What happened? Upstart ride-sharing company, Uber, last week announced a 10% increase in fares in Sydney, apparently in response to a recent ATO ruling that required Uber drivers to charge and report GST. While Uber fights the ruling at a corporate level, the company announced that prices would rise accordingly, reducing the price differentiation between Uber and standard cabs.
What's the impact? If Uber becomes less attractive for passengers, it could potentially have a positive impact on the revenue of ASX-listed taxi payment company Cabcharge Australia Limited (ASX: CAB). However an overall increase in the cost of transport could have a detrimental effect on the revenues of hoteliers and landlords including Hotel Property Investments Ltd (ASX: HPI) and Australian Leisure & Entrtmt Pty Mgt Ltd (ASX: LEP).
Should you be concerned? Investors in Cabcharge should probably be concerned, regardless of Uber's price rise. Cabcharge's share price has nearly halved from over $6 in September 2014 to today's price of $3.41 as the taxi industry faces intense competition and regulatory hurdles, and Cabcharge itself is targeted by regulatory changes aimed at reducing exorbitant service charges.
As for hotel operators and landlords, I expect that Uber's fare change will have little impact on operating conditions for now, however investors need to keep an eye on it, especially for companies with exposure to suburban pubs.
Could Cabcharge Australia Limited surge higher this week? Cabcharge's share price rose by nearly 2% last week, strongly outperforming a 4% fall in the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) with particularly strong relative performances on Thursday and Friday following the Uber announcement. I expect analysts to come out with revised analysis early in the week, however I wouldn't expect any upwards movement to last for long. Cabcharge is a powerful force in the taxi industry, however as companies like Nine Entertainment Co Holdings Ltd (ASX: NEC) and Fairfax Media Limited (ASX: FXJ) have found out, being at the top of a declining industry doesn't correspond to strong and growing profits.
