Uber CEO on Surge Pricing: Get Used to It

Travis Kalanick says his company's model is 'dynamic pricing' in ground transportation, something never seen before

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The CEO of car-service app Uber has a message for riders who were enraged about high rates on New Year’s Eve and during snowstorms: put up with it, because it’s not going anywhere.

In an interview with the Wall Street Journal, Travis Kalanick addressed what the company calls “surge pricing,” where Uber’s algorithm calculates a higher price during times of high demand, often a multiplier of 2 to 8 times the standard ride cost. Uber users took to Twitter on New Year’s Eve to complain about the surge in prices–one rider tweeted that a fare that was normally about $35 had skyrocketed to more than $250. And during a New York City snowstorm in mid-December, riders report they were offered fares of $23 a mile, leading to many outraged users (and potential users).

But the price hikes are just rational, market-based economics, Kalanick explained, comparing the increases to purchasing a hotel room or airline flight during the holiday season. About the outrage, he said: “I think that’s just people getting used to dynamic pricing in transportation. In ground transportation, there’s been fixed pricing for 100 years. Because of that, there’s an education process.”

Kalanick also talked about the company’s future. Uber currently has 550 employees and plans to more than double that number this year. When asked whether he plans to launch an IPO, he said ,”We don’t have any plans right now. We’re just growing a business. We’re only three-and-a-half years old.”

[Wall Street Journal]

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