Riders coped with Uber surge pricing over holidays

This Friday, Nov. 21, 2014, file photo taken in Newark, N.J., shows smart phones displaying Uber car availability in New York.
This Friday, Nov. 21, 2014, file photo taken in Newark, N.J., shows smart phones displaying Uber car availability in New York.

Clara Groene planned ahead.

Knowing Uber would raise its prices for New Year's Eve, she and five friends hired someone else to safely drive them around as they rang in the New Year.

That's because the controversial ride-sharing app uses a pricing model that fluctuates with demand -- not a standard metered rate like taxis. The company's "surge pricing" on New Year's Eve underscored another distinction of Uber's business model, which is under fire in Chattanooga and in cities across the country for operating outside the rules that regulate taxi companies.

New Year's Eve is Uber's busiest day of the year. On Dec. 31, 2013, the company generated $10.7 million in gross revenue, Business Insider reported.

An Uber representative said its pricing policy helps ensure there are enough drivers on the road at peak times. And the company repeatedly communicates its surge pricing to customers. It notifies users ahead of time. And when rates more than double, users must type in the surge multiplier so they know what to expect. Uber's website describes its pricing model as simple supply and demand.

SURGE PRICING

Here's how Uber describes its surge pricing, a supply-and-demand rate model. With surge pricing, Uber rates increase to get more cars on the road and ensure reliability during the busiest times. When enough cars are on the road, prices go back down to normal levels. It's important to know that you'll always be notified in big, bold print if surge pricing is in effect. When rates are more than double, the surge confirmation screen also requires you to type in the specific surge multiplier to ensure you understand what rates to expect. -- Uber

"With surge pricing, Uber rates increase to get more cars on the road and ensure reliability during the busiest times," the website states. "When enough cars are on the road, prices go back down to normal levels."

Even so, the policy has created ill will in some instances. When a hostage situation developed in Sydney, Australia, last month, Uber's algorithm automatically pushed prices up in the area to more than four times the price before the incident. Once the company realized the issue, it offered free rides for people from the city's central business district.

Groene, 25, is a regular Uber user. But after the company notified customers of its New Year's hike in rates, she and her friends found a work-around by hiring a sober friend.

"We just kind of wanted to circumvent the issue by taking it into our hands," she said. "But overall, my experience with Uber in Chattanooga has been great."

The price surge was enough to get Lauren Shumaker to leave her friends. She's an Uber driver and decided to go out for a bit Wednesday evening, when she could earn about $5 extra an hour, she said.

"It was enough to have me leave my friends to go do it for a little while," she said. "Looking back, I should have driven the whole night, but I wanted to enjoy the evening."

She mostly drove people from their homes to downtown. And no one seemed thrown off by the prices -- in fact, many people were surprised at the prices, which they said seemed cheaper than cab fares, she said. Sample fares on Uber's website put the price of a ride from the Chattanooga Airport to the University of Tennessee at Chattanooga at $16. A ride from Coolidge Park to downtown is listed at $8, though those rates can change.

"It's all based on demand," she said. "It's all based on people requesting rides compared to people available to give rides."

But city ordinances don't allow cabs to hike their prices at busier times, said Tim Duckett, owner of Millennium Taxi Services.

"If I were to do the same thing, they'd call me in, take away my license and put me out of business," he said.

Even if cabs were allowed to charge more at peak times, Duckett said, it's just a bad way to treat customers.

"They're authorized to gouge the public," Duckett said. "Either willingly or unwillingly, the practice is bad."

Regulations may be changing for Uber. The Chattanooga City Council approved a first reading of an ordinance last month that will provide some oversight of ride-share companies, though it largely allows Uber to stick to its pricing model. The council will vote on the ordinance's second reading Tuesday.

J. Bartlett Quinn, chairman of the city's transportation board, said officials are still grappling with whether and how they might react to Uber's price surges.

"I'm not sure that everybody's in agreement on the issue," he said. "It's still up in the air as to what exactly is going to happen in Chattanooga."

Contact staff writer Kevin Hardy at khardy@timesfreepress.com or 423-757-6249.

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