Uber and Lyft drivers are making a comeback, but prices aren’t dropping

The average rate for Uber and Lyft in the U.S. increased month-over-month from February to July, hitting new highs each time, according to data from Rakuten Intelligence, a market research firm that based its analysis on electronic receipts of more than one. millions of consumers. While the average rate in July rose slightly from June, it means that consumers paid 50% more for a trip last month compared to January 2020, before the pandemic.

That’s what more Americans have paid for rides on Uber and Lyft in at least three years, according to Rakuten.

The skyrocketing prices, which companies say are driven by continuing labor shortages, come despite the recent influx of drivers. Uber said Wednesday that 30% more drivers signed up in July compared to the previous month. Lyft said Tuesday that 50% more drivers signed up in the three-month period ending in June compared to the previous three months.

“The data is clear: Driver supply has not kept pace with increased driver demand, throwing the ridesharing market out of balance,” said a Lyft spokeswoman, adding that the company would continue to invest in driver incentives to alleviate shortages.

Soaring prices haven’t hampered bookings, reflecting consumer tolerance for high prices after widespread closures kept many at home last year. Uber and Lyft’s travel business rebounded in the second quarter from last year’s lows, and Edison Trends data shows that consumer spending on private travel remained high during the week ending July 19 in comparison with the same week of the previous year.

The Covid-19 Delta variant “could hurt everything again, but this time things will pick up a lot faster,” said Brad Erickson, an analyst at RBC Capital Markets who covers both companies. “The reserves are not going to go down 90%. It’s not going to be anywhere near the magnitude of last year, ”he said.

No company has publicly disclosed how travel prices have performed across the country in recent months. They also haven’t said how many more drivers are needed to meet demand. But Uber said this week that prices were returning to pre-Covid levels in cities or states that had ended unemployment benefits. That change pushed more drivers to work for Uber in cities like Miami, Atlanta and Houston, alleviating the continuing job crisis and moderating high prices, the executives said.

In New York, San Francisco and Los Angeles, Uber’s main domestic markets, “demand continues to outpace supply, and prices and wait times remain above our comfort levels,” he told analysts on Wednesday. CEO Dara Khosrowshahi, after the company reported quarterly results.

An Uber spokesperson reiterated that the situation varies from city to city. In some, he said, prices are getting closer and closer to pre-pandemic levels, while in others they remain high.

Early signs are that the driver shortage and high prices will decline at the end of the current quarter next month as Lyft continues to offer bonuses to drivers and while other states eliminate unemployment benefits. Uber said 90% of the 90,000 inactive drivers it surveyed in June indicated they planned to return in September.

Uber and Lyft’s high spending on driver incentives, combined with uncertainty around the impending Delta variant, sent their shares down earlier in the week despite beating analysts’ second-quarter demand projections. Both stocks recovered from their lows of last week.

In the extreme scenario where demand is reduced and drivers avoid carpooling again, “much of this investment that companies just made will be irrelevant,” said RBC’s Mr. Erickson. Uber and Lyft have the strength to inject money again, but it will translate into “a lot of lost dollars.”

Lyft said its third-quarter revenue would suffer as it planned to spend more on driver incentives, after spending $ 572 million on them during the second quarter. “We are maintaining high investments in supplies to help lower prices,” Lyft CFO Brian Roberts told analysts on Tuesday. Roberts said he didn’t think prices would stay that high in the long run.

Uber spent more on incentives than analysts expected in the second quarter. The company said it does not plan to spend much more on them in the current quarter because it has been acquiring drivers in recent weeks despite withdrawing the incentives.

SHARE YOUR THOUGHTS

How are you responding to the driver shortage and high prices? Join the conversation below.

As Uber and Lyft seek long-term profits, analysts say consumers should expect to pay more per ride compared to discounted fares before the pandemic. But analysts also do not believe that prices will remain at their current levels.

Driver earnings are at an all-time high, thanks to continued bonuses. Uber said its drivers make more than $ 40 an hour in its busiest markets. But a short-term challenge is to retain them once the incentives wear off.

Derrick Stanfield Kivoi, who runs a small digital marketing business in Miami and has driven for Uber for several years, drove again this year after a year-long hiatus because the incentives were too good to turn down. Uber offered him $ 100 for three consecutive rides, he said, and then followed up with a $ 250 bonus for 40 completed rides during the week.

Bonuses decreased in recent weeks (Uber’s $ 250 bonus dropped to $ 50) and Kivoi disabled the app earlier this week. “As soon as the incentives stop, I stop,” he said.

Uber and Lyft are trying to address the changing dynamics of work for hire. Uber announced free online language classes for drivers late last month. It also started showing drivers what passengers paid for a trip overall, rather than just showing them the fare portion.

Lyft said last month it was exploring a partnership to cut one of the biggest expenses for drivers, which could involve significant discounts on gas or insurance or help with vehicle purchases.

Write to Preetika Rana in [email protected]

Copyright © 2021 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

Add Comment