Uber and Lyft expect private rides to pick up sharply, but there are some potential hurdles

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As more people get vaccinated against COVID-19 and pandemic restrictions are eased, the rideshare industry is bracing for a comeback but faces potential roadblocks. Uber Technologies Inc. UBER, + 1.74% and Lyft Inc. LYFT, + 2.37% saw a sharp drop in travel demand as travel and general mobility shut down due to COVID-19 last year, but analysts expect that your business comes roaring back. So far, Uber and Lyft have recovered 52% of the business they lost during the steep decline in March 2020, according to Edison Trends.

“If you look at carpool holistically, you’re set for a pretty strong rally,” said Steven Weinstein, an analyst at research firm M Science. The data shows that whenever there has been a lifting of restrictions, there has been a strong rebound in transport activity, he added. The two rideshare giants expressed optimism about the ride recovery when they reported fourth-quarter earnings in February. Uber CEO Dara Khosrowshahi said in his earnings call that the company was seeing “some pretty attractive signs.” Lyft CEO Logan Green predicted that contrary to predictions of his demise, cities will do well after the pandemic. And Lyft revised its first-quarter estimates in early March, saying it expected to see a minor decrease in travel volume for the quarter ending March 31, along with a smaller loss. Since then, Lyft has said it “expects to see positive growth in weekly carpool year over year and each subsequent week through the end of 2021, barring a significant worsening of COVID-19 conditions.” See: Uber rides pick up and deliveries rise, but revenue doesn’t exceed expectations. the working conditions of company drivers. Additionally, business travel is not expected to reach pre-pandemic levels until 2023 or 2024, according to a recent survey by the American Hotel & Lodging Association, which would affect demand for airport travel, conference transportation and more. “You are going to see a lot of enthusiasm [about ride-hailing]But it’s probably not all justified yet, ”said James McQuivey, an analyst at Forrester. A tale of two recoveries? In terms of sheer demand for their services, Uber and Lyft could have divergent payback histories. Data from M Science showed that in February, amid continued weakness in travel, 79.5% of total spending on Uber was on its delivery service. As mobility increases, Weinstein expects a reversal: The company’s delivery business could plummet as private travel picks up. For more information: The pandemic has more than doubled the business of food delivery applications. Now what? “The pushes and pulls will probably silence [Uber’s] general recovery, ”he said. On the other hand, because Lyft is so reliant on private rides, it is more likely to experience a “pretty explosive” recovery, he added. Both companies continue to face regulatory risks that could drastically affect their businesses, the biggest of which is the classification of their drivers. In recent months, there have been a handful of developments on this front: The US House of Representatives recently passed and sent to the Senate a bill called the PRO Act, which strictly applies to the ability of workers to get organized but that could affect the concert companies. ‘Worker classification issues. Uber said in March it would make changes in response to a UK Supreme Court ruling that requires the company to pay drivers minimum wage and vacation pay, as well as establish and contribute to pension plans. Also in March, Spain announced a new law that will grant concert workers employee status. And the European Commission recently said it is looking to improve labor protections for concert workers. As they address these driver-related issues, Uber and Lyft are concerned about whether there will be enough drivers to support a rebound in carpooling. Khosrowshahi said during Uber’s earnings call that he was concerned about the supply of drivers, especially during the second half of this year. Brian Roberts, Lyft’s chief financial officer, said on the company’s earnings call that he intended to invest in controller supply this quarter to prepare for the rest of the year. In response to growing demand for rides, Uber announced earlier this month that it would spend $ 250 million in bonuses as it tries to attract drivers to its platform. Chris Benner, a professor at the University of California at Santa Cruz and director of the Institute for Social Transformation that studies concert work, was skeptical about concerns about the supply of conductors. “There is certainly no shortage of people who need work,” Benner said, referring to the nation’s unemployment crisis. “If Uber and Lyft experience a driver shortage, it is due to their own practices: they do not provide adequate compensation (which we know to be true based on our data and others, often below legal minimum wage levels) and they don’t provide adequate resources to make driving safe. “Gig Workers Rising, a group of drivers and other app-based workers, echoed that sentiment and said in a statement:” It’s interesting that Uber and Lyft are publicly expressing they need a surplus of drivers to increase competition and cut costs. We know people are desperate right now for jobs and financial opportunities. ” Shares of Uber and Lyft have risen nearly 90% in the last year. But Lyft’s shares have risen more than those of its biggest rival so far this year. It’s up about 26%, while Uber’s shares are up about 12%. The S&P 500 SPX Index, + 0.09% has risen approximately 12% year-to-date and approximately 46% in the last 52 weeks.