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Ride-hail giant Lyft will pilot a new feature called Price Lock that will let a rider purchase a monthly subscription “that caps the price for a specific route at a specific time,” according to CEO David Risher.
The feature is designed to address the inconsistencies of surge pricing, particularly for commuters who use the Lyft app everyday. It’s part of Lyft’s broader plan to “open up a can of whoop ass on primetime,” Risher said Wednesday during Lyft’s second-quarter earnings call.
“Primetime” is how Lyft refers to surge pricing, which is when ride-hail platforms dynamically increase the price of rides when demand is high or supply is low.
“Reliable pricing is particularly important to them because they know what their ride should cost and hate it when prices change,” Risher continued.
Lyft didn’t provide many insights into how the economics of Price Lock will work, but Risher said Wednesday that the subscription would cost under $5. Whether that’s a monthly or annual price is unclear. The company did not immediately respond to a request for comment. Risher said Lyft has already been testing out the feature, and customers can find it on the app today.
Coming for “primetime” pricing isn’t new to the company. A year ago, Risher outlined his plan to kill surge pricing in an attempt to offer riders cheaper fares to convert them from Lyft’s biggest competitor Uber.
Risher noted that “primetime won’t ever completely go away” because “it’s an important way to match supply and demand when spikes quickly.”
“But with innovations like Price Lock, we can chip away at how often it occurs and hopefully take what I’m willing to bet is rideshare’s most hated feature, and turn it into a reason to choose Lyft.”
Over the past year, Lyft has made a concerted effort to reduce the number of rides impacted by surge pricing. Risher noted that on a quarterly basis, that number declined by 25%, which he said contributes to better conversion rates.
“In fact, the markets where we saw the sharpest declines in primetime in Q2, like Phoenix, Baltimore, Orlando, are the markets where conversion rates are improving the most,” said Risher.
This was the first quarter that Lyft reported GAAP profitability, but that success was tempered somewhat by a soft forecast for the third quarter. Lyft forecast gross bookings, which is the total value of transactions, coming in between $4 and $4.1 billion, which is slightly lower than analyst estimates of $4.13 billion. (For comparison, Uber’s gross bookings for the second quarter came in at $20.6 billion, but Uber has global market share, and Lyft is available only in the U.S. and Canada.) Adjusted core earnings guidance of $90 million to $95 million also came in below Wall Street targets of $104.3 million.
Lyft noted that it expects gross bookings to grow slightly faster than rides, in part because decreased surge pricing will have an impact on gross bookings per ride.
