After Allowing Transit Service to Worsen, Denver Isn’t Ready for Predictable Uber & Lyft Price Increases

Cheezy stock photo courtesy of Uber.
Cheezy stock photo courtesy of Uber.

Uber and Lyft started selling on stock exchanges recently, a sign that the companies will certainly raise prices.

Higher fares will price out many Coloradans and for those who turn to public transportation as an alternative, they will soon learn why transit ridership is plummeting in the region. Since Uber and Lyft became popular, officials have not only failed to invest in public transportation, but they have repeatedly cut bus service in the region’s densest neighborhoods.

In Colorado, rising ride-hail prices will hit low-income populations hardest. Both Uber and Lyft currently offer shared rides at low prices that compete with the Regional Transportation District’s fares, which are among the highest in the country. Though the two startups are notoriously secretive, we know that poor Coloradans rely heavily on at least one of the companies. Of Lyft rides in the state, 54 percent start and end in a low-income area, according to the company’s 2019 Economic Impact Report.   

It’s impossible to know how much prices will rise and when the increases will come. But to continue operating, the two money-losing startups must soon give shareholders the profits they want. And so far, investors are not bullish. Since the companies started issuing stock, the shares of both have dropped in value.

Uber’s stock debuted on the New York Stock Exchange this morning and its shares are down 7.6% percent already. Lyft stocks have dive-bombed 29% since its initial public offering in March. The lack of investor excitement stems from the companies losing massive piles of cash last year: $3 billion in the case of Uber, and $1 billion for Lyft.

There are also no apparent ways for the companies to cut costs significantly. In fact, their expenses are likely to raise after Uber and Lyft drivers went on strike Wednesday to demand higher wages.

Many drivers make less than minimum wage and as elected officials grow concerned about their inability to earn a living, some cities are likely follow New York City’s lead. Drivers there earned $11.90 after expenses, despite a minimum wage of $15 an hour. But in December, the Big Apple required ride-hail companies to pay around $17.20 an hour.

The companies will need those drivers for the foreseeable future, too. When Uber launched after the 2007 arrival of the iPhone, many imagined self-driving cars in the near future. But more than a decade later, few expect autonomous vehicles anytime soon.

The need for human drivers makes Uber and Lyft unlike other tech startups, which can grow simply by buying more servers. Jarrett Walker, the respected transit planner and author of Human Transit, noted as much in a recent blog post.

“Their dominant cost, the driver’s time, is entirely unrelated to the company’s size,” he wrote. “For every customer hour there must be a driver hour.”

With a growing list of challenges, how will these startups shore up their billion-plus annual losses and deliver dividends to their shareholders? Basic economics paints an ominous financial future for the companies.

“To remain viable, Uber and its peers must make more money per trip,” writes The Economist. “They could increase fares. But cheap rides have been crucial to building their user bases. However dominant one or another becomes, competing transport options remain, from personal cars to public transport to travellers’ own two feet. Higher fares will make those alternatives more attractive.”

When the companies do jack up prices, thousands of daily ride-hail customers in the Denver metro will look for alternatives, including driving and public transit.

Those who start driving will add another setback to Denver’s elusive goal of reducing single-occupancy vehicles trips, from 73% to 50% by 2030.

But for those who look to transit, there is a glimmer of hope. RTD will soon redesign its bus network. And Denver has plans to create a high-frequency transit network in the next 20 years. But both ideas are likely to come with price tags that reach into the billions.

As these plans come into focus, the RTD Board of Directors, the Mayor of Denver, Gov. Jared Polis and the region’s delegation to the U.S. Congress will need to act fast and make a compelling case to taxpayers.

Does the Denver region have the political leadership to raise that much money?

We will see.

Until then, let’s hope Uber and Lyft’s inevitable fare increases don’t price out significant numbers of Coloradans before fast, reliable transit service can get them where they need to go.

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