The return of Uber and Lyft to Austin has put the city’s only ride-hailing nonprofit in a fight for survival.
RideAustin, one of several small companies that started operations in Austin after the ride-hailing giants left the city in May 2016, is now seeing its ridership cut in half since the two returned to town. The company is slashing expenses and cutting staff, said CEO Andy Tryba.
“We always knew that at some point Uber and Lyft were going to come back. So we've always prepared for it,” Tryba said in an interview with The Texas Tribune, adding that RideAustin expected a big drop in rides — but didn’t think it would happen so fast.
The company was one of many that emerged in the wake of a policy fight between the City of Austin and the two biggest ride-hailing companies. When the Austin City Council, citing safety concerns, voted in favor of an ordinance to force the companies to run fingerprint-based background checks on their drivers, Uber and Lyft successfully campaigned to put the rule up to a public vote. After a bruising campaign during which the two companies spent more than $8 million to get the ordinance overturned, Austin voters opted to keep the background checking rules. The ride-hailing giants ceased operations in the city just days later.
RideAustin, which began operating in June 2016, was notable as the first ride-hailing company to run on a nonprofit model that promised better pay for drivers and allowed riders to donate to local charities through the app. It's seen ridership steadily increase over the past year — which spiked to more than 110,000 weekly rides during the South by Southwest festival.
But RideAustin's fortunes turned during the Legislature's 85th regular session this year, when lawmakers passed a statewide regulatory framework for ride-hailing companies that supersedes local ordinances — including Austin's. Gov. Greg Abbott signed it into law on May 29, and Uber and Lyft returned to Austin the same day.
The drop in ridership for RideAustin was swift and dramatic: last week, the company provided 22,000 rides — less than half of the 59,000 rides it operated in the week before Uber and Lyft returned. Tryba attributed part of the loss to UT-Austin students leaving town for the summer, but he also acknowledged that a large share of rides was recaptured by Uber and Lyft.
In response, RideAustin is cutting staff, from 25 at its peak down to 12 now — and possibly as few as six or seven — as well as reducing fares and slashing operational expenses, including shuttering its headquarters.
Tryba said cutting operational expenses can lower the minimum number of rides the company has to regularly deliver to stay afloat — but that if the ride volume drops below 20,000 rides per week, however, the nonprofit will likely have to cut costs further or go out of business.
RideAustin is working to avoid the same fate as Fare, a Phoenix-based ride-hailing company that shut down operations in Austin just a week after Uber and Lyft’s return. In an email to customers, the company said it couldn’t “endure the recent loss of business.” Other ride-hailing services that had started operating in the initial vacuum have also gone out of business over the past year.
The city’s ride-hailing market changed significantly after Uber and Lyft left. Researchers from the University of Michigan, Texas A&M and other universities conducted a study about how Uber and Lyft’s departure changed riders' behavior in Austin. They found that only 40 percent of respondents transitioned from Uber or Lyft to other ride-hailing companies, while 60 percent started making similar trips using other transportation, like biking, walking or driving a personal vehicle.
Chris Simek, a researcher at the Texas A&M University Transportation Institute that authored the study, said that among those who chose another service, “about half reported using RideAustin most often to make that type of trip. About a third reported using Fasten most often, and about one in 10 reported using Fare most often.”
Simek said the research team plans to do a follow-up study to analyze the market now that Uber and Lyft are back.
RideAustin's nonprofit model — unlike other companies, it doesn't take a cut from standard rides — has attracted drivers like Kacy Garvin.
“I liked the fact that they were looking out for the drivers, and not trying to take a cut like Uber and Lyft,” Garvin said, adding that even though business has been slow with RideAustin, he would not drive for Uber or Lyft. “I chose RideAustin because their business platform is better than the other ones.”
But Garvin might be in the minority: In the week before Uber and Lyft’s return, 2,741 drivers gave rides for RideAustin, versus 2,167 drivers two weeks later – a reduction of 21 percent.
Uber’s return has captivated drivers like Taylor Kelley, a stay-at-home mom who decided to take on the side job once the company returned to the city. “I chose Uber because I thought it was the most popular app and it would be the best way to make some money on the side.” Kelley says she had heard of RideAustin but that she thought it was a public transportation app, not a ride-hailing company. She only learned it was an alternative to Uber a couple of days ago.
Despite the loss in business, RideAustin is determined to move forward. Over the next couple of weeks, the nonprofit will start a crowdfunding campaign for a pilot program to hire drivers as full-time employees "with an hourly salary, insurance, health care and all the other benefits of being a W-2 employee versus being a 1099 contractor," Tryba said.
“We're basically trying to prove a theory on whether or not a local community like this can support a nonprofit model," he said. "We believe there is a market there of anywhere between 20,000 and 25,000 rides a week, and that is a steady stake. But we don't know – we'll have to see whether or not the community continues to support us versus the Silicon Valley giants."
Disclosure: Uber, Lyft, RideAustin and Texas A&M University have been financial supporters of The Texas Tribune. A complete list of Tribune donors and sponsors is available here.
This article originally appeared in The Texas Tribune at https://www.texastribune.org/2017/06/21/rideaustin/.
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