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