Why Are Passengers Paying Such High Fares? These Answers May Surprise You

At The Rideshare Guy, our main goal is to help drivers earn more by teaching them how to utilize all the tools of the trade. These could range from rideshare to deliveries. But sometimes we have to check the pulse of passengers in order to validate the claims made by Uber and Lyft regarding higher fares, longer wait times, and so-called driver shortage. Senior RSG contributor Sergio (Surg-io) Avedian did an informal survey and was utterly surprised about what he heard from passengers.

I have been a driver and a passenger on both platforms now for about five years. As a driver, I started on a full-time basis with utilization rates of over 85% before the marketplace was overly saturated and saw my utilization rates plummet to the 40% levels.

Due to severe rate cuts in Los Angeles (Uber pays 60 cents a mile/21 cents a minute – Lyft pays 80 cents a mile/12 cents a minute) my income from rideshare driving took a nosedive to less than 50% of what it used to be in the good old days.

Then the pandemic hit, and I totally quit driving for almost two years. Recently, Uber and Lyft lured me back with lucrative bonuses. Although on a very part-time basis, I started driving again as well as writing articles for RSG.

When I put an article together, I want it to be based on facts and from first-hand experience. Most mainstream media pieces are full of fluff or they are fed by Uber/Lyft PR folks.

As more people are getting vaccinated and confident to go out again, rideshare demand is coming back strong – to the point that demand is definitely outstripping supply. As the CEO of Uber tweeted, Uber is becoming the go-to platform for me not just for what they offer me as a driver but for the prices they charge over Lyft when I need a ride.

Uber tweeted out about my article naming Uber as my go-to app

Why Are Uber and Lyft Fares Skyrocketing?

Take a look at the following screenshots of what a passenger paid for a ride I did this weekend. Pre-pandemic this ride would have cost less than $10 dollars. She paid more than $10 a mile, triple of what cabs charge in Los Angeles.

As with many other services these days, prices are going up on everything we consume on a daily basis such as gas, food, etc. It is called inflation and it is eating up our discretionary income.

Rideshare is no exception. Fares in most cases have gone up to the tune of 100% on both platforms.

Uber and Lyft are blaming the driver shortage for increased fares. Is that true or is it just an excuse to raise prices to turn a profit after a decade in existence? I think it is the latter. Both Uber and Lyft have not made a red cent since their inception.

Initially, they were backed by venture capital money and they were spending irresponsibly to subsidize every single ride to increase their Monthly Active Users (MAUs). They did such a great job that they were able to shift the risk from private hands to the public via their IPOs. However, they kept bleeding cash and their stocks have languished.

Take a look at the following screenshots. Why are passengers willing to pay over $10 a mile for rides?

It may be shocking to a lot of people who will read this, but I think the best thing that happened to Uber and Lyft was the pandemic. It solidified Uber’s food delivery business, and now that we are coming out of the pandemic, their rideshare business is back as strong as ever.

Uber/Lyft are charging whatever they wish for rides that used to cost less than half the amount during the pre-pandemic days.

As their latest earnings reports prove, both companies may be on their way to profitability. According to them and EBITDA, Uber and Lyft are showing a positive bottom line for the first time in a decade.

Will their stocks respond and please all the institutional holders going forward? That will depend on two things: how long can they keep charging these inflated fares for rides, and how much they back off the hefty driver bonuses.

Are Passengers Complaining About Higher Fares?

When I am driving, my goal is to make as much money as possible in the shortest period of time. I have really done well the past few weeks.

Another goal of mine is to do my own small sample survey and collect as much data as possible for the articles I write.

Depending on the signals I receive, when a stranger enters my car, I will try to strike a conversation with the rider. The past few weeks, my intent was to speak to as many passengers as possible to get an idea of why they are willing to pay a lot more for rides.

Out of a couple hundred rides I gave, I came away with a clear understanding of why the riders are willing to pay double what they used to in the following order:

  • Convenience
  • Safety
  • Inefficient public transportation system
  • Dislike of cabs

These are the exact reasons that existed before the pandemic for Uber and Lyft to become the popular choice of transportation for passengers. However, this is a commodity business, so I would have thought people would be turned off by paying higher fares for something they received for half the price during the pre-pandemic days.

Unequivocally, convenience was the number one reason for riders to continue using Uber/Lyft! All passengers said they were aware of the higher prices, but convenience trumped whatever they were paying for the rides. Almost all of them said they would continue using Uber and Lyft as long as the fares wouldn’t go any higher than what they are now!

The following are some of the egregious fares some of my passengers paid over the past couple of weeks. I am not complaining about the money I am making, but I am still wondering if this trend will continue.

This gentleman said he was in a rush and he really didn’t care what the price of the ride was since he just pushed a button and I showed up in a clean, comfortable car within a couple of minutes.

This gentleman was from Minnesota with his two boys. He said the convenience factor of Uber is unbeatable, and he wouldn’t even think of getting in a cab. He obviously enjoyed our conversation because the tip was juicy and said he will read RSG going forward, since I pass out my cards every chance I get.

The following trip truly blew my mind, not only because I received a tip but I ended up making almost $20 for a ride of less than a mile. He even apologized for making me wait. Am I dreaming or have I just been very lucky the past few weeks? People love the service that Uber provides, period!

Last but not least, this couple was from Arizona. They just had a good time at Universal Studios in Hollywood. They waited close to 20 minutes for me to arrive since I had a passenger in the car when I received the request.

No complaints, they said the rates are a lot higher in Los Angeles than Phoenix but the convenience factor was again front and center for choosing rideshare vs a cab!

My Take

Uber and Lyft both have gained massive popularity due to many factors, but my concise survey of passengers clearly points to convenience as the leading reason for riders to come back to rideshare post-pandemic!

For the longest time, I thought Uber and Lyft could raise the fares and pay drivers better in order to keep their best ones on the platform and avoid an 80% turnover rate as well as marketing costs to replace them.

Well, Covid took care of the part their executives didn’t have the guts to do: raise fares to become profitable instead of being locked in a race to the bottom.

Are the drivers benefiting from this? For now, yes. Driver earnings are up in most major cities, but as we all know, there are three things guaranteed in life: death, taxes and Uber/Lyft cutting the rates for the driver!

Be safe out there!

Is the passenger fare hike here to stay? Is this the new normal for Uber and Lyft? Shout out your thoughts in the comments!

-Sergio @ RSG