Las Vegas Taxi Industry Opening the Door for Uber

Las Vegas Taxi Industry Opening the Door for Uber

The long standing turmoil surrounding the Las Vegas taxi market has been brought to a head recently with the announcement that the popular ride sharing company Uber plans to start operations in Nevada. Watching as this situation unfolds, I am struck by how all the major players in the Las Vegas taxi industry have unwittingly done everything in their power to make this possible.

While over the last few years much of the attention has been on the taxi drivers, in reality the problem goes much deeper than that. It starts with a broken system of regulations, a Taxi Board that takes its marching orders from the best connected and not the best interest of the community, an inept and unprofessional Taxicab Authority masquerading as a legitimate law enforcement agency, and the taxi owners who, above all else, are blind to any prospect that doesn’t involve turning an immediate profit.

The problems with this system go back further than most of us can remember, however, today’s problems arise most directly from the decision three years ago to substantially increase the number of taxis serving Las Vegas. I know I can hear it already, how can adding more cabs to service the public be a bad thing? Well, it’s that kind of mindset that allowed the Taxi Board to think their actions would be perceived as innocuous and be disregarded, if not ignored entirely. It was, however, most certainly a bad thing for everyone in Las Vegas outside of the taxi industry.

Just to cover the actions leading up to September 2011, at the particular insistence of Mark James, then CEO and President of Frias Transportation, but with the favor of virtually all of the Las Vegas taxi companies, the Taxi Board chose to add:

• 6 full time medallions for 15 companies, 90 new medallions in total.
• 6 extra weekend medallions on Friday, Saturday and Sunday for all 16 Las Vegas companies, 96 in total.
• Plus, 17 new medallions for Thursdays and Mondays for all 16 Las Vegas companies, 272 in total.

These 458 new medallions accounted for 2102 new taxi shifts per week.

Of these new shifts, all but 226 of them were allotted for strip service.

Truly astounding numbers, especially when remembering that the economy still had not fully recovered from the major downturn in 2008.

In a system in which a city sells new medallions it is very unlikely that something like this would happen, but in Las Vegas, the companies do not buy their medallions so there is virtually no disincentive for them to go before the Taxi Board and try to get as many as they can walk away with. The capacity for corruption in such a system should be obvious. The greedy owners want as many taxis as they can get and due to the cozy relationship with the Taxicab Authority and the Taxi Board they usually get what they want. At this time the entire procedure rarely amounts to more than a rubber stamp.

The result of the added taxis, however, was not so innocuous. It was detrimental to the city, its reputation, and most of all the population at large. Because Las Vegas is such a popular tourist attraction, the taxi industry here is like few others. In most cities you see taxis everywhere you go. This makes sense of course since that is where their business is, but in Las Vegas, anywhere off the strip is usually an unprofitable distraction. There is a seemingly endless supply of tourists coming and going for shows, dinners, business, etc. In Las Vegas, that is where the money is and, as a result, that is where most drivers want to stay.

The simple truth is, what is profitable for the drivers is also profitable for the companies. So for drivers and companies alike, there is a strong incentive to give strip taxis priority. Realizing this some time ago the city decided to allot some medallions as “geographically restricted.” These are often referred to as “Geo” medallions. These taxis with geo medallions were to ensure the overall city and off strip hotels had adequate taxi service. It wasn’t perfect, but with having no choice it did force drivers out into the city.

There was a major flaw, however. Once the companies reached a certain number of taxis those medallions became largely irrelevant. These taxi companies only have so many vehicles and so many drivers. Once that number is reached, which it clearly was with the allotment of 2011, many of those taxi companies were able to pick and choose which medallions to put into service.

With statistics directly from the State of Nevada Taxicab Authority website, we see that from January through August of 2011, before the allotment described above, all taxi companies which were allowed to operate on the Las Vegas strip “blew” a total of just 269 geo shifts. That’s an average of 33.6 shifts per month, a rather impressive number.

How about from September through December of that same year, after the allotment? The very same companies blew a combined 4,625 geo shifts. As we can see, the effects were immediate and profound.

Of course, that was just four months right? Perhaps they just needed a little time to adjust to the new demands? Well, maybe not. In the 37 months since September 2011, these same companies have blown a combined total of 55,848 geo shifts. That works out to an average of 1,509.4 blown shifts per month. In effect, that is 1,509.4 taxis every single month that are not out in the city to help the woman who had too much to drink get a ride home, or to get the family to the airport on time, or to help get people to work when their car breaks down, etc, etc, etc. (Due to their employee strike these numbers exclude Yellow-Checker-Star statistics from March through May of 2013.)

These strip taxi companies have blown shifts for other medallions as well, to be sure, but the lion’s share is clearly these less profitable geo medallion cabs. Since the increase of September 2011 more than 2 out of every 3 blown shifts belong to that group.

Combined Statistics for LV Strip Taxis 2010-Sep2014

To make matters worse, it is not uncommon to be on the strip and see these cabs with geo medallions staging at strip locations. I can only assume these cabs operating outside of their legal charter have a very low priority for the Taxicab Authority.

And of course, this is where Uber’s big opening is and they know it. Because the local population has been virtually ignored for so long Uber has effectively had the red carpet rolled out for them. They clearly have overwhelming public support to enter the market and break this unholy monopoly.

Need another example of the Las Vegas taxi alliance’s arrogance, public indifference and market insolation. Even as Uber was unveiling their intention to enter the Las Vegas market and as the overwhelming public support became more and more evident, four Las Vegas taxi companies (Frias Transportation, Yellow-Checker-Star, Bell Transportation and Desert Cab) sent a representative before the Taxi Board asking for, and receiving, a rate increase rate that will make Las Vegas rates second only to Atlantic City. That’s a clear stick in the eye to everyone in Las Vegas and it doesn’t even appear to have given them a second thought. Not the taxi companies who asked for the rate hike, nor the Taxi Board who gave it their usual rubber stamp.

The taxi companies, the Taxicab Authority and the Taxi Board have all placed their faith in their carefully structured regulations and a legal system that will apparently do whatever it takes to preserve this monopoly. They may be right, but for how long?

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