Some are abandoning Uber and Airbnb: Millennial brands have become expensive

“If I used ride-hailing services, delivery apps and everything else like I did, I would be out of money every month,” she said.

Manley is among many American adults adjusting to life after what’s been called the “millennial lifestyle subsidy”: a set of apps and services launched in the 2000s and 2010s that won the loyalty of a generation by offering low-cost, convenient services that were previously out of reach. Think Uber, Blue Apron, WeWork, Sprig and Flywheel. Subsidized by their venture capitalist backers, these brands sought to attract as many customers as possible, hoping that profits would follow.

But inflation and rising interest rates have driven up prices and scared off some investors. So consumers accustomed to subscriptions and luxury experiences at lower prices are having to find alternatives. For some, like Manley, that means going back to the old way of doing things: shopping around for hotels, taking public transit more often and working out at home with video fitness classes.

“At first, it was obviously an adjustment, like if I was trying to go to an event and normally I would take a Lyft,” Manley said. “I had to readjust some things, but I’ve gotten away from that mode of transportation and I don’t see myself going back to it anytime soon.”

Millennial lifestyle subsidy has hooked a generation on convenience and low prices

For a while, cash-strapped young Americans seemed to be in luck: Their career prospects might be bleak or they might have no chance of home ownership, but at least they could take a fitness class for $5 or even free.

The subsidized services seemed to be aimed at “citizens,” Manley said. “It may sound very dramatic, but it was as if we had come together to create cheaper and better alternatives to the only option we had up until then.”

Suddenly, luxuries that had been out of reach for recession-hit Americans, especially those living in food deserts or struggling to get around on public transit, became a little more accessible. For reasonable prices, you could get food delivered to your door, access to fitness classes or a private car-like experience. Millennials who were just entering adulthood were hooked.

But the entry prices for many of these services are rising. In 2022, Peloton raised its membership fee from $39 to $44 and launched additional subscriptions. Citing YipitData, Bloomberg reported that between 2019 and 2022, Uber’s average fare increased 45% and Instacart’s service fee increased 61%.

This has led some people to question whether their apps and subscriptions are worth it, or whether they should go back to doing things like their parents.

Grant Plotkin, 26, is a Gen Zer who received the pre-2020 millennial grant as a young adult. He used different ride-hailing services when they offered discounts to get started. He opted for Airbnb instead of hotels. He ordered meal kits.

But as prices have gone up, he’s changed his habits: Rather than finding him in a car, you’re much more likely to bump into him on the ferry. Instead of going to a WeWork-style coworking space, he uses the amenities in his building. He eats out less, and when he does need to drive somewhere, he compares prices on different platforms.

Plotkin estimated that if he were to use the same services as before the pandemic, his costs would double.

“I remember before, Uber was a no-brainer, it was $20 here, $15 there, it was super easy. And now it’s $40 or $50, and you have to ask yourself that question,” Plotkin said. “I mean, it can cost more than your meal.”

End of millennial subsidy could lead to higher prices across the board

Rising wages have kept many Americans’ finances relatively healthy despite inflation, so the convenience of apps remains strong. Airbnb reported record bookings in the first quarter this spring, but as more hosts enter the short-term rental market, many say they’re getting fewer stays. In a perfect example of the end of a subsidy, Netflix recently raised prices on some of its plans and cracked down on password sharing after losing subscribers. That helped attract more individual listings.

Brett House, a professor of professional practice in the economics division of Columbia Business School, said low prices weren’t meant to be a long-term gift to consumers — they were meant to function as disruptors.

But this model is untenable in a high-interest-rate environment. When money was cheap to borrow and invest in a new business, investors could subsidize entry costs in the hope that infinite growth would lead to a captive customer base. Today, however, with interest rates at their highest levels in two decades, capital is more expensive.

Additionally, inflation is straining consumers’ budgets, as they look for ways to change their habits. Some may forgo meal kits and subscriptions. Even the most affluent consumers are turning to discount brands like Dollar General and Aldi.

Ending the subsidies could also exacerbate some of the inequalities they concealed: House said the Americans hardest hit could be those who live in areas without reliable public transportation or with few stores — meaning they can’t simply go elsewhere to find a better deal.

“There’s always been a dark side to this type of economics, and that’s really, I think, what the legacy of this period is going to be,” Bilal Baydoun, director of policy and research at the Groundwork Collaborative, a left-leaning think tank, told BI. Those substandard prices were fueling a “monster,” he said, “and that monster is the kind of monopolistic pricing systems, enabled by big tech companies, that we see today.”

One of the legacies of apps from this era could be dynamic pricing. In the same way that ride-hailing apps increase prices during peak hours, algorithms have made it easier for companies of all kinds to offer variable prices based on market conditions or user information.

The idea has also been introduced to more customers. You might scoff if a cab driver told you you’d have to pay more for a ride in the rain, but you might not blink when an app tells you costs could increase due to weather conditions. The next iteration of the millennial subsidy might be to gamify the prices of groceries or fries.

“People are unhappy not knowing how much things cost. We live in a time where budgeting is essential to survival in a country that is in a long-term affordability crisis,” Baydoun said. This creates a “sense of chaos,” Baydoun added, and a feeling of being “at the mercy of corporate pricing consultants who are paid a lot of money to come up with ever more and more effective gimmicks.”

All of this could lead companies to adopt ever riskier tactics to generate revenue, such as dynamic pricing or trickle pricing, where fees are revealed slowly throughout a transaction — something that could break customer loyalty and lead to lower wages for workers.

In the meantime, Americans are trying to find new incentives where they can. For Plotkin, that comes in the form of another increasingly popular offering: credit card rewards. Companies like American Express have offered subscription services and early access to events to attract new, younger customers. And younger workers are responding in kind, with fights breaking out over who exactly gets to use their card for brunch when everyone else gets 5% off meals.

“To maximize the ROI (if you can call it that) on my city trips, I figure, OK, I’m using my specific card that earns more points for ridesharing than for dining out, clothing, or retail,” Plotkin says. “And I’ve tried to get smarter. I feel like I need to stretch that dollar even more now, in the current economy.”

Has the loss of the millennial grant impacted your finances or lifestyle? Contact this reporter at [email protected].