Uber has just sent out an update via email regarding the pricing options in New York after Hurricane Sandy. Surge Pricing is back.
Yesterday, the company implemented Surge Pricing — a higher rate during times of high demand — and then abruptly turned it off after a poor reaction by the internet. Instead, the company charged regular pricing, yet paid the drivers at Surge Price rates, likely slashing margins into losses.
In the update sent out via email, the company explains that Surge Pricing will be back in effect this afternoon for customers in Manhattan. A copy of the email is below, but in short: Paying drivers at a 2x rate while charging customers normal pricing did increase the number of drivers on the road (by 3x), but at the cost of $100,000 in additional payments to drivers in one day, “something we can’t continue indefinitely without breaking the bank,” the letter says.
Some feel that Surge pricing is the equivalent of price gouging. But it’s not. Anyone who lives in a metropolitan area dependent on public transportation knows that cabs are almost impossible to find on inordinately busy nights. Surge Pricing entices more drivers than usual to come out and work on a night like New Year’s Eve or Halloween, and keeps Ubers on the road.
On New Year’s Eve, the Surge Price rate was 6.25x. Yesterday after Sandy, prices in New York were only at 2x, and only for an hour before numerous blogs, even ours, and Twitter came down on the transportation startup.
With today’s implemented Surge Pricing, Uber isn’t taking any part of the fee. Some have accused Uber of greedily raking in the 20 percent fees it takes per ride, so this should calm those people down a bit, considering yesterday’s and today’s losses for the company.
The rate isn’t a flat surge rate, but the app will notify users when they hail a car.
Here’s the full letter, for your reference:
First and foremost, we hope that you and your family and friends are safe. The Uber NYC office is currently closed and some of our team members are without water and power.
With limited public transportation, demand for Uber rides is astronomically high. That means we’re working to get as many drivers out as possible to help New Yorkers get around the city. So, in order to maximize the number of drivers on the system yesterday, we started paying drivers 2x the fare on all trips – and in the meantime charging riders the standard 1x fare avoiding surge pricing for most of the day after Sandy. Doubling drivers’ fares tripled the number of cars on the road and kept them out there far longer. However, footing the bill for higher driver costs came at a significant expense to Uber with over $100,000 in additional payments to drivers in a single day – something we can’t continue indefinitely without breaking the bank.
So while we were mostly able to avoid higher prices the day after Sandy, the reality is that under this week’s extreme conditions, raising the price is the only sustainable way to maximize the number of rides and minimize the number of people stranded – by providing a meaningful incentive for drivers to come out in undesirable conditions.
Later this morning we will be reverting back to standard Surge Pricing for riders. It is a hard decision, but one we feel strongly about. Without raising the price, there will be less than ½ the number of drivers on the system with several times more demand on far fewer drivers. Without Surge Pricing, Uber would become essentially unusable this week. For those needing a ride this week, it’s going to be expensive; there will be a clear pricing notification in the app at the time of request. During this emergency price increase, Uber will waive all of its own fees with 100% of the fare going directly to the drivers helping New Yorkers move around the city.
You can read more about Surge Pricing on our blog: http://blog.uber.com/2012/03/14/clear-and-straight-forward-surge-pricing/
Our thoughts and prayers are with all New Yorkers in this time of crisis. We’re going to do everything we can to continue to provide the most reliable, efficient transportation option for NYC. Be safe, and stay Uber.
The Uber NYC Team
Josh, Andrew, Ed, Kyle and Nicole in Manhattan,
Jeremy in Brooklyn,
Betty in Queens
and Cait in The Bronx