For Tel Aviv residents, the Tel-O-Fun bicycle rental network – which lets people go for a spin for an hour or a day at a time, using bikes parked at stations across the city – has been a huge success, an environmentally friendly and low-cost way to get around the city and avoid traffics snarls and the paucity of parking.
But for the company operating Tel-O-Fun, the ride has been less pleasant. After two years of losses amounting to 701,000 shekels (about $180,000), FSM Ground Services registered a slim 144,000-shekel profit in the first nine months of this year. Revenues which grew 16.5% last year to 17.5 million shekels, amounted to just 10.7 million shekels in the first nine months of 2014, a 15% drop from the same time last year.
Moreover, the business model FSM uses, which relies on a mix of subscribers and one-time users paying cash on the spot, seems to be failing. Even though 80% of the bicycles are taken out by subscribers, they account for just 20% of the company’s revenues.
The figures come from the third-quarter financial report of Fridenson Logistic Services, which is traded on the Tel Aviv Stock Exchange and controls 45% of FSM.
FSM won the franchise to operate the bicycle rental network until the year 2021. It erected 110 stations and deployed 2,000 trademark, green-and-white bicycles, set up a website and a helpline. In exchange, FSM gets a 6 million-shekel payment from the city every year and splits any revenues exceeding 4.5 million shekels with it.
Tel-O-Fun is modeled after similar operations in a host of European and North American cities, including Paris, Brussels, London and New York. But like Tel-O-Fun, bike rental schemes have not proven to be profitable. Montreal took over its bike network BIXI; Citi Bike in New York ran into financial problems; and in London, Barclays Cycle Hire loses $2,000 annually on each bike in its fleet.
Tel-O-Fun is not a major part of Fridenson’s business, which is mainly devoted to more conventional transportation like trucking and freight forwarding. In any case, the 2014 figures may be nothing more than a temporary setback.
The decline in revenues this year seems to have stemmed from the Gaza war over 50 days of the summer, keeping tourists away and many Tel Aviv residents at home, as rockets rained down from Gaza. “Operation Protective Edge struck a real blow on the use of Tel-O-Fun services,” said Ofer Sela, director of operations.
He estimated that the number of riders dropped from 9,000 a day before the fighting began at the start of July to between 7,500 and 8,000.
“The third quarter is usually our most profitable,” said Asaf Tikotsky, Fridenson’s chief financial officer. “These are the summer vacation months, when there’s a flood of tourists. September is the High Holiday month when many people want to ride bicycles.”
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