Uber New Surge Pricing Changes to Fixed Rate
Last month, Uber announced that they were completely changing how surge pricing would be calculated for Uber Drivers. Uber has already changed how surge pricing works in most major markets with upfront pricing that no longer showed customers what the surge multiplier is. The new surge pricing shows in the new version of the Uber Driver app as well. It will be a mater of time before Uber forces everyone to update their Uber Driver app. In some smaller markets, Uber passenger can still see the surge multiplier if they do not have upfront pricing.
How Does the Old Surge Pricing Work?
When it was busy on Uber, Uber would set a surge multiplier on the trip. If the multiplier was 1.25x, the trip was 25% more expensive. If the surge multiplier was 2x, the trip was twice as expensive. Drivers used to get the same multiplier, so trips would pay twice as much if the surge multiplier was 2x.
With Upfront Pricing, Uber hides the surge multiplier from passengers so they could not see how much more expensive their ride was. Uber continued to show a surge multiplier to drivers but I questioned whether the two multipliers were the same. I suspect that the driver surge multiplier would be lower than that of the passenger.
What is Wrong With Uber Surge Pricing?
The old multiplier system favored very long rides and it was not as lucrative for short rides. This system incentivized drivers to ignore requests that were not long rides or drivers would accept trips and call the passenger to see where they are going. Also, some drivers would ignore specific parts of the city because they knew that passengers in that part of town would only go a short distance.
There would also be times where the surge pricing would only last a few minutes so very few drivers would actually get any trips with surge pricing. Some drivers try to chase the surge pricing, which rarely works. By the time drivers get to the surge zone, the surge pricing would often be gone.
With this Surge Pricing system, I often accept the first or second request and keep driving. The time I spend trying to get the highest surge trip would normally not amount to higher earnings. There was no use trying to hunt for a surge price trip since it doesn’t happen that often in Boston. Back in the fall, afternoon rush hour would consistently generate surge pricing, but traffic was always a mess. It would take you 20 minutes to pickup a passenger so it was rarely worth the time to drive during afternoon rush hour.
What is Uber Flat Rate Surge Pricing?
Uber is implementing a new type of Surge Pricing. Instead of a multiplier system as described before, Uber is moving to a flat rate surge pricing. The new surge pricing will add a flat rate bonus to every trip. Drivers will continue to see the flat rate surge bonus with every trip request and their minimum flat rate surge bonus on the bottom of their Uber driver app when not on a trip.
Uber also claims that if the trip is very long, they would increase the surge bonus to compensate the driver for the additional time required to complete the trip. I have a few trips that showed the increased surge. I believe I accepted a trip with a minimum surge of $2, but since the trip took 24 minutes, the surge increased to $7.43. The rider paid $36, I was paid $21 so Uber made $15 on that trip. Not necessarily fair, but this is what upfront pricing and flat rate surge pricing can do for Uber.
Below is Uber’s explanation of the new Flat Rate Surge Pricing:
We’ve heard from you that surge can be frustrating, so we’re introducing updates to make it a more reliable and consistent earning opportunity for drivers.
Here’s an overview of our discussions and answers to the main questions they asked.
- What’s changing about surge?
- How do I earn with the new surge?
- How will this change affect my earnings?
- How does surge work on long trips?
- Sometimes I don’t get surge on my next trip. Why is that?
- How does surge work for UberPool trips?
- Where can I see my surge earnings from UberPool trips?
- How do I give feedback about the new surge experience?
Back to basics: What is surge?There are times when so many people are requesting rides that there aren’t enough cars on the road to help them all. Bad weather, rush hour, and special events, for instance, may cause unusually large numbers of people to want to ride with Uber, all at the same time.
To make it worth your while to drive to these busy areas, we add dollar amounts on top of your fares for trips taken from there. These dollar amounts are shown on the map screen.
The dollar amounts on the map will increase in zones where there is a higher discrepancy between demand for rides and drivers in the zone. This is shown through the colors on the map and the dollar amounts you see.
You will see higher dollar amounts in the middle (or red zone) of the surge zones. These represent a higher volume of riders requesting. Dollar amounts are lower in surrounding zones where there are fewer riders requesting.
Is the New Surge Pricing Better or Worst?
I believe that the new Surge Pricing is slightly better than the old version. I typically get only short rides when there is surge pricing, so the minimum flat rate surge pricing helps me more than the old multiplier system. In one hour, I completed three short trips with a minimum surge of $5, so I made $15 in surge pricing alone. I would expect this to happen more often.
The new Surge Pricing system also pays the driver a higher surge bonus if the ride is longer, so it seems to be able to pay drivers more on short trips but also attempt to maintain similar earnings on longer trips. In Uber’s explanation, the “unicorn” surge pricing fares will probably be rarer, but surge bonus will be at a higher level across many shorter trips. Many of the trips I complete are fairly short, so hopefully the new flat rate surge pricing will work better.
So far, I have seen a more consistent surge bonus across more of my trips. I can’t say whether I am making more or less with this system since surge pricing is fairly rare for me in Boston. Either way, the new system doesn’t affect me that much since only a handful of trips has the surge bonus on it. However, I do believe that this surge pricing system is better than the old system.