Uber Kills Surge Pricing In NYC For Customers, Drivers Paid 2X Rate To Meet Post-Sandy Demand

With the subway system down for the count in the wake of mega-storm Sandy, it’s very, very tough to get around New York City today. And this morning, people who opened up their Uber apps to hail a car in Manhattan were met with another obstacle: “Surge pricing,” which is when Uber hikes up fare prices during especially busy times.

Now, Uber’s surge pricing kicks into effect during especially high-traffic times, such as holidays and late nights after major sporting events. The idea is that even during times of high demand, if someone really needs a ride and is willing to pay, there will be a car available for them. The high pricing balances out the high demand.

And while today in New York there is certainly an imbalance of supply and demand, many people thought that Uber deciding to turn on “surge pricing” while the city is working to collectively recover from the storm was distasteful. And they let Uber know — via Twitter, of course.

https://twitter.com/FrankDenbow/status/263648893957447680

Hey @uber_nyc I love you but doubling the price for "intense demand" when there's no transit/disaster sounds like price gouging to me.

— corey zaloom (@CoreyZaloom) October 31, 2012

At first, Uber responded that the reason for the price hike was to incentivize more drivers to get on the road for work — and it bears mention that the pricing in NYC today was two times the normal rate, while on New Year’s Eve it has gone up to more than six times the normal rate. But the company ultimately decided to switch back to normal pricing for customers, while continuing to pay drivers twice as much as normal rates to keep them on the road.

https://twitter.com/Uber_NYC/status/263654607027335168

https://twitter.com/Uber_NYC/status/263663679453687808

In an email, Uber CEO Travis Kalanick told TechCrunch that Uber opted to turn off surge pricing for consumers, and decided to take a loss by still paying drivers the surge prices. “This way we can maximize the number of drivers on the road.” He wrote:

“There are huge losses for the business in doing this initiative, but will do it as long as we can today while we figure out more sustainable ways to keep supply up while the city is in need.”

The issue here, it seems, is not necessarily that people did not want to pay more to encourage drivers to work. But the fact that Uber itself was also benefiting from surge pricing in this post-disaster scenario rubbed people the wrong way. This response seems like exactly the right thing to do.

In all, the surge pricing was only in effect for about an hour, so Uber’s swift reaction to public sentiment seems like a good example of pivoting position quickly to do the right thing. It’s a standard move for tech-focused startups these days: Push the envelope a bit and ship as quickly as possible, but stay vigilant to how users respond and react quickly if needed.

Additional reporting by Jordan Crook