Cabs: 'We're not dead yet'
For 35 years, John Shannon of West St. Paul has made a living as a cab driver. But the last few years have been hard. Growing competition from ride sharing services is threatening the industry's survival.
"I would hope people would not forget about cabs," he said. "It's been tough."
Shannon has seen the number of cabs — and cab drivers — on Twin Cities roads steadily fall. Hundreds have succumbed to Uber and Lyft's seductively low prices.
"At first it was more of a nuisance-type thing, but as they grew more popular it was obvious that they were cutting into the business," Shannon said. "They were giving away free rides, and they got real, real popular with that."
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The trends eroding the cab industry are playing out at a key destination, the Twin Cities airport. The number of Uber and Lyft drivers authorized to serve the airport has grown steadily to more than 5,000. The number of cabs authorized has dwindled 25 percent to 600 since last year.
On a recent morning, taxis at the airport waited for customers while there was consistently a dozen or so people hopping into Uber or Lyft vehicles.
"Quite frankly I'd rather pay $21 to go downtown Minneapolis than pay $46 in a cab, in a dirty cab," said Joseph Karel of Chicago.
Twenty-five-year-old Emma Dunn of St. Paul said she always Ubers.
"It's what I've always used," she said. "So, it's a little bit easier for me. I know the process a little bit more."
But Ryan Day of Honolulu still wanted a taxi. He said they're what he's used to and just simpler.
"I'm in my late forties. Taxis, you get in; it's quick; you don't have to text or do anything. It's like instant gratification, I guess," he said.
To fight back against Uber and Lyft, some cab companies are lowering fares, adopting technology and strategies employed by their new-economy rivals and trying to change how cabs are perceived.
"We're not your father's cab company," said Waleed Sonbol, who manages the Blue & White cab company in St. Louis Park. He has an ownership stake in four other taxi operations that have a combined 285 vehicles.
"We understand where we failed, but we are making the advances to be better and to be what you should expect in a cab company," he said.
Sonbol said customers can hail one of his cabs using a third-party app called Riide. It shows vehicles' locations, wait times and estimated fares. And he said using the app can keep fares close to Uber's and Lyft's on a per-mile basis.
"In some cases, we're probably on average around maybe 50 cents more," he said.
And Sonbol points out that when ride sharing companies boost rates during busy times, cab fares can be about the same — or even less.
Leaders in the cab business say Uber and Lyft have certainly hurt their business but they also say there were simply too many cabs put on the road on the earlier side of this decade.
"It's a little bit of both," said New Hope-based Transportation Plus, CEO Steve Pint.
Pint is transforming his fleet of some 500 cabs that operate under the Yellow, iHail and other banners.
"We're providing the same services [as Uber and Lyft] and doing it better. It's up to us to make it be cool to take a cab," he said.
Central to that effort is the company's smartphone app, iHail, and the option to request rides by text, e-mail or phone. In addition, Pint is working on "de-taxifying" taxis, making them look like Uber and Lyft vehicles.
Their markings are more subtle than traditional taxis. The vehicle types and colors are more varied, too. They have Uber-like dashboard window stickers. And dashboard cameras to monitor what goes on both inside and in front of a cab.
But Pint laments that cabs face far more regulatory oversight than Uber and Lyft do. From fare caps to licensing fees and greater scrutiny of drivers and vehicles.
In Minneapolis, for example, the city rules for cabs run to 39 pages. It's half that for ridesharing companies.
And Pint said Uber and Lyft continue to set fares below their actual cost hoping to drive competitors out of business.
Transportation industry consultant Hubert Horan doesn't dispute that.
"They have all these riders who love them because they get cheap fares," he said. "Well, it's not economical. Uber is not charging passengers what it costs to transport them."
Asked if its Twin Cities fares are below cost, an Uber spokesperson didn't answer the question.
Horan said those fare subsidies come, in effect, from Silicon Valley investors who still have faith in Uber, despite a history of corporate misbehavior ranging from a sexist culture that spurred a rider boycott to run-ins with regulators about issues such as failing to protect customer data to exaggerating driver earnings in the Twin Cities and many other markets.
Last year, the San Francisco-based ride-hailing company agreed to pay $20 million to resolve Federal Trade Commission charges about exaggerated compensation claims nationwide.
In early 2015, for instance, the FTC said Uber had told prospective drivers in Minneapolis they could make $18 an hour. But the commission said that only a tenth of drivers had been earning that much.
The FCC also alleged that Uber's exaggerated earnings claims enticed many people to buy or lease vehicles that they ended up unable to afford.
There's no sign investors will cut off the cash that keeps Uber running, even after a $4.5 billion loss last year. But Pint and Sonbol say their cab companies won't capitulate either.
Uber must eventually raise fares and that will be risky, said Brent Goldfarb, associate professor of management and entrepreneurship at the University of Maryland.
"When they do that, then demand is going to fall," he said. "And if demand falls too much, then drivers are going to stop driving. And when drivers stop driving, then ... people ... are going to have to wait longer for those rides."