We’ve Hit Peak Ride-share
By Ben Montgomery
President, Premium Parking
In the parking industry we are scared. At nearly every convention we a have a multitude of speakers telling us that the US is amid a mobility revolution that will kill off parking lots and garages. The culprits? Ride-hail and self-driving cars.
Colleagues, don’t believe the hype! 2019 will be the year that ride-share peaked. Uber and Lyft are causing headaches and congestion in municipalities, leading to negative customer sentiment. And year-on-year growth in riders seems to be leveling out. It stands to reason that prices will go up and demand will subsequently fall. There is nothing that these ride-share companies can do that will break the relationship between price and demand.
Ride-share companies are also hedging on autonomous vehicles – but reality is they are likely decades away. And when they do get there, they may not ever be able to replace drivers.
Here are 3 reasons why prices will rise and we shouldn’t be worried:
1. Subsidies will disappear. Both Uber and Lyft took their companies public this year, and the market is now watching their financial performance on a quarterly basis. They will need to show progress toward profitability. To be profitable, you need to charge more for a service than it takes to produce the service.
2. Municipal taxes and regulations will increase. Uber and Lyft are just taxis with better software. Taxis have always been highly regulated and taxed by local municipalities. These local governments are slow to move, but they have now started. Over time the gap between regulations and fees on taxis and ride-hail will converge, leading to increasing costs.
3. Most drivers are employees. Uber and Lyft are part of the “gig” economy. The reality is most of their rides are provided by full time (30+ hrs/week) drivers who are pricing their services not that far above minimum wage levels. These companies will need to treat their drivers in a manner more consistent with a typical employee/employer relationship and pay them more over time.
This is not an indictment of the ride-share industry, just simple economics. The teams at Uber and Lyft have created an impressive management and dispatch network. Their software and systems likely generate 15%-20% savings on managing a traditional fleet of taxis. At Premium we talk about Uberization not as a mobility revolution, but a revolution in middle-management.
These ride-share companies have leveraged the ubiquity of mobile phones to automate the following middle management steps:
1. Defining a task, then finding the best person in an organization to complete it.
2. Connecting the customer with the employee.
3. Seamlessly accepting cashless payment.
4. Giving the customer feedback on the status of the task, while getting feedback on the quality of the service provided.
5. Using the feedback to deliver consistent, quality service.
With increasing demand for urban real estate, the business of efficiently managing parking spaces will not die, but thrive. The challenge is how can we “Uberize” the management of parking, and what strategies will increase the effectiveness and efficiency of our services.