Lyft Brings Back A Version Of Shared Rides | Chicago News
(CNN) – Shared rides have been a key part of how the founders of Uber and Lyft considered disrupting transport. In 2014, companies ran mutually to be the first to announce their carpooling options, with the promise of creating a more efficient and affordable service for users.
Then the pandemic hit, and businesses quickly suspended their joint offers to help curb the spread of COVID-19.
About 16 months later, Lyft is slowly bringing back a revamped shared ride option. But as it does, it faces changing public health challenges as well as financial risks predating the pandemic. (Asked by CNN Business about its shared ridesharing plans in the United States, an Uber spokesperson said the company “will explore the Pool relaunch when the time is right and follow the advice of health experts. “)
Lyft announced Thursday that it will be relaunching the option starting July 19 in three markets – Chicago, Denver and Philadelphia. Passengers will have three shared ride options, which will be prioritized based on wait time and have an initial price assigned to each: 15-30 minutes, 5-15 minutes, and less than 10 minutes. The longer the wait, the shorter the journey.
“As the country reopens, we want our most affordable ride option available to our runners,” Lyft president and co-founder John Zimmer said in a statement.
Additionally, Lyft said it has added “no surprise pickup” labels on some shared rides. These routes will be set with no additional stops along the way, a factor that will contribute to a more accurate estimated time of arrival for passengers, the company said.
The company said it has determined the markets in which to reintroduce shared rides based on driver demand and supply. It expects eventually to add the service to all of the nearly 20 markets where shared trips were offered before the pandemic.
New precautions have been put in place: Lyft runners can only reserve one seat (meaning no guests), the front and center seats must be unoccupied, and masks are required for runners and drivers, as for its regular service.
Aside from health concerns, the notion of shared rides could also help ridesharing companies solve another pressing problem: a persistent shortage of drivers just as the US economy is opening wide. This is a fundamental supply and demand issue: costs tend to be higher for consumers when fewer drivers are on the road. In view of these costs, some users may wish to take advantage of more economical travel options.
But pooling only works on a large scale financially. In its IPO documents, Lyft cautioned against not effectively matching runners among its risk factors – if a passenger who has chosen a shared journey, for example, is not paired with another person, the passenger still benefits from the reduced fare and the driver still receives a fixed amount. The company, however, would earn less on the ride than they expected because it did not match another runner. The new offering still leaves that possibility open, although longer wait times give Lyft more opportunities to match riders.
Even before the pandemic, it’s clear that pooling was not where companies wanted it. Lyft’s CFO revealed in a 2020 earnings call that shared rides accounted for 17-18% of total trips in the third and fourth quarters of 2019. The company once said he wanted shared rides to represent 50% of his business by the end of 2020.
Uber CEO Dara Khosrowshahi, on a call to discuss the company’s third quarter 2019 results, noted that the company was “losing significant sums” on shared rides due to discounts in order to encourage the use of the service. “The product and technology teams are much more focused on the efficiency of shared driving,” said Khosrowshahi. He added that new additions such as Express Pool, where passengers walk to a destination for pickup, were aimed at cutting costs organically rather than relying on artificial price discounts.
“They had to subsidize [shared rides] strongly to make it work, even on a modest scale, ”said Bruce Schaller, transportation consultant and former New York City transportation manager who has research the effectiveness of Uber and Lyft shared services in reducing vehicle mileage in four cities. “They were reducing financial incentives for drivers and passengers before the pandemic and I would be very surprised if they put them back.”
The companies, which both went public in 2019, have reiterated to investors that after years of bleeding money they expect to be profitable, excluding some expenses, by the end of the year. Over the years, companies have largely favored growth over profits.
As Schaller points out in his research, published data by New York and Chicago indicate lower pool rates “apparently in concert with reduced rate discounts after Uber and Lyft IPOs in 2019”. (Lyft said it expects its shared ride improvements to result in more bookings and lower prices.)
While Uber may not be bringing shared rides back to the US just yet, the company revived a version of Pool in the Australian markets of Perth and Sydney this year. To minimize detours and waiting times, passengers are sometimes required to walk to or from a pickup location.
In the meantime, runners in the US can hack their own version of pooling by taking a friend or two by adding stops or split the rate – which costs $ 0.25, Uber pointed out. Lyft does not have a split pricing option.
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