Uber and Lyft each have vowed that 2020 will be their last
year with four quarters in the red, but that path to profitability might give
travel buyers a reason to reevaluate their ground transportation policies this
year.
Both ride-hailing companies went public in 2019, and
subsequent earnings reports showed fast-growing bookings—and losses—for each.
Uber, for example, reported a loss of $1.2 billion in the third quarter alone,
while Lyft’s third-quarter loss was $463.4 million, nearly double the loss of a
year prior. Uber CEO Dara Khosrowshahi has set a goal for 2021 to be the
company’s first year of profitable earnings, while Lyft executives said 2019
will have been the company’s peak loss year and that earnings would be positive
by the fourth quarter of 2021.
At the same time, the companies are facing increasing
regulatory pressure from several angles. In November, Uber lost its license to
operate from Transport of London, which cited a “pattern of failures” related
to passenger safety and verifying drivers’ identities, which it is appealing. A
December court ruling in Germany, where Uber also faces harsh regulations that
leave it largely as an intermediary between professional taxis and chauffeured
transportation suppliers in the country, stands to further restrict its
operations there.
U.S. regulations are becoming a bigger issue as well.
California this year is enacting a law to cut down on companies’ use of
independent contractors. Uber already has tweaked its model within the state in
anticipation. Chicago, meanwhile, this year started a tax on ride-hailing
rides, meant to cut down on traffic congestion, and New York is sorting through
its own congestion-pricing scheme. All of this means that Uber and Lyft rides
potentially could become costlier this year, not just due to taxes and
regulations but also as the companies face increasing pressure to become
profitable.
“The price of [ride-hailing] products once again is going to
have to go up because nothing else they do is working for profitability,” said
Dave Kilduff, CEO of DK Consulting Group. “How long will investors allow them
to lose massive amounts of money and still invest?” Increased prices from
ride-hailing suppliers could give traditional ground transportation suppliers
leeway to raise their rates as well. “In the limo side of business, because of
the pressure from Uber and Lyft, they haven’t been able to take price increases
in a number of years,” Kilduff said. “Prices have been held down for four or
five years.”
Outside of price, duty-of-care concerns linger for the
ride-hailing providers. Uber last month published a report showing it had
received more than 3,000 reports of sexual assault on trips in 2018. For Uber,
publishing the report was meant to show relative safety, as that number was
among about 1.3 billion total rides, and about half of those were cases in
which the driver, not the passenger, was the victim. Even so, the companies are
facing legal challenges that they are not doing enough to prevent these
assaults, which adds fuel to the duty-of-care discussions that have circled
around corporate usage since their inception.
As such, this might be a good year to address
ground transportation in their travel policy. Even for those who have, it will
be worth paying attention to budding technology offerings that seek to
integrate all sorts of transportation offerings. Car rental suppliers, for one,
are working on incorporating such features in their apps, and several
third-party suppliers are in various stages of development, Kilduff said. “As
prices go up, companies should want to start re-comparing what the better
pricing and duty-of-care options are, and you want to see it at the time of
booking,” Kilduff said. “That’s a part of this buildout.”