operator Zagster touts the benefits of
collaborative sponsorship—which provides branding opportunities in exchange for financial
support from community businesses, nonprofits, developers, etc.—for small and mid-size cities
that may not otherwise be able to afford a bikeshare system. Sponsorship agreements should
consider the future expansion of the bikeshare system and the long-term vision. New phases
could either build on the sponsorship of the first phase or try to package sponsorships in
terms of phases. Future deals tend to be less valuable than the initial, or opening,
sponsorship.
Finally, with sponsorship comes the risk of affiliation with a private entity. If the sponsoring
entity has image problems during the sponsorship period, then the bikeshare might suffer
from the association. The long-term risks of such an agreement need to be evaluated before
entering a sponsorship deal, and a risk mitigation plan should be developed.
7.3.3 PRIVATE INVESTMENT
Massive private investment completely upended the global bikeshare landscape starting in
late 2016. Chinese internet giants Alibaba and Tencent, as well as Silicon Valley venture capital
firms like Sequoia Capital and Accel Partners invested heavily in private dockless bikeshare
companies. Mobike and ofo reached “unicorn” status in 2017, each valued at over US$1 billion.
While this level of investment allows dockless bikeshare companies to provide bikeshare to
cities without requiring any public funding, the long-term viability of their business model has
yet to be shown. For this reason, cities should plan for how to handle private bikeshare
operators not being able to continue operating, and should include language in the permit that
requires companies to alert the city prior to ceasing operations.
Alternatively, private entities, such as universities or developers, may be willing to contribute
directly to the capital cost of bikeshare stations on or near their premises, and possibly pay
annual operating costs over a set period. This type of investment would probably happen in
later phases, after the success of the system has been shown, but it can occur where there is
high demand already. Property developers may be enticed to invest in bikeshare to get
stations built in their area first, if they think it will increase the marketability of the
development. The implementing agency should either proactively approach developers and
other entities in areas it has identified for implementation or expansion—and not let developer
interest dictate expansion—or give the authority to the operator to do so. In Boston, the
Hubway bikeshare system has a handful of “Champion Partners”, including New Balance,
Biogen, and Harvard University, that sponsor a station and are advertised on the system’s
website. In its zoning code, Arlington, Virginia, offers private sponsorship opportunities that
include advertising on Capital Bikeshare bikes and/or stations under their jurisdiction. While
developers can negotiate with county officials to include full or partial station funding as part
of a transit-related improvement package, officials have the right to decline if they think the
station will not be well used.[53]
7.3.4 LOAN FINANCING
Taking out a loan from a bank to cover the investment in capital costs is an option. If bank
loans are a source of financing, then the financial model needs to include debt servicing in the
operational costs. The revenue model will need to be able to cover those expenses, which can
be quite high. Loan financing is usually reserved for the private sector, but can be a last resort
option for publicly-operated systems.
7.3.5 USER FEES
The traditional bikeshare payment structure, established by the Lyon and Paris bikeshare
systems in the mid 2000s, features a membership fee paid up-front guaranteeing unlimited
rides of a certain duration (usually 30 minutes). Longer trips are assessed an additional fee per
designated increment of time. This pricing model is effective for encouraging ridership—
especially short trips—but is not typically able to sustain the system. More flexible pricing
structures, including those that reduce operating costs by encouraging system rebalancing,
as well as peak/off-peak fees could help make bikeshare more financially sustainable.
There are two types of fees charged to the user, which can be levied on their own or in
combination:
Subscription Fee
The customer registers with the system and is granted unlimited access for a certain time
period—a day, week, month, or year. Typically, shorter-term subscription fees generate the
most revenue. In an analysis of US systems, annual members took a large majority of trips,
but casual users provide roughly two-thirds of the revenue for the system.
Usage Fees
Usage fees are charged during the time the bike is in use. Most systems include a set
increment of time in the price—normally 30 or 45 minutes. After that, usage fees can
increase exponentially as a way to encourage short trips, and thus higher bike turnover.
They can also be a flat rate—and, therefore, less punitive—tied to each additional
increment of time. Often, usage fees are accrued because casual members may not
understand they will be charged for exceeding the ride time limit included in the base
price. For hybrid systems, usage fees include time overages and any charges to the user
for parking a bike outside of a hub or preferred station. Dockless systems only assess
usage fees and typically do not offer a “free” ride period.
System planners must consider the service-fee structure carefully, since a significant post-
implementation change to the price structure is likely to cause public backlash or, at the very
least, confusion. Some cities and academics have conducted studies to better understand the
effect of various price structures on usage and revenue generation. One such study finds that,
unlike private cyclists who place heavy value on parking availability at their destination,
bikeshare riders will make decisions related to their trip based on costs. Thus, increasing the
number of stations in already well-covered neighborhoods may be less effective in generating
uptake than siting new stations outside of the service area that allow more trips to and from
existing stations within the “free” ride period.[55] Many cities try to keep the price of bikeshare
lower than that of mass transit and personal vehicles make it competitive with those forms of
transportation and accessible to lower-income users.
Setting user fees requires knowledge of the habits and average routes that may be used by
casual users versus long-term members, as well as of the city’s own criteria, policies, and
objectives for the bikeshare system. For example, Barcelona’s Bicing system is available only to
residents, as users are required to register for an annual membership, and the system offers
no daily or weekly passes. This decision was made in part so that the bikeshare would not
compete with the multiple bike rental operations already in existence in the city. Bicing is also
a hybrid system—traditional bikes and pedal assist—and offers different pricing schemes for
each bike type. Alternatively, Pittsburgh’s Healthy Ride system modeled its fares after transit,
offering a US$2 single trip option, as well as “standard” and “deluxe” monthly options. No
annual subscription is offered.
Pricing models vary widely, and should incentivize the types of trips the system will serve.
Contract or permit language should require each operator to provide a pricing strategy, and
should incentivize operators that enable bikes to be unlocked using a linked city public transit
card. Below are some examples of pricing strategies:
Pay Per Trip (Usage Fee)
Transit-focused bikeshare systems such as Germany’s Call-a-Bike have been using the pay-pertrip
model for some time. These systems almost exclusively serve first-last-kilometer
connections, which makes their low per-trip price appropriate. Call-a-Bike charges €1 for 30
minutes, but also offers a monthly price.
Dockless bikeshare systems are characterized by low per-trip pricing as well (usually around
US$1 per 30 minutes in the United States, and sometimes prorated by the minute), which tends
to benefit occasional users more than regular commuters. However, station-based systems are
also begining to offer a relatively low ($3 or less) per trip fare. This model encourages the
operator to maximize user trips (each trip generates revenue) and the user to minimize trips
because they are paying at the time of each trip. Per trip pricing may serve to lower barriers to
accessing bikeshare for some groups that may not be able to make a more costly investment in
a monthly or annual membership. However, without a discounted monthly or annual
membership option, commuters who take dockless bikeshare to and from work three times per
week would spend about US$24 per month on bikeshare, compared to annual memberships
which tend to range from US$60-$120 for the entire year.
Annual Subscription + Usage Fees
Most station-based systems charge a flat subscription fee and usage fees only if the user
exceeds the ride time limit. The subscription fee buys the user a specified amount of riding
time, and then usage fees are charged once that period elapses and the bike has not been
returned. Minneapolis, Atlanta, Vancouver, and several other North American systems reward
annual members with double the “free” riding time (60 minutes) compared to casual members
(who receive 30 minutes). Mexico City and Rio de Janeiro offer all users 45 and 60 minutes of
included riding time, respectively.
Long-term subscriptions, usually called memberships, offer a stable revenue stream for the
system, and the registration process plays a secondary role of verifying customers’ personal
and payment information on a regular basis. To make membership more attractive, most
systems offer either discounted usage fees or slightly longer included ride times. This model
tends to incentivize the user to maximize trips (i.e., each additional trip lowers the cost per
trip) and the operator to minimize trips. Membership allows the system to keep track of active
users more accurately by requiring them to update their user profiles and payment details on a
regular basis. Members also may enjoy perks—like contributing ideas for new station
locations—in annual user surveys. Strong long-term membership numbers may also help to
attract sponsors (see subsection 7.3.2, above) and/or advertisers (see subsection 7.3.6, below).
Low Annual Subscription Pay Per Trip
A less common pricing structure, this option best serves people who use bikeshare
occasionally, but not on a regular basis. Madrid’s all pedal-assist BiciMad system uses this
unique membership type, requiring users to pay a relatively low annual subscription fee (€15
with a city transit card, €25 without one) and then pay €0.50 per 30 minute trip. BiciMad also
offers a flat €2 per-trip option with no annual subscription required. Barcelona Bicing’s pedalassist
membership follows this structure as well: €14 for an annual subscription and €0.45 for
each 30 minute trip taken, compared to €47 for an annual membership that includes unlimited
30 minute trips using standard bikes.
Pay Per Day (Usage Fee)
This pricing option is rare, but is used by OV-Fiets, a transit-focused bikeshare system in the
Netherlands. Users pay €3.85 for a 24-hour rental period and are encouraged (by way of a €10
fee) to return the bike to the station it was checked out from. This is mainly used by commuters
who use bikeshare to travel home from the train station in the evening, and back to the same
station in the morning. Compared to the above pricing schemes, this fee structure will likely
result in far lower daily usage per bike.
Examples of Bikeshare System Fee Structures By Region
7.3.6 ADVERTISING REVENUE
There are two main forms of advertising revenue:
General Outdoor Advertising
Advertisements can be placed in public spaces, such as on bus shelters, benches, or
billboards. Many systems contract all or part of the city’s outdoor advertising to the company
implementing the bikeshare system. Estimates indicate that JCDecaux in Paris generated
revenues of up to €60 million (US$80 million) annually from advertising. Linking bikeshare
operations to the general outdoor advertising revenue means that operational expenses will
be subsidized by the advertising revenue without directly touching city revenue sources. The
problem with this arrangement can be the lack of clarity between the costs reported and the
advertising revenue taken in by the firm. The lesson learned from Vélib’ in Paris and other
systems with outdoor advertising revenue contracts is that separate contracts should be
drafted for outdoor advertising and for operating the bikeshare system, even if both contracts
are awarded to the same company. The revenue from all sources should go into a government
or escrow account, and the operator should be paid based on service levels. While advertising
often comes under criticism, many systems create very good contractual arrangements that
utilize outdoor advertising.
Advertising on Bikeshare Assets
The bikeshare assets themselves—bikes, stations, kiosks, etc.—can also serve as advertising
platforms. Boston’s Hubway bikes have sponsor New Balance’s logo on the rear wheel cover, as
do Dublin’s “Just Eat” bikes. Santa Monica’s Breeze bikes feature advertisements for online
streaming service Hulu, the system’s presenting sponsor, on the rear wheel cover and basket.
Music streaming service, Deezer, advertises on bikes in Berlin’s station-based system, which
offers free 30 minute bikeshare rides to Deezer customers.
