Uber has most big cities covered with its gig-work drivers. Now, the company is trying to grow its ride-hailing business in the suburbs and other areas where people are spread out.
About 20% of the ride-hailing trips on Uber happen in “sparser markets,” Prashanth Mahendra-Rajah, Uber’s CFO, said on the company’s earnings call Wednesday. The number of rides in those less-dense markets is growing faster than those that Uber provides in dense cities, he added.
Suburbs represent an enticing growth market for ride-hailing apps like Uber as well as delivery apps like Instacart.
Last year, Uber struck a deal with Costco to start delivering items from the warehouse retailer to customers’ doorsteps through Uber Eats. At the time, CEO Dara Khosrowshahi said that the suburbs represented a growth opportunity for Uber, since many shoppers in those areas tend to be more affluent and buy more at once.
Bringing ride-hailing and delivery services to the ‘burbs comes with challenges.
Having drivers nearby can be harder, for instance, since ride-hailing drivers tend to hang out near populated or busy areas to increase the chance of claiming good-paying rides. Suburbs, by nature, are more sprawled out, meaning the closest driver might take a while to show up — if they even think it’s worth it at all to take the ride.
Another challenge for Uber in the suburbs is that more people own cars, Khosrowshahi said.
Unlike dense city centers, people are used to driving to get almost anywhere. Exceptions include people who want to get to and from the airport without driving themselves and paying for long-term parking.
But some suburbanites are still using Uber in specific ways, Khosrowshahi said.
Many are big users of Uber Reserve, which allows riders to book rides in advance, the CEO said.
For riders, that can be more efficient, since there might not be a driver waiting nearby to pick them up if they order a ride when they need to leave.
Reserved rides also tend to cost more, which is a benefit to Uber as it expands in the suburbs, Khosrowshahi said.
A growing share of Uber rides in the suburbs are not related to long-distance travel, such as catching a flight, he said on Wednesday’s call. Instead, users are turning to the app for more day-to-day rides.
“It’s becoming an everyday habit going out to dinner,” he said.
All of that means that Uber riders in the suburbs probably won’t use the ride-hailing service as much as their city-dwelling counterparts, Khosrowshahi said. But the rides they do take are likely to be more profitable for Uber, he added.
Uber reported first-quarter earnings that were largely ahead of analysts’ expectations on Wednesday. Despite worries about a potential recession and higher prices from President Donald Trump’s tariffs, the ride-hailing service said that its customers are not yet pulling back on spending.
“We don’t see any consumer slowdown at this point,” Khosrowshahi said on CNBC on Wednesday. “We don’t see consumers trading down to more affordable restaurants or pulling back from any of our services.”
