Uber, the car service that lets people summon rides via a smartphone app, was hit with its own storm this week when New Yorkers accused the startup of unfairly profiting by charging higher rates in the wake of Hurricane Sandy.
The San Francisco-based company, which said on Sunday it would enable “surge pricing,” backtracked today and announced it would return to standard fares for customers and eat the costs of paying drivers extra.
“To get drivers out, we are now paying them the surge price,” Uber Chief Executive Officer Travis Kalanick wrote in an e-mail to Bloomberg.com today. “There are huge losses for the business in doing this initiative.”
He said that Uber will go with standard pricing as long as it can, “while we figure out more sustainable ways to keep supply up while the city is in need.”
“Surge pricing” is a dynamic system that kicks in during peak demand periods such as New Year’s Eve. The Uber app displays a lightning bolt icon when fees are above normal to warn users before they book. In an interview with Bloomberg Businessweek in August, Kalanick said dynamic pricing is used “if it will increase the number of rides that happen. When prices go up, more drivers come out.”
Still, charging people more to get around New York in the wake of a natural disaster did not sit well with some people. When Sandy was barreling toward the East Coast on Sunday, the Uber New York Twitter account — run by the company’s community manager, according to its bio — wrote, “surge pricing will be enabled — we want to provide you w/ a reliable service. stay safe, & dry!”
That was met with tweets like this one from Frank Denbow:
@uber do you really need to do surge pricing at 2x in nyc now?
And this one from Maurice Rahmey:
New UBER deal: Storm Surge Pricing. The higher the winds are, the higher our pricing goes!