Recently, Uber and Lyft made changes in some cities to how surge is calculated and paid out. Many of you emailed RSG, wondering if these new changes were good for drivers or not. Senior RSG contributor Will Preston investigated the new surge rates and compared them to old surge – here’s what he found.
Once again Uber and Lyft changed the way we drivers get paid – this time with the new ‘flat rate surge’. As usual, many drivers feel it is just another attempt by these companies to increase how much they make versus how much we make. I thought I would take a look at what my surge rides look like to see if this was the case for me. Here’s what I found about the new changes to surge, and how you can use these changes to your benefit.
For those who didn’t notice, Uber and Lyft changed the way they pay surge sometime last year. Instead of telling a driver that he or she will get two or three times the normal fare, the driver is told that they will get a fixed amount on top of the normal fare. For example, they might be offered an extra $4.50 on the next ride – regardless of length.
Whether or not this is good or bad depends on how you view a few different things about how surge used to work. So let’s take a look at that now.
How Uber and Lyft Surge Used to Work
In the good old days, surge rates were a multiple of the fare regardless of how long the fare was. You were told what the multiplier was when you received the ride request. A 2X surge (meaning two times the normal fare) was fairly common in my area, and you might occasionally get a 3X fare if you were lucky. Passengers didn’t like it very much, but they really had no choice if they wanted to get home. Drivers, of course, loved it.
There were driver strategies designed to drive up the surge rate. Knowing that a potential surge was happening, drivers would sit there with their phones off-line waiting for the surge to get high enough, after which they would all go online and hopefully get a nice long ride with a big surge rate. This was especially prevalent at events like concerts and sporting events.
Although it was really great when you got a nice surge ride, there were actually a lot of things about the old system that drivers didn’t like. The biggest thing was when you were sitting smack dab in the middle of a 3X surge zone and you received a ride request outside of the surge zone – with no surge.
Another issue was the letdown that happened once you realized your 4X surge fare was only going 1.5 miles. This letdown was especially pronounced when you waited 30 minutes or more in a queue to get that surge ride, such as a sporting event.
I think the real problem with the old surge system is that passengers started figuring out ways around it. In San Diego, for example, concertgoers at what we used to call Qualcomm Stadium would park in the free parking lot 2 miles away in Old Town and take an Uber or Lyft to the stadium. That way they could take a 10X surge back to the free lot, and it would barely hurt.
Combine the fact that many passengers started figuring out ways around surge with the fact that Uber and Lyft both started telling drivers where there was more passengers without offering them any incentive other than getting a ride. New drivers would actually drive out of their way to go to the busy area, thus making sure surge never happened. The net effect in my market was that surge virtually disappeared.
Upfront Pricing Contributes to Pay Confusion
Before discussing how the new surge works, it’s important to remind new drivers that part of the issue comes from what Uber calls upfront pricing. (Lyft does the same thing but has no name for it.) We explain how upfront pricing works below:
That means on almost every ride, there is going to be a differential between what a driver gets paid now vs. what a driver could have gotten paid if they simply received 80% or 75% of what the passenger paid – the way we used to get paid.
When you combine this disconnect with a change in how the surge system works, you create an opportunity for Uber or Lyft to charge the passenger a much higher surge rate than they are paying the driver. For example, Uber or Lyft might offer the driver an extra five dollars, but chare the passenger an extra $30 – and the driver would have no idea unless they did a detailed analysis of every ride afterwards. This is yet another example of why drivers don’t like upfront pricing.
New Surge Changes for Uber and Lyft
Like everything else, Uber and Lyft are probably trying various surge methods in various markets, so I can really only explain what I’ve seen in the San Diego market. I have seen three different types of “surge” pricing.
The first type of surge is that drivers are shown an area on the map that is a “hot zone” like the old surge maps – with two big differences. The first difference is that instead of saying 2X or 3X, it says +$3.00. (Actually, the dollar amount can be anything. I’ve seen numbers from one dollar to nine dollars, but the most common number I’ve seen has been around three dollars.) Above you can see several different surge rates in one map. The way these flat rate surge bonuses work is they are added to whatever your normal fare will be. So +$5 means Uber will add $5 to whatever fare you earn.
One important difference now as opposed to previous surge is you receive the surge amount as long as you enter the red zone when it is offered, even if you’re just driving through it. Like previous surge maps, the maximum number (e.g. $3) is typically available in the center of the red zone, and lower dollar amounts are available at the edges of the zone.
The moment you enter the edge of the zone, you will see some dollar amount listed as a bonus on your next ride. If you manage to get to the center of the red zone, you will see the advertised amount (e.g. $3) as the bonus.
This means that even if you are simply driving through a red zone, you will receive that bonus on your next ride whether or not that next ride comes from within the zone or from outside the zone. This is true for both Uber and Lyft, although it only applies if you are driving through it will not on a ride. If you are already on an Uber ride, you’re not going to get an Uber surge on your next ride just because you happened to drive through a surge zone. But if you drive through it while waiting for a ride, you’ll get it. Even if you are completely outside that zone when you accept your next ride, you still get that ride bonus.
This at least solves the problem of being in a surge zone and getting a non-surge ride. Unfortunately, you won’t get that huge surge bonus on a long ride unless you get the next surge request.
It is quite rare, but I have also seen Uber offer a surge advertised as being at least $3 on your next ride. Unfortunately, I don’t have a screenshot of it. What I have found in practice is that these rides work like the old surge. If the customer is charged a higher surge rate, you will get that surge rate. But you are guaranteed to get at least the advertised amount on your next ride – even if that customer is riding in a non-surge zone.
Consecutive Ride Bonus
This isn’t really surge, but it does affect where and when you drive, so I’m including it here. In addition to the surge zones that come and go as surge zones tend to do, I’ve noticed the addition of some outlined areas where you see a value like $9/3. That means you will get an additional nine dollars if you complete three rides in a row, as long as the first ride begins within the outlined zone.
The new surge can also be combined with a consecutive ride bonus, as you see in the screencap below. In this screencap you can see two surge areas inside a single consecutive ride bonus area.
Driver Strategies for New Uber and Lyft Surge
These surge rates work differently than the old surge, so they require different strategies. A few weeks ago during a particularly busy Saturday night, I significantly increased what I would typically earn in such an evening using these strategies. The good news is they are relatively simple to understand.
Stay with One App
Because it has brought surge back to my market where we previously had none, I’m currently in favor of these new surge methods – even though I still miss the old method. But all three of them have one thing in common: they give you an incentive to stay online with the platform in question. (I’m pretty sure this was actually the primary reason behind how the new surge system works.)
If you know your next ride on Uber is going to pay an extra five dollars, it gives you a five dollar incentive to not take the ride that Lyft is offering you without the right bonus. This means that I find myself turning on the other app much less often that I used to.
This is even more true of the consecutive trip offer. If you have already given two out of three rides, you might be throwing away several free dollars by taking a ride on a different service. This is especially true if you are stacking a consecutive ride bonus with a surge bonus.
Chase the Surge
In the old days there was no reason to chase the surge, meaning drive out of your way to go to a surge zone. If you were near the surge zone and they needed you inside it, you would get a ride request with a surge rate. If you didn’t have a surge request, there was no incentive to drive to the center of the surge. Usually it would go away just as you got there.
With new surge, you get a surge rate as long as you’re in the zone when it’s on, and Uber and Lyft are leaving a surge zone up longer once they start one, so you have a better chance of getting a surge rate by driving toward the zone. This is why I now definitely chase the surge.
When I complete a ride, I immediately look to see if there are any surge zones anywhere near me. If there are any, I will immediately plot a path to the center of the zone that allows me to reach the edge of the zone as quickly as possible as well. In fact, I will even turn down a ride request if I am almost to a surge zone but have not yet received a ride bonus. I will wait a minute or two until I am well within the surge zone and have my ride bonus before I accept my next ride.
You can see in these photos that I saw a +$4 surge fare nearby and started heading to it. You can see where I was in San Diego when I saw it, which is 2 miles from the beginning of the zone. Then you can see I got $2 added on my next trip as I entered the zone, then $3, then $4 as I approach the center or the zone. This is what I mean by getting to the zone as quickly as possible, then getting to the center of it as quickly as possible as well.
With the consecutive rides offer, all I have to do is get inside the outlined area for the first of three rides. I then wait for my next ride – assuming I don’t already have a ride from inside that zone. If I see one of those outlined zones near me, I will definitely had straight for it.
Once you’ve given a ride inside the zone, you’re given a counter of how many more rides you have to complete, as you can see below.
Once you have completed the three rides, you’ll see this message.
Concerns with the New Uber & Lyft Surge
We have received a number of complaints from drivers who have reported seeing fares where it appears the customer paid a much higher surge rate than what the driver was paid. The sad thing is that if that happened on a given ride, you have nothing to complain about. You agreed to take that ride for your regular rate plus some other amount. The fact that Uber charged the passenger a significantly higher amounts is completely irrelevant as far as Uber is concerned. It may be relevant to you, but Uber support would say there’s nothing wrong.
Having said that, I decided to look at my surge rides over the last few weeks to see if that happened to me. I had 18 surge rides where I earned $153.32 in base fare and $55.75 in surge. That means on average, I earned 36% more on those rides that I otherwise would have earned.
The bigger question, however, is whether or not Uber made out better than I did. The answer in my case is definitely not – at least not in the average. If we include the booking fee, I actually made an average of 72.68% of what the passenger paid. If we take out the booking fee, I made 86.7% of what the passenger paid as their actual fare. On average I did pretty well.
There was at least one ride where I got “shafted” by the new system. The passenger paid $24.71 plus the booking fee, and I was paid $12.13. Uber received 51% of this reasonably large fare.
I’m not sure if this is just the “we’re going to charge this passenger a higher rate because of where they live” policy or the concern that Uber/Lyft charges the passenger a higher surge rate. But, honestly, this was the only ride where it happened.
On some rides I received more than the passenger paid for their fair. In one ride, I was even paid more than what they paid for their fair plus the booking fee.
If you’re like me and the old surge had all but disappeared from your area, then this surge is a welcome bonus. But if you’re still getting the old style surge pretty regularly, you’re probably not going to like this one much. But, either way, I do think that you should look at these new strategies if these new surge rates come to your city.
Readers, what do you think of these changes to surge?
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-Will @ RSG
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