Uber and Lyft surge pricing drives angry SF customers back to taxis

Uber and Lyft surge pricing drives angry SF customers back to taxis

‘We just can’t stop talking about how high the prices are getting. It’s ridiculous.’

After San Francisco reopened last month, Raquel Santizo headed to a bar in the Mission with a group of friends. But when it was time to get back to her place in the Inner Richmond, rideshare prices had jumped as high as $100.

“I ended up waiting it out until 3 a.m. or so when it was still a steep $39,” Santizo said.

It’s become a hot topic of conversation among her network of twenty-something professionals. “We just can’t stop talking about how high the (rideshare) prices are getting. It’s ridiculous.”

If it continues, Santizo is considering switching to taxis or bikes to save money. And she’s not the only one. The extreme markup during peak hours by companies like Uber and Lyft — commonly referred to as “surge pricing” — is driving rideshare customers back to good old-fashioned taxicabs. That’s quite a turnaround from the past decade’s transportation trends, during which the big ridesharing companies disrupted the market and dethroned the once-dominant taxi industry.

“When they surge and they run out of cars, everyone walks downstairs,” said local cab driver Matthew Sutter, who took out a quarter-million-dollar loan for a taxi medallion and thus gets priority on pickups at San Francisco International Airport. (The taxi stand is downstairs from ridesharing pickup at SFO.) “We’re just racing back and forth, back and forth. (Customers) don’t mind waiting a little because of the principle of Uber and Lyft — they’re getting pissed off.”

Sutter, a 29-year veteran cabbie who didn’t work during the pandemic, estimates he has nearly doubled his business. Joseph Mullins, a driver since 2010 who now works for Yellow Cab, is making over $100 more each day than usual and takes “a customer away from Uber every day, just about.” Multiple people in his cab have noted the high costs of grabbing rideshare cars from downtown toward the west side of The City.

“We are definitely experiencing much better business than previously, especially through the apps,” said Barry Taranto, who’s been driving a cab for 20 years. “My income from Flywheel has gone up exponentially. A lot of the people that I’m getting have not ridden a cab in years.”

Flywheel, an app with similar features as Uber and Lyft but filled with cabs from various companies, is seeing a “record” number of new downloads and bookings roughly triple than what came in two months ago.

“We have so much business right now,” said Hansu Kim, president of Flywheel Technologies, which is a separate entity from Flywheel cabs. “There’s not enough vehicles — Uber, Lyft or taxis — to meet the demand. We have a huge amount of new and existing users who are booking again.”

Kim added a caveat: Only about half of the usual number of cab drivers are on the road. Just under 500 taxis were operating in June, San Francisco Municipal Transportation Authority spokesperson said Thursday.

Prior to the pandemic, Uber and Lyft had whisked away customers by offering passengers investor-subsidized cheap for cheap, enticing drivers with bonuses, and skirting around taxicab regulations that were later rewritten in their favor by the state. The cab industry’s shortcomings at the time — cash only, technology gap, decentralized dispatch to request rides and picky drivers — made it an easy choice for many.

But it looks like the era of millennial luxury on the dime of venture capitalists is over. When you add in the ongoing driver shortage, shareable rides removed during the pandemic, and reduced Muni service, San Franciscan’s regular modes of transit are scrambled.

Residents are driving private vehicles, walking, biking, or taking scooters as an alternative to pricey car trips. Issues often emerge late at night when Muni and BART are no longer running, which also affects workers at restaurants and bars struggling to staff up. (In August, BART’s midnight service will resume while Muni will move to restore 85 percent of pre-pandemic service by January 2022.)

“People have really learned to use these apps and do the price comparisons,” said Susan Shaheen, co-director of the Transportation Sustainability Research Center at University of California, Berkeley. “As they come close in terms of what services they provide, there’s going to be more room for competition. A big question that is out there is, ‘Are people loyal to a particular brand or particular type of service that they’re going to be willing to stick with?’”

In that vacuum, taxicabs are having a bit of a moment. But no one is assuming the resurgence here to stay.

Many drivers switched to food delivery services like Doordash during the pandemic and have been reluctant to return to strained relationships with Uber and Lyft. However, unemployment benefits are tapering off and rideshare drivers will eventually come back. With that, surge pricing should calm down.

“Right now, the prices are going up so much is mostly due to the dynamic pricing,” said Chris Gerace, contributor at The Rideshare Guy blog. “Once things get back to an equilibrium where there’s more drivers on the road, that wait time will come down. Better pay rates and better safety, that would probably (convince) a lot of drivers to come back.”

Lyft is adding drivers to boost app offerings and saw an uptick in the onboarding process between February and May. Uber did not respond to a request for comment.

“Earlier this spring, as vaccines rolled out and people started moving again, we began to see the demand for rides outpace the number of available drivers,” a Lyft spokesperson said. “We’ve added thousands of drivers in the past few weeks and it’s already leading to a better rider experience with wait times down more than 15% nationwide, and down 35% in some major markets.”

Still, the influx of cab passengers provides an opening for the industry to retain customers. People have noted that taxi drivers tend to know how to drive in The City better, are stringently vetted and are assured knowing they are properly compensated.

But the industry must still adapt and people inside it know it. In a major change to the usual order, Flywheel Technologies will move to a flat rate next month so customers know exactly how much they will be paying. Kim hopes that it will disprove the general perception that taxis are the pricier option.

“Because taxis don’t do an upfront estimate or flat price for the customer, there’s this meter anxiety that feeds into the idea that it’s more expensive,” Kim said. “To some degree, there’s a level of professionalism that you get with a taxi driver you don’t get with Uber and Lyft.”

“We’re at the perfect storm for this moment.”

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