UPDATED 16:46 EDT / OCTOBER 30 2018

APPS

Uber rolls out monthly subscription service in bid to boost growth, counter Lyft

In a bid to win over more users, Uber Technologies Inc. has started rolling out a subscription plan that offers significant fare discounts for a monthly fee.

The service, dubbed Ride Pass, became available today in Los Angeles, Austin, Orlando, Denver and Miami. The launch comes two weeks after Lyft Inc. rolled out a subscription offering of its own called the All-Access Plan that similarly offers to cut travel expenses. 

Both Uber and Lyft are gearing up for initial public offerings in 2019 that will require selling investors on their growth potential. Neither company is currently profitable, which makes it all the more important for them to perform strongly in areas such as user acquisition. Offering lower rates to high-value users who frequently hail rides is one way of doing that.

Uber is taking a different approach with its subscription offering than Lyft, the company told The Verge. Lyft’s All-Access Plan provides up to 30 trips worth up to $15 for a fixed $299 monthly fee, which works out to a 50 percent discount if a person up all their rides. The new Ride Pass from Uber, meanwhile, follows a model more comparable to that of Amazon Prime.

Users who pay the $14.99 monthly fee (or $24.99 in Los Angeles) gain the ability to hail rides at discounted rates. The prices for each given month are calculated based on “historical data” and aren’t affected by the fluctuations in demand, weather and traffic that Uber normally factors into fares.

The company promises rider savings of up to 15 percent. Owing to its lower entry barrier and the fact that there’s no maximum trip limit, Ride-Pass could potentially enable Uber to target a broader cross-section of users than its rival.

The plan’s relatively low monthly price should be more accessible for riders who on average don’t take enough monthly trips to justify Lyft’s $299 package. At the same time, the offering could also appeal to users on the other end of the spectrum who exceed the All Access Plan’s 30-ride maximum.

If it proves popular, Ride-Pass could potentially help Uber narrow the gap with Lyft, which in May claimed to be growing sales three times faster than its rival. But a wide rollout of the service may also complicate the company’s path to profitability. Uber is currently footing the difference between discounted fares and normal prices rather than passing on the expense to rides, which could add up quickly across the hundreds of cities where the company operates.

Photo: ell-r-brown/Flickr

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