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Uber and Lyft Ride Price Surges: Why You Should To Prepare to Pay More

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A few weeks after receiving the second dose of a coronavirus vaccine, Debora Lima reverted to an old routine: she got out her phone and asked for an Uber ride so she could meet up with friends for dinner.

But instead of being picked up within five minutes as expected, Uber surprised Ms. Lima with a 19-minute wait and an expensive fare. It wasn’t a one-time mistake. Ms. Lima, a 28-year-old Miami resident, planned to spend $ 100 a month on frequent Uber trips. Only two trips recently have devoured half of their monthly budget.

As the coronavirus pandemic appears to be receding in the United States and more people are traveling, socializing, and carpooling, they are finding that these cheap and fast journeys are more expensive and no longer readily available. Customers across the country say they were shocked by the price hikes. In some cases, their Uber trips from airports cost as much as their plane tickets.

Uber and top competitor Lyft admit that prices are rising and waiting times are longer, but they do not disclose details. A recent analysis by research company Rakuten Intelligence found that the cost of a trip in March was 37 percent higher than a year ago. In April, costs were up 40 percent.

As in many other industries, ride hailing companies say prices are rising because they cannot find enough workers. But more than most other types of businesses, Uber and Lyft can cleverly pass the cost of finding these workers – in their case, drivers treated as contractors – directly to their customers.

When there aren’t enough drivers to meet demand, companies pay them more and sometimes resort to surge pricing to lure drivers into areas of high demand. Some of the recent spikes have seen prices rise 50 percent or more, said Daniel Ives, managing director of equity research at Wedbush Securities. Price increases can be a boon to motorists, but they sometimes cause outrage among drivers, especially during holidays and at major events when demand can drive prices up.

“By organizing their drivers to be contractors, Uber and Lyft have in a way enabled the drivers to employ those contractors,” said Wendy Edelberg, director of the Hamilton Project and a senior fellow at the Brookings Institution . “Every time we open our Uber app, we may feel a bit like the small business that can’t fill the position after putting the ‘Seeking Help’ sign up.”

Uber and Lyft have put money into additional incentives for drivers, such as cash bonuses for completing a certain number of trips. But the incentives don’t seem to be as effective as they were before the pandemic. Some drivers said they were not driving again because they are still afraid of getting sick.

Other financial incentives could also discourage drivers. While they wouldn’t normally get unemployment insurance because they are categorized as independent contractors, Uber and Lyft drivers are eligible for pandemic unemployment benefits under the CARES Act, which eases the financial pressures that would otherwise have forced them back behind the wheel climb.

“We gave the people a lot of financial support,” said Ms. Edelberg. “We made it possible for people not to make these transitions in desperation, to prioritize their health, to prioritize their families. So this will take a while. “

In an earnings report in early May, Uber said it had 3.5 million active drivers and couriers in the first three months of the year, 22 percent fewer than last year. “We haven’t seen driver supply keep pace with the growth in demand in the US,” said Dara Khosrowshahi, CEO of Uber, at the JP Morgan Technology, Media and Communications Conference in May.

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June 11, 2021 at 12:49 p.m. ET

In May, more than 100,000 other drivers returned to the platform, said an Uber spokesman. Uber has aggressively increased its incentive spending, investing $ 250 million in driver recruitment, branding it as a “stimulus”.

Lyft also said it doesn’t have enough drivers and is spending a lot to recruit them. In the first quarter of the year, the company spent $ 100 million on driver incentives, according to a earnings report.

“It is something we take very seriously, but we are very confident and I see significant progress already,” said John Zimmer, President of Lyft, at the JP Morgan conference. Lyft saw so-called driver “leads” – drivers interested in working for the platform – up 25 percent between late February and May, Mr. Zimmer said.

According to Gridwise, a service that helps gig staff track their earnings, the incentives are starting to work. Ride-hailing revenue has grown steadily this year, rising from $ 18 an hour in January to $ 25 an hour in May, Gridwise said.

The higher wages seem to tempt some drivers to return. While the number of drivers is still below pre-pandemic levels, Gridwise estimates it has only decreased by 11 percent, an improvement from the 25 percent deficit in January. Uber also said the total number of trips with price increases decreased from a peak in March.

“When employers say they can’t find the workforce they need, always add the phrase: ‘To the wages I want to pay,’” says Heidi Shierholz, director of politics at the Economic Policy Institute. “We know how to attract workers – give them better jobs, better pay and better working conditions. This is not rocket science; That’s how you do it.”

But customers are impatient for a return to the fast, cheap trips. In Miami, Ms. Lima said she was hoping the company would keep prices low as it tried to get more drivers back on the road. “Make sure the customers are happy,” said Ms. Lima. “At least with the price.”

Currently, because of the price jump, it is impractical to use Uber as it once did. Instead of an everyday item, she said, Uber is likely to become a luxury item.

Cristine Sanchez, a hotel clerk in New York, used to pay about $ 20 for Uber trips from Queens to Brooklyn. Now the fare is about $ 38, she said, and a ride to the Bronx is nearly $ 45.

Ms. Sanchez recently found that airfares were almost as high as those of her Uber trips. When she recently found a $ 60 round-trip flight to Miami, she booked an impromptu trip with friends.

“If the choice is to go to the Bronx or Miami, I’ll go to Miami,” said Ms. Sanchez. “It’s like come on, Uber, come on Lyft, let’s bring it together.”

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Robert Dunfee