Lyft surge pricing falls as company attracts more drivers
- Lyft lowered its prices to stay competitive and saw fewer earnings per ride
- An increase in drivers, however, has led to declining surge pricing
- Competitors like Uber also use surge pricing when they're short on drivers
This Monday, May 16, 2016, file photo shows a smartphone displaying the Lyft app, in Detroit. (AP Photo/Paul Sancya)
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(NewsNation) — An influx of drivers has led to a drop in Lyft prices during peak times, otherwise known as surge or prime-time pricing.
The ride-hail company reported a 35% reduction in prime-time pricing during its Q2 earnings call Tuesday.
Although it may work as a tool to incentivize drivers to take gigs during peak hours, riders “hate” the prime-time price hikes “with a fiery passion,” Lyft CEO David Risher said during Tuesday’s call.
“We’re trying to really get rid of it,” he said. “And because we’ve got such good driver in supply, which we’ve worked really hard to get, it’s decreased significantly.”
In its second quarter, Lyft saw the most drivers in nearly three years and the average hours per active driver also reached a new multi-year high, a company spokesperson told NewsNation in an email Wednesday.
It’s that added boost in supply that’s responsible for driving down surge pricing.
“To be clear, Lyft isn’t changing (prime-time) pricing,” the spokesperson said. “(Prime-time pricing) is down because there are more drivers on the platform, which means there’s a healthier marketplace.”
Lyft’s competitor Uber describes surge pricing as an incentive for drivers and a premium for riders.
“Surge pricing automatically goes into effect when there are more riders in a given area than available drivers” according to Uber’s website. “This encourages more drivers to serve the busy area over time and shifts rider demand, to maintain reliability and restore balance.”
Lyft recently made it’s stay-within-area filter more precise, allowing drivers to pinpoint where they want to drive and work within a five-mile radius of that location.
“It means that drivers can stay within their own neighborhood if they want and not end up super far away at the end of the day,” Risher said during the call.
That change alone led to the increase in driver hours and weekly retention rates, Risher said.
Lyft’s shares fell more than 7% Wednesday, Reuters reported, citing investor’s fears about the company’s focus on competitive pricing.
Revenue per active rider was $47.51 in Q2, down 5% from Q2 last year.
