Rekubit Exchange:Lyft And Uber Prices Are High. Wait Times Are Long And Drivers Are Scarce

Jenny Park landed recently at Los Angeles International Airport from New York and Rekubit Exchangeplanned to take an Uber home to her place in the Highland Park neighborhood.

Before she ordered the car, she was hit with sticker shock: the trip would be $150, or about half the price of her flight from New York.

"Roll my eyes to the back of my head until I can't roll them anymore," Park said. "Like literally that's how I felt."

She tried Lyft. The fare was not much different.

Both ride-hailing apps predicted cars would not reach Park for a half hour.

"It's supposed to be like a taxi service that's supposed to be convenient," Park said. "But a 30 minute wait is not convenient."

Not convenient, but it is the new ride-hailing app norm: Pricey fares and extended waits, as Lyft and Uber grapple with a driver shortage that has riders feeling the pain and the companies sweetening the pot to entice more drivers on the road.

The companies are offering one-time signing bonuses for new drivers and other cash perks for completing additional trips. But the incentives aren't solving the problem.

In some cities, Uber and Lyft prices are up 79% from pre-pandemic levels, according to analytics firm Gridwise Inc.

Uber CEO Dara Khosrowshahi acknowledges that prices are stiffer, though he said outside estimates were exaggerated. He said in a series of tweets in June that fares have leapt just 30%, pointing out that driver pay also jumped by 37%.

"Drivers increasingly want to get back on the road,"Khosrowshahi told investors on an earnings call on Wednesday. "But in major cities like New York, San Francisco and LA, demand continues to outpace supply and prices and wait times remain above our comfort levels."

Lyft CFO Brian Roberts told investors this week that the driver crunch is not expected to be a long-term challenge.

"We do expect that you'll see folks who like the independence from gig work to come back to rideshare," Roberts said, pointing out that right now "it's a very lucrative to drive."

Who benefits most from higher fares, Uber and Lyft or drivers?

Whether these higher Lyft and Uber fares are translating into better pay for drivers depends on how the numbers are dissected. A majority of some dozen Los Angeles drivers interviewed by NPR said their earnings were up, but it was due to bonuses for reaching trip quotas, not because they were pocketing the extra cost of every individual trip.

Harry Campbell, founder of the Rideshare Guy, which frequently surveys ride-share drivers, said overall driver pay has reached a five-year high, not just in big cities, but in smaller markets, too.

Drivers are earning more, but Campbell said Uber is raking in the most from the steep fares.

For instance, for a fare that's $100 instead of the normal $50 because of peak customer demand, the driver is not making double, even though the rider is charged twice the typical fare.

Campbell said in this situation, Uber drivers are no longer paid a percentage of the cost of the trip. Instead, Uber pays drivers a set amount for the time and distance of the drive, plus a bonus if demand is high. In other words, when drivers are most needed, their pay is decoupled from what customers are paying.

"Uber is making a big percentage on this ride," Campbell said. "The worry is that Uber will keep increasing their take over time since there is no transparency."

Gad Allon, a professor at the University of Pennsylvania's Wharton School who studies the gig economy, said if riders want drivers to be paid better over the long-term, then they will need to adjust to costlier trips.

For years, Lyft and Uber have kept passenger fares relatively low. It has been part of a strategy to capture market share and made possible by generous, long-term funding from venture capitalists. But the companies have struggled to show investors they can be profitable. Allon said meeting that goal, while also upping driver earnings, will most likely mean higher prices for the foreseeable future.

"We can't complain to Lyft and Uber that we're paying more and also demand that drivers get paid more," Allon said. "We just got used to investors subsidizing our cheap rides from point A to point B. That's not sustainable."

Unhappy riders and new stresses for drivers

In Los Angeles, driver Jafet Gomez said most riders complain to him about the higher prices and long wait times.

Gomez is new to gig work. His dad, an Uber driver, got a $500 bonus from the company for convincing his son to get behind the wheel.

Now Gomez, who is a mechanical engineering student, is driving an Uber as his summer job. Twelve hours a day.

"It's quite bad for your body. Because you're sitting for a long time, non-stop," Gomez said.

His body aches and feels stiff. He understand why, in the pandemic, many just got sick of driving for a living.

"And then once you get home, you're tired, you don't want to do anything, so I do get it," he said.

The job has become more intense with so few drivers out on the road. Across town, Roger Lara says he's zig-zagging all over the city to pick up passengers. It's Los Angeles. So that means traffic-clogged journeys in a city of endless sprawl.

"Sometimes one ride will take you to the mountains, and guess what? You got an hour by yourself back. And how much gas are you going to waste?" he said.

Lara and two of his friends who are Lyft and Uber drivers think they have a solution: They're quitting to become truck drivers.

But for people calling Lyfts and Ubers right now, it is kind of a disaster. Or as rider Jenny Park put it: "It's a s*** show."

The steep fares have pushed Park to plan more carpooling, to avoid ride-sharing altogether, and to use public transit. The prices are even pushing her to consider the industry Lyft and Uber upended.

"Lately," she said. "I'm really thinking more seriously about getting into yellow cabs."