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Are Uber and Lyft coupons a thing of the past?

Quartz logo Quartz 5/20/2020 Michelle Cheng
a person driving a car: A passenger gets into an Uber car © Provided by Quartz A passenger gets into an Uber car

In the beginning, aided by large amounts of venture capital for their startups, Uber and Lyft would try to outspend one another on promotions to capture new customers. But as the ride-hailing services grew, they began pulling back on discounts.

Now, Covid-19 could mean the days of discounted Uber and Lyft rides are over for good.

With ride-hailing down sharply in the pandemic, promotions have virtually disappeared across the industry since mid-March, Lyft’s chief financial officer, Brian Roberts, said on a May 6 call with investors.

“So we’ve said consistently that our strategy is to focus on profitable growth, not growth at all costs,” said Roberts. “And so ultimately, we want to win on product innovation, customer experience, and brand preference—not coupons.”

On Uber’s call with investors the same week, CEO Dara Khosrowshahi said that going into Covid-19, promotional activity was “pretty stable” and hadn’t changed much since the pandemic began.

“It’s a phase in the evolution of ride hailing that we expected to see at some point, where [ride-hailing companies] would rely less on aggressive discounting and prices would go up,” says Arun Sundararajan, a professor at New York University’s Stern School of Business who focuses on the sharing economy. “We would have reached a point where prices were in line with what people are willing to pay for a higher quality product—we’re just reaching that point faster.”

But Ygal Arounian, an analyst at Wedbush Securities, says the notion of discounts disappearing for the long-term is “unlikely”—and that’s not a bad scenario for either Uber or Lyft, as it could be an indication that business is back in a competitive way.

Where will ride-hailing shake out?

Just a month ago, Uber was encouraging people to stay home. Now, the direction has changed. “We want to prepare for the new normal,” said Sachin Kansal, Uber’s senior director of product management, on a recent conference call with reporters.

Already, the company is ramping up for what the norms of ride-hailing will look like post-pandemic. Guided by direction from both the Centers for Disease Control and Prevention and the World Health Organization, Uber said it would require that drivers and riders wear masks starting this week. There will be accountability for this: Drivers will need to verify that their mask is on, by taking a selfie on the app. Both drivers and customers will be encouraged to report if someone takes off their mask during the rides.

The measures suggest that demand for rides is filtering back into the market after staggering declines in the early weeks of the pandemic. Lyft CEO Logan Green said that in April, rides plummeted 75% year-over-year. Uber’s ride bookings were down 80% in April.

How soon and how strongly will the industry bounce back? There’s a panoply of factors to consider.

Long term, work-from-home trends suggest commuting may be down overall, and any continued pullback in business travel may mean fewer rides needed to and from the world’s airports. On the other hand, in a post-pandemic world, preferences may shift away from mass transit in favor of ride-hailing. More specifically, people may prefer riding alone over sharing a ride, while bicycles and scooters—both of which Uber and Lyft have expanded into—also may see more uptake.

Wedbush’s Arounian says that the price of rides could go higher—but only up to a point. “If it’s getting too expensive, and the economy is not back in full strength, people might take the risk and wear the mask and gloves and take the $3 subway ride rather than the $10 Uber ride,” he says.

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