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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  • TakeFive

    Facebook offering price was $38 a share. I bought shares in the low to mid $20’s. It’s now ~$190; it’s almost a ten bagger. Glad I didn’t listen to all the experts. I can recall reading way too long pieces (like what you’d find at The Economist) on why Amazon would never make a profit. Glad I didn’t listen.

    Anybody aware of how much the price of gas has gone up over the since January? Anybody aware how much the cost of renting an apartment in downtown Denver has gone up over the last 6 years?

    Now if you want to focus on transit which is an afterthought here, I’d be ‘All In.’

    • TakeFive

      I’ll offer my own view of the future that ignores all the silliness. Uber/Lyft have dramatically changed the transportation landscape. Streetsblog et al biases aside people vote with their feet and their pocketbook.

      Marlon Boarnet, a professor of public policy and chair of the department of urban planning and spatial analysis at the USC Price School of Public Policy chaired a study with respect to low income areas.

      The researchers found that car commuters in low-income neighborhoods in San Diego have about 30 times greater job accessibility than those who take public transit.

      Looking towards the future RTD needs to focus on what it can best do. It needs to invest in “high capacity” corridors.

    • james

      The hike in stocks prices and housing (hard assets) especially over the last 10 years is, imho, is almost entirely a result of the devaluation of the dollar throw the numerous QE initiatives… The hidden tax that burdens us all. Its not real, but it is…

      • TakeFive

        The value of the $ went down during the great recession; it has since gone back up. Inflation (which goes more to your point) has been timid. I don’t subscribe to that school of thought.

        • james

          It all depends how you ascertain the value of the $ and calculate inflation, there are many ways to skin those cats. Due to increases in efficiency in manufacturing, via automation/off shoring cheap labor, etc, it does appear the value has gone up when we talk about manufactured goods. But when you factor in the cost of home ownership/rentals and perishable items, life in general shows the truth.. The overall value has most certainly gone down… way down, no matter what broad economical statistics tell you.

          • TakeFive

            Are you by chance familiar with Hedgeable site?

  • LazyReader

    Why any new ride share companies haven’t materialized is a mystery.

    • Derp_Derp

      Because there’s only so many companies that can plausibly claim they will exercise monopoly power after driving competitors out of business with investor subsidies.

  • LazyReader

    “rising ride hailing prices will hit low-income populations” Low income people don’t ride Uber/Lyft. The decline in transit stems from the poor buying their own cars because they’re fed up with inferior service and not being able to go where they please. RTD’s allowing transit to worsen is the result of their own spending decisions they sold to the voters as good idea. Cities that spend billions of dollars on light rail projects like
    Denver inevitably decrease or terminate bus services to pay for the construction costs that inevitably rise beyond projected budgets when the projects were decided upon…… in point almost every light rail project in the last 30 years; All of whom were at least…50% or more over budget. RTD has some of the highest fares nationwide which increased recently; THAT alienates poorer riders. Whom are the predominant demographic who use transit in the first place.

    But this trend is not exclusive to Denver; low-income transit riders are giving up on transit. They have been for years. Transit ridership has been steadily on the decline since 2014. Transit systems growing costs and declining service are shifting poor people into autos. Constant service cuts, the Billions in deferred maintenance debacles, exuberant rail construction costs, decreasing quality and increasing lewd behavior
    and criminal activity have all played their part in transits slow decline. They cant fix it, they don’t want to fix it; at least Not without Federal or states bearing most of the burden which in the long run creates a more bureaucratic and incompetent city government that cant succeed in any endeavor without. Worker productivity among transit systems nationwide have also declined. In 1960, when most transit agencies were private, transit carried ~60,000 trips per working employee each year. Today it is less than 25,000. In an era in which employee productivity in most industries is rapidly growing, in transit it is declining. The transit industry has become more a bloated bureaucracy and rail tycoon empire than a transportation provider. Combine ALL this with the fact the industry has evolved into a taxpayer addict; where subsidies account for over 70% of it’s operating costs and nearly ALL it’s capital costs.

    • TakeFive

      Reader… now you’re just trolling. You’re just regurgitating the same propaganda crapola as before. I’ve twice debunked your points with respect to Denver; won’t waste any more of my time. In essence you’re just Lazy.

      Low income people don’t ride Uber/Lyft.

      WRONG – I started ride-hailing 90 days ago. For grins I’ve worked everywhere. I’ve taken 3 of the nicest young Hispanic (high-end) restaurant workers home to their mobile home. I’ve helped load groceries into my CRV for the trip home. I’ve taken a young lady dressed to the Nine’s downtown for an evening of Jazz and Jambalaya. I could go on and on. The problem with purveyors of propaganda (whether left or right) is they’re typically detached from the real world. You certainly fit the mold.

  • Camera_Shy

    I sort of see uber/lyft as unsustainable businesses. These companies are losing money fast. It is an attempt to charge less for taxi service. Driving people around costs money, and if the labor and vehicle costs are not covered properly, the business(es) will die off.

  • Derp_Derp

    Making a single-occupancy ride into a double occupancy ride where one is the uber/lyft driver, plus a single occupancy deadhead to the next fare or some aimless circling or idling waiting for a fare is a net-loss for efficiency, air quality, carbon emissions, and most every meaningful metric. The only wins are reutilizing that vehicle more and freeing up parking.



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