June 2019

Ride-hailing giants receiving very mixed reviews in San Francisco

(Note: This article originally appeared on SFGATE, a website sister-site of the San Francisco Chronicle.)

Ride-hailing companies once promised that their services would reduce the number of cars clogging city streets. In fact, the opposite is true in dense parts of cities.

Everyone knows that ride-hailing apps have proved popular with many customers, being generally easier and significantly cheaper than taxi cabs.

But are the benefits worth the long-term disruption created by Uber, Lyft and other transportation network companies in San Francisco? Here’s what recent studies tell us.

Traffic is a mess

Uber and Lyft accounted for two-thirds of a 62 percent increase in congestion in San Francisco over six years, according to a study published last week. Without ride-hailing services operating, traffic models estimate that hours of delay would have increased by 22 percent. (Joe Castiglione, deputy director for technology, data and analysis at the San Francisco County Transportation Authority co-authored the report covering 2010-2016 with researchers from the University of Kentucky.)

Uber and Lyft discounted the data Transportation Authority officials released, saying that it didn’t account for the growth in tourism, freight or delivery services that increased with the economic recovery.

Congestion is much worse in high-density city business centers, such as the Financial District, than in residential areas. A June 2017 study found that on a typical weekday in San Francisco, ride-hailing drivers make more than 170,000 vehicle trips and that the trips are concentrated in the densest parts of the city.

Both Uber and Lyft say they support congestion pricing, such as the plan New York legislators approved for Manhattan that would charge drivers entering the borough about $12 to sit in traffic. But if congestion pricing discourages people from driving into the city in their own cars, ride-hailing services could see a surge of new customers.

During periods of high demand for rides with a limited supply of cars, Uber and Lyft raise their prices dramatically — doubling or tripling them, for example, on New Year’s Eve. A 2016 Uber and University of Chicago, Booth School of Business, study that tried to make the case that surge pricing was beneficial to customers noted that surge pricing coincided with a doubling of drivers on the road.

Drivers are overworked and underpaid

Uber and Lyft charge drivers a commission of 20 or 21 percent, but if you add the booking fee and “safe rides fee,” Uber’s actual cut can be much higher, especially for low-fare rides, notes Riderster. Uber says its drivers can make

$25 an hour, which is not bad for a part-time gig. However, when you figure in the cost of gas, maintenance, depreciation, traffic fines, and car payments or leases, it works out to be much less, drivers say, and often not enough to make a living wage in San Francisco.

Of the 50,000 Uber drivers in San Francisco, many live outside the Bay Area in cities like Modesto and Sacramento. Some sleep inside their cars at night. One driver told the Guardian he estimates he makes about $10 an hour.

Ride-hailing services are killing the taxi/limo business

Uber, Lyft and other for-hire services don’t have to pay for the taxi medallions that once could fetch hundreds of thousands of dollars in some cities. Their low prices undercut cab and limo services. The argument can be made that this is the price of progress, analogous to the automobile destroying the horse and buggy business in the first decade of the 1900s. Of course, the first automobiles were not subsidized by billions in venture capital cash.

Ditto for the rental car business

Uber and Lyft have captured 70.5 percent of the U.S. business traveler market, according to Forbes, leaving the car rental industry with 23 percent. Plus, people who used to rent cars on vacations are now more likely to rely on ride-hailing services to get around. Hertz stock is down about 33 percent from 2018 highs.

Fewer parking lots, garages, spaces in the city

While ride-hailing services add to congestion, they reduce the need for parking. University of Colorado researchers estimate that one out of four ride-hailing trips would have consumed a parking space. Whether you think this is a good thing depends on if you have a car and rely on city parking. Or if you have a business that relies on parking for walk-in customers.

Uber’s business plan clashes with that of its drivers

Uber’s revenue is dependent on how many trips it can facilitate, so it needs to scale its business to become profitable. But by recruiting more drivers, it saturates the most lucrative areas of cities and potentially reduces the amount of money each driver can make.


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