Sarah Manley, 31, was dealing with sticker shock.
Manley, an artist and musician in Baltimore, was a loyal Airbnb user before the pandemic. When she got out of the jam and looked on the platform for a short stay, she was shocked by how much the prices had gone up. Indeed, Airbnb’s average daily rate increased by 36% from 2019 to the end of 2022.
Manley chose a hotel. Short-term rentals aren’t the only habit she’s given up. She is no longer using ride-hailing services like Uber and Lyft. She found that parking at the airport for a few days is actually cheaper than the round-trip fare.
“If I was using rideshares and delivery apps and everything the way I was, I’d run out of money every month,” she said.
Manley is one of many American adults adjusting to life after the so-called subsidized millennial lifestyle: a group of apps and services that launched in the 2000s and 2010s and won the loyalty of a generation by offering convenience and low prices to things that may have been inaccessible before. Think Uber, Blue Apron, WeWork, Sprig and Flywheel. Subsidized by their venture capital backers, brands sought to attract as many customers as possible, hoping profits would follow.
But as inflation and higher interest rates have driven up prices and scared away some investors, consumers who have grown accustomed to subscriptions and luxury experiences for less must find alternatives. For some, like Manley, that means going back to the old way of doing things: shopping for hotel deals, taking more public transportation and working out at home with video fitness classes.
“At first it was definitely an adjustment like, wait, I’m trying to get to this event and normally I would take a Lyft,” Manley said. “You’ve had to recalibrate some things, but I’ve moved away from them and I don’t see myself going back to them anytime soon.”
The millennial lifestyle subsidy attracted a generation to convenience and lower prices
For a while, cash-strapped young Americans looked like they’d lucked into a good deal: They might have had bleak career prospects or no chance of owning a home, but at least they could take a class. fitness for $5 or even free.
The subsidized services felt like they were “for the people,” Manley said. “That sounds very dramatic, but it was like, oh well, we’ve come together to make these alternatives cheaper, better than the only option we’ve ever had.”
Suddenly, luxuries that were out of reach for recession-hit Americans — especially those living in food deserts or struggling with erratic public transportation — were a little more accessible. For reasonable prices, you can get food delivered to your front door, access to boutique fitness classes or a private car-like experience. Millennials who were just reaching early adulthood were hooked.
But the low entry prices for many of these services are increasing. In 2022, Peloton raised the membership fee to $44 from $39 and released additional subscriptions. Citing YipitData, Bloomberg reported that between 2019 and 2022, Uber’s average fare increased by 45% and Instacart service fees increased by 61%.
It’s left some people wondering if their apps and subscriptions were worth it — or if they should go back to doing things like their parents did.
Grant Plotkin, 26, is a Zer General who experienced the pre-2020 millennial subvention as a young adult. He jumped at various transportation services when they offered promotions to get off the ground. He chose Airbnbs over hotels. He ordered meal kits.
But as prices have risen, he’s changed his routine: Instead of finding him in a car, you’re much more likely to catch him on the ferry. Instead of going to a WeWork-style workspace, he’ll use his own building’s equipment. He eats out less and when he needs to take a car somewhere, he is comparing prices on platforms.
Plotkin estimated that if he used the same services he used before the pandemic, his costs would double.
“I remember Ubers used to be just a no-brainer, and it would be $20 here, $15 there, super easy. And now I mean it’s $40 or $50, and you have to question that ,” Plotkin said. “I mean, this could be more than your meal.”
The end of the millennium subsidy could mean higher prices across the board
Rising wages have kept many Americans’ finances in relatively good shape despite inflation, so the convenience of apps is still strong. Airbnb this spring reported record first-quarter bookings, but with more hosts entering the short-term rental market, many say they’re getting fewer stays. In a prime example of ending a subsidy, Netflix recently raised prices for some of its plans and cracked down on password sharing after losing subscribers. Worked to entice more individual registrations.
Brett House, a professor of professional practice in the economics division at Columbia Business School, said low prices were never meant to be a long-term boon to consumers — they were meant to act as a switch.
But this model is not sustainable in a higher interest rate environment. When money was free to borrow and pour into a new company, investors could subsidize the costs of entry prices in the hope that endless growth would lead to a captive audience. Now, however, with interest rates at a two-decade high, capital is more expensive.
Plus, as inflation squeezes people’s budgets, they’re looking for ways to change their habits. For some, it’s the discontinuation of meal kits and subscriptions. Affluent shoppers are also turning to discount brands like Dollar General and Aldi.
Ending the subsidies could also exacerbate some of the inequities they covered: House said the hardest-hit Americans could be those in areas without reliable public transportation or few stores — meaning they can’t just go walking. elsewhere to find a better deal.
“This kind of economy has always had a dark underbelly, and that’s really, I think, what the legacy of this period will be,” Bilal Baydoun, director of policy and research at the Groundwork Collaborative, a think tank with a focus on left. , BI said. Those lower-than-normal prices were feeding a “monster,” he said, “and that monster is the kind of monopolistic, Big Tech-backed pricing schemes we’re seeing today.”
One of the legacies of apps from this era may be dynamic pricing. In the same way that travel apps increase prices during busy times, algorithms have made it easier for companies of all kinds to offer different prices based on market conditions or user information.
It also introduced more customers to the idea. You may scoff if a taxi driver says you have to pay more for a ride in the rain, but you don’t bat an eye when an app says costs may go up because of the weather. The next iteration of the millennial subsidy could be price-gouging games for groceries or a portion of fries.
“It’s making people miserable not knowing how much things cost. I mean, we live in an age where budgeting is really essential to get through a really long-term affordability crisis in this country,” Baydoun said. This creates a “sense of chaos,” Baydoun added, and a sense of “simply being at the whim of corporate pricing consultants who are paid huge sums to really find the best and the best tricks.”
All of this can lead to companies pursuing increasingly risky tactics to bring in revenue, such as incremental pricing or spot pricing, where fees are slowly revealed during a transaction — something that can break customer loyalty and mean lower wages for workers.
Meanwhile, Americans are scrambling to find new subsidies where they can. For Plotkin, this has taken the form of another increasingly popular offering: credit card rewards. Companies like American Express have stepped in with offerings like subscription services and early access to events to attract new and younger customers. And younger workers are responding in kind, with squabbles breaking out over who exactly gets to put down their brunch card when everyone gets 5% tip to eat.
“To maximize the ROI — if you’re going to call it that — for going out on the town, it’s like, OK, I use my specific card that gets more points for sharing travel versus dining versus apparel or retail,” Plotkin said. . “And I’ve been trying to get smarter. I feel like I have to stretch that dollar even further now in this economy.”
Has the loss of the millennial subsidy affected your finances or lifestyle? Contact this reporter at jkaplan@businessinsider.com.