How to Start a Shuttle Service in 2022: A Complete Guide
January 19, 2022
As vaccination rates increase across the country, air travel is on the rise. According to the TSA, travel throughout the U.S. on August 8, 2021, was up 160% compared to the same date in 2020. An airport shuttle business is a profitable business venture as travelers return to airports.
Use cases for shuttle services extend far beyond air travel. Shuttle buses can offer affordable, efficient transportation options for people seeking access to hospitals and jails, and they can help curb traffic by transporting commuters into the city.
When starting a shuttle service, it’s important to keep recurring costs as low as possible to maximize profitability. Proactively facilitating route planning, route optimization, and driver management reduces costs, saves time on management tasks, and makes your shuttle service more profitable and efficient.
Jump to the section that most interests you:
- What Is a Shuttle Service?
- Why Start a Shuttle Service?
- What Are the Costs of Starting a Shuttle Service?
- How to Start a Shuttle Service
- How to Reduce Recurring Expenses for a More Efficient, Profitable Shuttle Service With OptimoRoute
- The Future Is (Shared) Mobile
What Is a Shuttle Service?
A shuttle service regularly transports 10 or more travelers, typically by bus or van, from one place to another. One version of a shuttle service company provides its customer base with transportation to and from the airport. Shuttles are attractive to travelers because they are often cheaper than self-parking or taxis.
Another example is a medical transportation service or NEMT business. In this case, shuttle drivers would transport patients or the elderly to and from hospitals, homes, and elderly care facilities.
There are essentially two types of shuttles: scheduled shuttle services, which run on a pre-scheduled loop between set locations, and on-demand shuttle services, which go to and from different locations depending on the passengers’ needs. A shuttle that runs back and forth between a given hotel and various airport gates is an example of a scheduled shuttle service. An on-demand shuttle operates more like Uber Pool: it can go to and from the traveler’s destination of choice, but it might make multiple additional stops along the way to accommodate other travelers.
Why Start a Shuttle Service?
With travel increasing once again, now is a good time to start a shuttle service. Between 2016 and 2019, the U.S. charter bus industry saw sustained growth and earned $3.1 billion in revenue. Although 2020’s pandemic-related dip in travel resulted in a 15.4% drop in revenue growth in the charter industry, current signs are promising. Airports and hotels may want to offer returning guests a convenient and reliable way to get to and from their destinations. Shuttle services now have a unique opportunity to partner with area businesses—including hotels and shopping centers—to capitalize on increased activity in the travel, hospitality, and retail sectors.
If run efficiently and effectively, shuttle services can be a good way to make money—particularly if they tap into high-traffic routes or use technology to run their routes more optimally.
What Are the Costs of Starting a Shuttle Service?
Starting a transportation business involves two types of costs: one-time (also called startup) and recurring, which are ongoing.
Business License Expenses: Believe it or not, simply starting a shuttle business—before customers, employees, or vehicles—comes with a price tag. Whether you decide on a corporation, sole proprietorship, or LLC business structure, you’ll owe your state filing and reporting fees. Exact amounts vary by state and type of business, but fees typically fall between $50 and $150.
Vehicles: One of the largest (and most important) upfront expenses for shuttle services? The cost of the motor vehicles. Shuttle bus prices vary depending on their size, passenger capacity, whether you are buying or leasing, and whether they’re new or used. According to Major Vehicle Exchange, new 15-passenger buses cost $50,000, on average, and used buses cost $25,000.
Vehicle Permits: Once shuttle service owners purchase their vehicles, they also need to buy permits that allow for their use in a business capacity. Again, requirements and costs vary by state, but company owners can expect to pay a permit application fee as well as a small annual fee.
Franchising Licenses: Entrepreneurs might opt to open a shuttle franchise for various reasons rather than go it completely alone. By franchising, shuttle services can tap into the brand recognition of an established shuttle company, gain support from a larger organization, and limit their risks and liability, all while still becoming owners of a shuttle company. Starting a franchise comes with its own set of fees, however. For example, it costs between $43,000 and $48,000 to open a Driverseat shuttle franchise. This sum covers multiple expenses, including a franchise fee, a training fee, a vehicle down payment, marketing costs, and various other expenses.
Operating a transportation service comes with its fair share of recurring costs. The business’s profitability will depend on its ability to keep these costs as low as possible while attracting a substantial number of customers.
Fuel: Fuel is an essential—and highly variable—expense. According to AAA, diesel fuel, which powers many buses, currently costs anywhere from $2.933 in Mississippi to $4.375 in California. Fuel prices are subject to a variety of macroeconomic conditions over which shuttle companies are powerless, so it’s important to use fuel as efficiently as possible.
Driver Wages, Maintenance, and Storage: Other recurring costs include driver wages, which amount to an average of $13.36 per hour, cleaning and maintenance costs, and vehicle storage fees. According to research conducted by the Kevin Smith Transportation Group, annual gas a diesel costs average between $2,110 and $2,500 per vehicle, and annual insurance costs can range from $3,360 to $6,000.
How to Start a Shuttle Service
Once you’ve identified how much capital you’ll need to set up and keep your business running, you can plan the details of your business.
Determine your service area
Before you determine your shuttle transportation service area, it’s important to understand the scope of your operation. With the resources you have available to you, figure out how many shuttles you can afford to operate. If you have a healthy budget, you can cover a wider geographic area. If you’re operating with limited resources, it might make more sense to start out small and plan to expand eventually.
Regardless of the size of your business, it’s important to conduct competitive research to determine gaps in the existing market. How many shuttles are currently in operation in your area? Are they on-demand shuttles or scheduled shuttles? Do they have exclusive partnerships with area organizations, such as hotels and shopping centers? Look at local airports to see if an airport shuttle service model would make sense. Reach out to establishments that don’t currently offer a shuttle service or taxi service for their customers in order to develop potential partnership opportunities.
In order to maximize your profit, it’s important to tap into a heavily trafficked area and transport as many passengers as efficiently as possible.
Decide whether you’ll offer scheduled or on-demand service
Once you know where you plan to operate your transport business, you can determine your business model. The two most common options are scheduled (like a bus service) or on-demand services. You’ll charge customers differently depending on which type of service you offer. For example, if you’ve partnered with a hotel to offer an airport shuttle, the hotel will probably pay you a flat fee to run on a scheduled loop. If you offer on-demand service, you’ll likely charge travelers directly.
If you have a smaller team and fleet, it might make sense to begin as a scheduled shuttle service. If you’re able to forge a partnership with an area business, you can begin by establishing a set shuttle route between that business and another location, such as an airport or a hospital.
Consider offering on-demand service at a premium price if you have a larger team, more vehicles, and greater flexibility. On-demand service, which takes multiple travelers to and from varied pick-up and drop-off locations, adds routing complexity. This makes route optimization important.
Acquire necessary documentation and insurance
Before you ever drive a passenger, you need to make sure your company’s documentation and insurance needs are in order. You’ll need the following:
- Multi-passenger permits, the costs and details of which vary by state
- Vehicle registration
- Appropriate licenses for your drivers, depending on your location and the type of vehicles in your fleet (some states will require a chauffeur’s license; many will require a Class B license)
- Business and liability insurance
- Airport permits, if applicable (varies by the airport)
Hire your team and purchase your vehicles
Once you’ve figured out the costs of starting a shuttle service, determined your service area, and gotten your documentation ducks in a row, it’s time to hire your team and purchase your vehicles. These are some of a shuttle service’s most important resources: the early success of your business hinges on the quality of both your drivers and your vehicles.
Purchase vehicles based on the kind of service you’re planning to offer. Obviously, a limo business would need limousines. If you’re offering a more bespoke, on-demand service, you may need a fleet of smaller vans. If you’re anticipating higher-capacity trips, you may need buses that can accommodate 40 or more passengers. Regardless of vehicle type, make sure your shuttle is accessible for disabled travelers and is ADA compliant.
As you build out your business, keep travelers’ comfort and safety in mind. Do your vehicles have enough storage for travelers’ luggage? Will they allow for appropriate social distancing? Do they offer optimal airflow? These differentiators could make your business the shuttle service of choice for frequent riders.
When you begin to build your team, make sure to hire experienced, reliable drivers. You’ll need a team that drives safely, takes direction well, and is dependable. As you strive to reduce inefficiencies that could undermine your profit, it’s important to ensure your drivers show up on time, adhere to the schedule, and willingly make any recommended route changes that can save time and offer a better customer experience.
How to Reduce Recurring Expenses for a More Efficient, Profitable Shuttle Service With OptimoRoute
Proactive route and driver management reduces costs, saves time, and drives profitability. By using software like OptimoRoute’s to create the most efficient routes for their drivers, shuttle services can get a leg up on reducing recurring expenses and becoming more profitable more quickly.
Inefficient, unoptimized routes don’t just add time for drivers and travelers—they can also have a negative effect on the business’s bottom line. Longer routes take more time, which results in higher wages for drivers and a greater expenditure of expensive fuel. Plus, longer routes mean fewer trips for the company—and fewer associated revenue opportunities.
Long and inefficient routes are also more likely to experience traffic issues and delays. This detracts from the customer experience and causes potential damage to the brand.
Optimize Shuttle Routes With OptimoRoute
It’s critical to optimize the speed and efficiency of your shuttle’s routes and schedules, but doing so manually is difficult and time-consuming—especially for a lean team whose efforts could be better spent on other higher-value tasks. Route optimization software like OptimoRoute’s can help.
OptimoRoute creates more efficient routes, regardless of the total number of stops your shuttle will ultimately make. The software automatically optimizes multi-stop routes by considering the driver and vehicle schedules, capacity, and service areas. Automation means less manual work for your team—and it gets drivers on the road more quickly with less oversight.
Plus, OptimoRoute tracks your fleet in real time, so you can predict delays and react accordingly. Easy-to-use analytics features allow for continuous improvement and driver accountability. This means you can see who on the team is performing well and who isn’t, so you can intervene as needed.
The Future Is (Shared) Mobile
As travel resumes, consumers will look for more cost-effective methods of travel. This increase in interest makes starting a shuttle service an ideal business venture.
What’s more, individuals and communities are more concerned than ever about traveling in a way that limits carbon emissions. Recent years have seen the rise of a rich urban mobility landscape, in which public transportation, ride-sharing, and—yes—shuttle services offer alternatives to energy-inefficient single-passenger vehicles. As sustainability becomes an ever more pressing concern, shuttle services may become even more attractive to travelers seeking to reduce their carbon footprints.
Starting a shuttle service can be a lucrative way to launch a business, serve a community, and promote a more sustainable future. However, doing so in a way that optimizes efficiency and profitability takes careful planning and logistics optimization. Software like OptimoRoute’s, which helps companies save fuel, manage drivers, and run more efficiently, can help.
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