Austin ride-sharers learn: When demand spikes, so do prices

Sept. 06--

When Jason Rother and his friends hitched an Uber ride the night of the Longhorn football team's season opener, they thought the ride-sharing service would be a safe and reasonably priced way to travel about 6 miles to a West Austin bar.

After all, Rother and his two friends had consumed some beers and it was a no-refusal weekend.

But soon after Rother and his pals settled into their seats at Abel's on the Lake, they suffered a case of sticker shock: an emailed receipt from the ride-sharing service showed the fare was $142.50, which was divided three ways.

"We didn't think it was going to be as expensive as it was going to be, but once it got there we were stuck with it," said Rother, a 26-year-old property management worker. "I guess we were just hoping it was going to be $50 and we would split it. We didn't quite realize what we had gotten ourselves into."

What Rother and his friends experienced was known as "surge pricing," a premium multiplier that ride-sharing services like Uber place on fares during times of high demand.

The experience shows the two sides of the debate over ride-sharing services. While the services can often be cheaper and easier than hailing a cab, at peak times the rates can be much higher than what traditional taxi services are allowed to charge. And the ride-sharing services -- at least for now -- remain illegal in Austin.

Uber spokeswoman Lauren Altmin told the American-Statesman the service's app clearly shows when surge pricing is in effect.

"The fact that surge pricing is in place is communicated repeatedly to a user -- and requires confirmation -- before the user can request the trip," Altmin said.

The surge pricing -- which can push fares to more than five times higher than normal -- is primarily intended to entice off-duty Uber drivers into service with the promise of pocketing higher-than-normal fares, Altmin said.

"During times of peak demand -- when there are not enough drivers on the system -- fares increase so as to incentivize more drivers to come onto the platform," she said. "Once demand falls or supply increases sufficiently, prices quickly go back to normal."

Representatives of Lyft, another ride-sharing service, didn't respond to a request for comment.

Last Saturday night, Uber's fare multiplier, which can range from 1.25 to 6 times the normal rate, landed at 5.5, a record for Austin, driver Nicolai McCrary said. A 5.5 multiplier means, for example, a fare that normally costs $10 would be $55.

"Last Saturday night was the highest rates we've ever seen in Austin," said McCrary, 25, who began driving for both Uber and Lyft this summer. "That's why people are talking about the rates."

While Uber and Lyft have been operating in the Austin area for several months, the services are doing so illegally, according to city officials. The companies don't have operating authority from the city, a Transportation Department spokeswoman said, and drivers typically lack required chauffeur permits.

City officials have discussed ways Uber and Lyft services could become legal, much like taxicabs, limos and pedicabs, but the issue has yet to be resolved. Other cities have struggled with the same issue, with Houston being among the latest to give the companies the green light.

Austin officials have been cracking down on the ride-sharing services, issuing more than 100 citations and impounding more than 40 cars since May, records show.

In addition to violating rules related to ride-sharing services, Uber and Lyft drivers have also been ticketed by Austin police for driving without insurance, carrying open alcohol containers in their cars and driving with an expired license, among other offenses.

Edward Kargbo, president of Yellow Cab Austin, said Uber, Lyft and other ride-sharing services should face the same regulations as taxi companies. In addition, taxi drivers are not only vetted through a criminal background checks, but must be approved by the Austin Transportation Department as well.

"You have companies trying to provide a service that already exists, but they want to provide it their way and ignore all the knowledge, wisdom and history of rules meant to protect the consumer," Kargbo said.

The variable prices the ride-sharing services charge are also part of the city's concerns, said Gordon Derr, assistant director of the city's Transportation Department.

"It's a market that can be manipulated," Derr said.

Uber drivers last Saturday earned anywhere from hundreds of dollars to one case of a driver who drove all night and earned $1,200, McCrary recalls from social media chats. McCrary said his fares totaled about $500 that evening, and he earned $300 to $400 after Uber took its cut.

But even McCrary said he believes the surge pricing needs to be reconsidered.

"I do feel like Uber should have a cap on their surge pricing," he said.

Uber drivers must undergo background checks that can take up to 10 days, and their vehicles are vetted.

Uber requires four-door vehicles that are no more than 10 years old, auto insurance and a series of other requirements. Lyft requires 2000 model vehicles or newer.

One of the services' appeals, some say, is that Uber and Lyft look for friendly drivers.

"Most of the drivers tend to be really friendly," McCrary said. "It's more of a ride-sharing app. I have made some pretty good friends, exchanged numbers and hang out. Sometimes they will invite you to grab a drink, and I can end my night early and hang out."

Users will get to see an image of the driver when they request the service. Sometimes, users develop a history, and drivers can refuse to pick them up if there are negative reviews attached.

Rother says he's not sure he will use the Uber service again. He says the surge pricing should be regulated, especially on no-refusal weekends, as it could entice some consumers to take risks and drive drunk.

Of course, users who are intoxicated might not realize what kind of price they are paying until they sober up, he said.

"If somebody is drunk, you may just want to find the easiest way home and you will just click anything to get the safe ride," he said. "On the other hand, people may say, 'Wow, if I need to pay $200 or more, maybe I'm just going to drive slow.' It seems like it can be a convenience, but with surge pricing, it can put a bad thought into people's heads."

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