Surge pricing, rooted in the economic concept of supply and demand, is a common feature in the ride-hailing industry. Recently, Grab Philippines has provided clarity on why surge pricing is implemented, even during the early hours of the day, as reported by Midori Business News Philippines.
Why Grab Philippines Surge Pricing Exists
Grab Philippines’ Director for Public Affairs, Booey Bonifacio, shared insights on why surge pricing is applied. She emphasized that there are only about 40,000 to 45,000 Transport Network Vehicle Service (TNVS) drivers available, while the demand for rides can reach up to 1 million passengers during peak times.
“We are consistently in a situation where the demand exceeds the number of available drivers. According to the basic principles of economics, this naturally leads to surge pricing,” Bonifacio explained in an interview with TeleRadyo Serbisyo.
Surge Pricing Applies Even During Early Morning Hours
Surge pricing isn’t restricted to peak hours; it can also be implemented in the early morning. Bonifacio highlighted that fewer Grab drivers are available during the predawn period, which can result in surge pricing.
“For instance, if a large number of BPO workers need rides, but only a few drivers are on duty, surge pricing will be triggered, even at 3 a.m.,” she clarified.
Incentivizing Drivers Through Surge Pricing
A significant portion of surge pricing goes directly to the drivers as an incentive. Bonifacio pointed out, “Drivers work hard, whether dealing with heavy traffic or working during the early morning hours. Surge pricing acts as a reward for their efforts.”
This additional payment motivates drivers to work during peak hours and inconvenient times, ensuring that enough rides are available for passengers when demand is high.
This additional payment motivates drivers to work during peak hours and inconvenient times, ensuring that enough rides are available for passengers when demand is high.
A report by the Philippine Center for Investigative Journalism (PCIJ) revealed that GrabCar rides often include surge fees, which are determined by an algorithm designed to encourage more drivers to get on the road. Despite the higher fares, PCIJ noted that customers still experience long wait times, which underscores the challenge Grab faces in balancing demand and driver availability.
This explanation from Grab Philippines sheds light on why surge pricing is a common practice. It’s a necessary solution to the ongoing challenge of meeting passenger demand with a limited number of available drivers, as also highlighted by Midori Business News Philippines.
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