High prices do not cause demand problem for Uber and Lyft resurgence

Uber and Lyft are emerging from the pandemic as leaner, lower-cost companies, with long-elusive operating profit and the unexpected power to raise prices without irritating riders.

Transportation app fees have climbed to unprecedented levels this year due to driver shortages. To the companies’ delight, passengers seem unflappable so far, returning en masse to the platforms in ever-increasing numbers.

“I think there is more pricing power overall than anyone ever imagined there was in the industry”Said the chief financial officer of Lyft Inc, Brian Roberts, on Tuesday.

On Thursday, the CEO of Uber Technologies Inc, Dara Khosrowshahi, described the current environment as a “gigantic pricing experiment ”.

“Even with prices on the rise we are seeing that as cities reopen, people start to use the product and use it a lot”He added.

The change means a major turning point for these firms, which for years sacrificed their profitability to gain users, competing with each other with discounts for travelers and bonuses for drivers.

According to an analysis of YipitData, which tracks email receipts, average charges per travel mile in the United States in the third quarter were nearly 25% higher than the comparable period in 2019.

For rides to the airport, which are among the most profitable routes for Uber and Lyft, the price increases were even more pronounced. The average fare for a trip to and from Chicago’s O’Hare Airport increased nearly 50% in the third quarter compared to 2019, according to a Reuters analysis of city data.

The higher prices benefit companies, who get a percentage from each trip. They have also resulted in record earnings for drivers, who also benefited from massive incentives for drivers paid by Uber and Lift to lure them back, the companies said.

Drivers Uber and food delivery drivers made $ 8.6 billion in the third quarter, up 60% from a year earlier, and the increase in driver salaries exceeded gross bookings, Uber said Thursday.

While the total supply of drivers remains below pre-pandemic levels, firms are confident that more drivers will return without additional incentives. They also stated that they will reduce additional bonuses for drivers in the coming months.

Roberts, de Lift, said the company will fund driver incentives during especially busy times through high consumer prices.

“We are likely to see high prices for some time, especially given the inflationary environment we are experiencing now.”Said Michael Erstad, an analyst at analytics firm M Science.

To the delivery business of Uber, which emerged as a backbone during the pandemic, hasn’t fared bad either.

Uber reported stable delivery bookings on Thursday, even as more people have resumed their departures. Its main restaurant food delivery business, Eats, even reported its first operating profit, driven by better cost management and fewer discounts for consumers, it said. Uber.

Higher prices combined with a more efficient budget could boost margins in the next year.

Both companies made drastic cuts during the pandemic to reduce their overall cost base. Those efficiencies, especially in variable costs, will show up as demand picks up again, they said.

However, as inflationary concerns mount and passenger levels remain 35% below pre-pandemic levels, Uber and Lift They will need to strike a balance between price increases and consumer loyalty.