Anika Begay
Ride-hailing giant Lyft will pilot a new feature called Price Lock that will allow passengers to purchase a monthly pass “that caps the price for a specific route at a specific time,” according to CEO David Risher.
The feature is designed to address peak pricing inconsistencies, especially for commuters who use the Lyft app every day. It’s part of Lyft’s larger plan to “open a can of prime-time bullshit,” Risher said Wednesday during Lyft’s second-quarter earnings conference call.
“Primetime” is Lyft’s term for what’s known as “surge pricing,” when ride-hailing platforms dynamically increase the price of rides when demand is high or supply is low.
“It’s especially important for them to have reliable pricing because they know how much their trip should cost and they hate it when prices change,” Risher continued.
Lyft hasn’t provided much information about how the Price Lock economics will impact Lyft’s bottom line, but Risher said Wednesday that the subscription would cost less than $5 a month. The feature is already available on the Lyft app and looks set to go for $2.99 a month.
The company did not immediately respond to a request for more information about the feature or whether it will be integrated into Lyft’s main subscription platform, Lyft Pink.
Coming to “primetime” pricing is nothing new for the company. A year ago, Risher outlined his plan to eliminate peak pricing in an effort to offer passengers cheaper fares to convert them from Lyft’s biggest competitor, Uber.
Risher noted that “primetime will never go away completely” because “it’s an important way to match supply and demand when peaks are rapid.”
“But with innovations like Price Lock, we can reduce the frequency with which it happens and hopefully take what I’m willing to bet is the most hated feature of ridesharing and turn it into a reason to choose Lyft.”
Over the past year, Lyft has made a concerted effort to reduce the number of trips affected by peak pricing. Risher noted that on a quarterly basis, that number has decreased by 25%, which he said contributes to better conversion rates.
“In fact, the markets where we saw the sharpest declines in primetime in the second quarter, like Phoenix, Baltimore and Orlando, are the ones where conversion rates are improving the most,” Risher said.
This was the first quarter in which Lyft reported GAAP profitability, but that success was tempered somewhat by a weak third-quarter outlook. Lyft forecast gross bookings, or the total value of transactions, to be between $4 billion and $4.1 billion, slightly below analyst estimates of $4.13 billion. (By comparison, Uber’s second-quarter gross bookings were $20.6 billion, but Uber has global market share and Lyft is only available in the U.S. and Canada.) The adjusted core earnings forecast of $90 million to $95 million also fell short of Wall Street’s targets of $104.3 million.
Lyft said it expects gross bookings to grow slightly faster than rides, in part because the reduction in variable pricing will impact gross bookings per ride.
Update: This article has been updated with the Price Lock price displayed on Rebecca Bellan’s Lyft app. It’s unclear if the subscription price varies by rider or region.
