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Why Your Uber and Lyft Rides Are So Expensive | WSJ - YouTube
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- [Narrator] In January
2020, say an Uber ride
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from New York City's
John F. Kennedy Airport
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to Midtown Manhattan cost about $50.
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Today, based on the average
price rise of Uber rides,
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that same trip could be $75,
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about a 50% jump.
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You may have noticed this too.
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According to data from
Rakuten Intelligence,
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the average Uber and Lyft
fair in the US rose month
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to month from February through July,
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breaking records each time.
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In July 2021, consumers
paid over 50% more per ride
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compared with January 2020.
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- All these customers are complaining
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that they are actually
paying more for their ride.
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- [Narrator] The biggest
factor that's driving prices up
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has to do with the pandemic,
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but prices were slowly beginning to rise
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even before the pandemic.
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- To all the viewers seeing this,
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don't expect dirt cheap prices the way
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that we had before the pandemic.
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- [Narrator] Here's why
your Uber and Lyft rides
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are going through the roof,
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and why they might not ever come
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all the way back down
to where they once were.
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- Ride prices are higher
for customers right now,
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especially during the pandemic
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'cause there is that shortage of drivers
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and increased demand.
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- [Narrator] Harry Campbell,
an Uber and Lyft driver
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runs a popular blog called Rideshare Guy.
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- Drivers, like many others,
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had a huge impact by the pandemic,
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and I think really what
we saw at the start
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was demand for ride hail
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really just fell off the cliff.
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- [Narrator] In early 2020,
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bookings for Uber rides declined 75%
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as Americans hunkered
down for the pandemic.
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As states have opened back up,
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the demand for rides has returned faster
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than the supply of drivers,
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resulting in price hikes in many cities
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across the US.
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Experts say that prices are taking a while
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to return to normal for a few reasons.
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- I think the number one factor
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why drivers haven't come
back to Uber and Lyft,
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and why we're seeing this shortage
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on the supply side still to this day
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is because of unemployment insurance.
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- [Narrator] Some states are still paying
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unemployment benefits
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but in states that have stopped benefits,
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Uber and Lyft are seeing drivers return,
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and prices go down.
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- Uber has said that they've
seen prices come down
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in places like Miami, Houston and Atlanta.
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Whereas big cities like New York,
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San Francisco and LA,
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prices are still high there
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because drivers haven't returned.
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- [Narrator] Uber said 90% of
the 90,000 inactive drivers
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they surveyed in June indicated they plan
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to return by September
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when unemployment benefits
expire in most states.
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Another factor keeping prices up,
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ride share companies aren't just competing
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for drivers amongst themselves,
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they're also competing with
food delivery services,
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which drivers say offer
safer work conditions.
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- Traditionally, driving for hire
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has always been a pretty dangerous job.
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You really don't know who's getting
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into your car at all times.
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I think the CDC recommendation
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was to stay six feet away from people,
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and as soon as someone gets into your car,
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they're breaking that rule.
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So a lot of gig workers
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have switched over to delivery services
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and found that they liked it.
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- Riders, on the other hand,
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are back on the road in droves.
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As rider demand as increased,
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both Uber and Lyft
increased driver bonuses
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earlier this year
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to attract more drivers
back to the platform.
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In April, Uber announced it
was allocating $250 million
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in an effort to boost driver availability.
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Lyft spent $572 million
on driver incentives
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through the second quarter of 2021.
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For now, these incentives
seem to be working.
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According to Lyft, more drivers
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are coming back to the
platform in recent months.
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As drivers return to the roads,
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Uber and Lyft hope that
prices will stabilize.
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But they'll probably never be as cheap
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as they typically were in the last decade.
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There are a few reasons for this.
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For one, Uber and Lyft
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had begun phasing out discounts to riders,
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even before the pandemic.
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- What started happening
before the pandemic
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is that pressure started
to build from investors.
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Investors started saying you have
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to have a sustainable model
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to future profits.
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- [Narrator] Uber and Lyft
had been using a subsidy model
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since the very beginning,
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and that model is fairly simple.
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Startups raise venture capital,
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and use those funds to attract customers
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with deep discounts.
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These subsidies could come in many forms,
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from low shipping rates
for e-commerce sites
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to coupons for free food delivery.
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For ride hailing companies
like Uber and Lyft,
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subsidies have involved attracting riders
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with big discounts,
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and then incentivizing drivers
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to provide those rides.
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But in recent years,
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the companies have begun phasing
out those rider discount.
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- They are not profitable companies.
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They lose money nearly every year.
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We don't know when they
will turn a net profit.
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- [Narrator] For now, ride share companies
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are still offering drivers incentives
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as a way of making driving more attractive
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for the long haul given
the ongoing challenges.
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However, Uber said that
their driver numbers
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have increased to a point
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where they'll be pulling back
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on driver incentives moving forward.
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The company's near-term challenge
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is keeping drivers after that.
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- The bonus pay every single week
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might be 30% of a driver's pay,
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so you could imagine
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that if they completely got
rid of these bonuses one day
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and drivers saw their pay cut by 30%,
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you'd have a huge exodus of drivers
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at a time where the companies
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are already struggling to match supply
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and match demand.
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- [Narrator] So companies are thinking
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of new ways to make
driving more attractive.
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- One of the things that Uber began doing
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is that it started offering
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free online language classes for drivers.
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The company says a lot of
their drivers are immigrants.
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English is not their first language,
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so this could be a tool
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that they could use to move up the ladder
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and develop new skills.
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- [Narrator] Also adding
to the cost of rides,
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when regulatory changes like Prop 22
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went into effect in late 2020,
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companies shifted some
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of the financial burden to customers.
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- If consumers want better
benefits to drivers,
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then we should also be willing
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to pay slightly more.
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- [Narrator] Both Uber
and Lyft are focusing more
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on long-term profits.
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Analysts say consumers should expect
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to pay more per ride compared
to the discounted rates
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before the pandemic.
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- I think that they probably
weren't paying the full cost
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of the fare in a lot of these situations
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and kind of getting a good deal.
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Riders may have to pay a little bit more
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for their rides, and they may not like it
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but hopefully, they'll
fine solace in the fact
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that drivers are getting
part of that ride.
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- [Narrator] For consumers,
ride share prices probably
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will not stay at their current heights.
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However, you probably won't see
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those low subsidized
prices again any time soon.
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