Why does the price of Grab rides always increase when it rains, during rush hours, and during the holiday season?
If you’ve been using ride-hailing apps in urban areas, especially in Metro Manila, you may have experienced significant discrepancies with fares when booking at different hours.
Why does Grab’s fare surge?
Grab Philippines is the most popular Transportation Network Vehicle Service (TNVS), also referred to as a ride-hailing app, in the Philippines. It offers various services, including delivery and customer services, but its bread and butter is its ride-hailing services.
Booey Bonifacio, Grab Philippines’s Director for Public Affairs, stated in an interview with Teleradyo Serbisyo that the surge results from the law of supply and demand. She explained that the surge kicks in when the demand outstrips supply.
With a population of approximately 15 million people in Metro Manila, there is a huge mismatch between the potential passenger demand and the roughly 40,000 to 45,000 authorized slots by the Land Transportation Franchising and Regulatory Board (LTFRB).
Bonifacio added that what’s happening is that there seems to perpetually be a state where the demand is much higher than the supply, resulting in a price surge.
For instance, rush hours are no longer just the going to and from the office of normal shift workers because even during the early morning hours, there may still be a demand from passengers working in the BPO industries, so there’s still a surge.
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How does Grab’s price surge algorithm work?
Grab’s explanation for their all-day surge is not convincing for many, leading to other questions.
In an article by the Philippine Center for Investigative Journalism (PCIJ), they collected Grab’s pricing information almost every hour from 6 AM to midnight for a week in their attempt to understand how the popular TNVS’ algorithm works.
They found that Grab Cars’ fees always include surge fees to get more cars on the road. However, despite high fares, the waiting time didn’t always become shorter. The research also added that the regulators are also not fully aware of how Grab’s algorithm works.
In 2022, the Lawyers for Commuter Safety and Protection filed a complaint against Grab’s fees, including the surge, with the LTFRB. Unfortunately, two years later, there has been no resolution.
You may also remember that Grab Philippines bought out Uber’s Southeast Asian operations in 2018, which was approved by the Philippine Competition Commission (PCC). This acquisition essentially allowed Grab to perform as a monopoly. Since then, their market dominance has remained strong even after the entry of new players.
Are there other Grab alternatives?
With the ever-increasing fares for Grab Cars, commuters have found cheaper alternatives, offering faster travel time, such as motorcycle hailing services. Here are some Grab alternatives you can try:
- Angkas (Motorcycle)
- Joyride (Motorcycle, car, and taxi)
- Move It (Motorcycle) – also owned by Grab
- InDrive (Car)
Please note that these apps implement their own pricing scheme, which may or may not include surge fees.
Grab is the most dominant ride-hailing company in the Philippines, allowing it to control the market’s pricing, including how it utilizes surge fees.
While its algorithm is still unknown, it’s better to think of its pricing as the price you pay for premium commuting in Metro Manila. You may also consider other competitors and compare their prices for added options.