Sin City Cash Burning
People love Uber. Well, except maybe the cab in front of me yesterday displaying a sticker with Uber’s distinctive “U” with a red line through it. Okay, Vegas cabbies hate Uber and Lyft. Maya Kosoff wrote for The Business Insider about her trip to last year’s CES convention and had this observation. “The cab drivers really hate the ride-hailing drivers. (Surprise!) One tried to cut off my Lyft driver as we were leaving McCarran on Monday night.”
A certain medical procedure kept me from driving recently and so I had occasion to Uber to my wife’s office. My driver actually drives for both Uber and Lyft. When I asked how business was he said, “very slow.” The Vegas convention sweet spot on the calendar has come and gone and I figured that would be his explanation for the tepid market in rides, which had him sitting in a parking lot for more than an hour before he had his first fare that day.
No, he said it's a supply problem. Too many drivers. He told me, but I haven’t confirmed it, Vegas has more Uber drivers than New York with a fraction of potential fares.
With free casino parking and valet services a thing of the past, more and more locals Uber to the Strip because it's cheaper, less hassle, and, well, allows for more and safer alcohol consumption. One casino executive told me that the Strip properties would prefer locals and tourists not drive on or near the Strip, but take the ride-sharing option.
My driver said he didn’t like driving drunks at night. “I’m home by 6 o’clock” he said. But a few drivers tell him they dig chauffeuring drunks, hoping for a mishap, which triggers a $200 payment to the driver for the cleanup of a rider’s over indulgence. My driver is not interested.
Bloomberg reports, “Uber’s business is massive and getting bigger. In the last three months of 2016, gross bookings increased 28 percent from the previous quarter to $6.9 billion. The company generated $2.9 billion in revenue, a 74 percent increase from the third quarter.” However, the company lost $2.8 billion last year.
Losing almost $3 billion doesn’t seem like a laughing matter, but there are no worries in Uberland. Eric Newcomer writes, “Jeff Jones, the company’s president of ridesharing who resigned last month, previously joked to staff that he joined Uber expecting P&L, meaning a profit and loss statement, but only found an L.”
Despite the losses, investors love the company as much as its users, valuing the company at $69 billion.
“Uber is a one-of-a-kind company, in good ways and bad ways. It’s going to be a case study,” said Aswath Damodaran, a finance professor at New York University. “This is a cash-burning machine.”
There’s no better place to burn cash than Las Vegas.