In late February, Wendy’s management team surprised both customers and investors with a clarification. The fast-food chain announced wrote to CNN that “Wendy’s will not implement surge pricing, which is the practice of raising prices when demand is highest. […] It was never our plan to raise prices when customers are visiting us the most.” Surge pricing is the practice of increasing prices when demand is high and decreasing them when prices are low. Basically, it’s a form of “dynamic” pricing.
Customers of course were elated to hear Wendy’s was no longer employing that kind of pricing strategy, but investors may be less pleased. Still, despite the controversy around dynamic pricing, many companies continue to use this strategy. Below are three stocks that have not given up on surge pricing just yet.
Airbnb (ABNB)
Founded in 2007 and headquartered in San Francisco, California, Airbnb (NASDAQ:ABNB) represents one of the many faces of the new digital economy. The company primarily operates a platform that enables hosts to offer stays and experiences to guests worldwide. Through Airbnb’s marketplace, hosts and guests connect online or through mobile devices to offer and book spaces.
Booking Airbnb’s rose into popularity due to consumers’ desire to book vacation accommodation that felt more like being at home. The COVID-19 pandemic, of course, led to decreased travel but as soon as borders reopened in 2021 and 2022, traveling spiked significantly. Airbnb uses surge pricing or, as they call it “smart pricing,” and they definitely benefitted from the resurgence of travel demand. The company top-line growth has been in the double digits for the past three fiscal years.
Uber Technologies (UBER)
Uber Technologies (NYSE:UBER) has definitely grown up as company that was taking on the taxi industry. The ride-hailing technology platform raised more than $8.1 billion in its 2019 IPO, which gave the company a valuation of $82.4 billion.
Uber currently has a global business with operations in the United States, Canada, Latin America, Europe, the Middle East, Africa, and parts of Asia. The company primarily operates through three segments: Mobility, Delivery, and Freight. The Mobility segment is what most people recognize Uber: transportation and ridesharing services. The company’s Delivery segment includes “Uber Eats.” Both of these segments are Uber’s largest segments by revenue, and if anyone has used them, they would know both of these segments employ dynamic pricing tactics.
The ride-hailing company has maintained double-digit growth in the past three fiscal years, and dynamic pricing likely helped with this.
Lyft (LYFT)
Lyft (NASDAQ:LYFT), used to be seen as a direct competitor to Uber, now only competes with Uber in one segment: mobility. The company operates a peer-to-peer marketplace for on-demand ridesharing in the U.S. and Canada.
Lyft has had its own controversies with surge pricing. The company loss of riders after these customers caught onto Lyft’s dynamic pricing tactics. This subsequently led to the company cutting fairs in order for prices to be “in line with the market.” Still, despite making some adjustments to their pricing model, Lyft CEO David Risher told Axios that surge pricing is not going away completely.
On the date of publication, Tyrik Torres did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
