Company operating bike-share in St. George pulls the plug on its business

This 2019 file photo shows the effects of a partnership between the city of St. George, Southwest Utah Public Health and Spin to set up a temporary protected bicycle lane on South Main Street to evaluate the potential for a permanent lane, St. George, Utah, Oct. 22, 2019 | Photo by David Louis St. George News

ST. GEORGE — As the weather throughout Southern Utah begins to warm, outdoor enthusiasts are taking to St. George’s extensive hike and bike trail system in increasing numbers. Unfortunately, one component for fun in the sun will be missing.

The partnership between St. George and Zagster, the Boston-based company that provided management and maintenance of electric scooters, which ended earlier this year, has now terminated its St. George bike-share program as well.

Zagster’s parent company, New Jersey-based growth equity firm Edison Partners, has announced the sale of nearly all of its portfolio assets in Zagster to Boston-based Superpedestrian.

“All of the developments have the city very disappointed,” said Marc Mortensen, St. George’s director of support services. “Because of the events, the city will probably issue Request for Proposals to other companies moving forward for another bike-share program and possibly another (RFP) for e-scooters as well.”

According to a press release, Edison Partners, a mobility engineering and technology company, simultaneously announced a $15 million investment from Zagster, joined by Spark Capital and General Catalyst, in Superpedestrian.

The venture capital of $20 million will finance the rollout of a Superpedestrian e-scooter fleet.

Zagster credits the coronavirus to its demise.

Bicyclists ride bikes rented through the Zagster smartphone app, date and location not specified | Photo courtesy Zagster, St. George News

“The effects of COVID-19 on our communities have been tragic,” said company spokesperson Jesse Rosenberg. “Sadly, the pandemic has also impacted Zagster’s business, and it is with heavy hearts that we must inform you that Zagster will no longer be providing bike-share services in St. George.

“This was a difficult decision but a necessary one, for which we are truly sorry,” Rosenberg said.

Zagster launched a bike-share program in 2007 that eventually expanded operations in 35 states including Utah.

Zagster’s withdrawal timeline details

  • Bikes and rideshare stations in St. George will be removed through Friday, but this could be a moving target.
  • Because of the impacts of COVID-19 on Zagster’s business, it will not issue refunds.
  • Riders registered for the service will receive an email with details about the closure.

“We can’t thank St. George enough for your partnership,” Rosenberg said. “You have been at the forefront of micro-mobility, advocating for sustainable transport options well before it was commonplace across the country. We hope the city will continue this great work post-Zagster as you work towards your goals of improving our communities through mobility.”

Moving forward, city officials said it only makes financial sense to seek another partner to provide a bike-share program than operate one itself.

“There are some great private companies out there that would be willing to come to St. George,” Mortensen said. “We’ve already heard some interest, probably gearing up for a fall launch, but this is such a new development as a city we are going to have to talk it over to see where we go from here.”

A third entity in the partnership with Zagster involved Spin – an electric scooter company owned by Ford Motor Company that provided e-scooters to the city with Zagster providing maintenance.

In April, Spin and Zagster parted ways on its e-scooter synergy and left cities like St. George with a missing link in its active transportation mix of moving people around the city.

Although promising a contract with another e-scooter manufacturer, something that never developed, Zagster said at the time it was still committed to operating its bike-share program.

Although the city’s contract was with Zagster, the fleet of Spin app-accessible e-scooters rolled out in St. George at the end of March 2019 proved more successful than city officials anticipated.

Spin e-scooters, St. George, Utah, Oct. 7, 2019 | Photo by Ryann Richardson, St. George News

What began with 100 scooters, scattered for rent at approximately 30 locations around town, quickly expanded to 400.

Shortly after launch, ridership outpaced expectations, averaging 18,000 trips a month.

According to San Francisco-based Spin, there had been more than 100,000 trips on an e-scooter in St. George, averaging just over 11 minutes per ride and 2.3 miles in distance.

While Zagster sites COVID-19 as an aggravating factor to its bike-share program’s demise, city officials question the company’s statements that the coronavirus was the singular factor or its sale to Superpedestrian.

Zagster’s actions with the bike-share program sent up red flags to its community partners in March 2018 when the company announced that it had raised $15 million in additional venture capital while laying off a number of employees.

“It didn’t seem like their business models both with e-scooter and bike share was sustainable long-term,” Mortensen said. “They were growing and expanding, but I have the feeling they burned through hundreds of millions of dollars in venture capital. COVID may have compounded the problem, but I don’t think their business model was sustainable long term.”

Mortensen added the key in any industry’s survival is a well-thought-out business model that defines operations, identifies revenue sources, customer base, products and details of financing.

It is such a new industry, Mortensen said, “I am not sure Zagster knew” their future. “That’s just my take on it.”

Bikes at the ready to be rented through the Zagster smartphone app, date and location not specified | Photo courtesy Zagster, St. George News

Although city officials and Zagster say the St. George market may have been too small, it could have been scaled down to meet market trends and guarantee reasonable revenue expectations.

“I think they needed X amount of rides for X amount of days to be profitable and I’m not sure they were hitting that mark,” Mortensen said.

St. George Mayor Jon Pike agrees that Zagster might have been too big for their business britches.

“Zagster has been a good partner for us,” Pike said. “But, this is an evolving industry. They have found in some of the smaller markets they just found they couldn’t make it work … and with essentially what I believe was a purchase and not a merger (with Superpedestrian) our contact with Zagster is invalid. Still, it seemed like Zagster’s business model wasn’t sustainable.”

Regardless of a traditional bicycle or e-scooter, or a mix of both, the thrill of the ride has never been more popular, Mortensen said.

“Judging by our trail use today, it is being used more and more than ever especially by bike riders,” he added. “If you go down the trail at the confluence of the Virgin and Santa Clara rivers, you will see hundreds of riders go by every day.”

Over the past couple of months, increasing numbers of people have sought an outlet to being sheltered in place in their homes. City officials say the 100-mile trail system is key to a positive, safe, socially distanced way to burn off steam from cabin fever.

To meet the local demand, Pike said, he believes the City Council will agree to solicit proposals from other vendors to offer a new and improved program to have bike share and, potentially, e-scooters roaming once again on city streets and riding throughout its trail system.

“I would hope we will do this quickly and get those services back in St. George,” Pike added.

Copyright St. George News, LLC, 2020, all rights reserved.

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