TARIFICATION 2: How to Increase Public Transport Operators’ Revenues Through Fares?
Our series of 5 articles on pricing continues with the analysis of Chris AYLES, head of Systra MVA’s activities in South East Asia and Australasia, and Nicolas SIAUD, urban transport planner specialising in public transport planning. This week they explain how transport operators can increase their revenues.
Mobility as a Service, referred to as Maas, cannot be developed without addressing the issue of transport pricing, or mobility in general. This is not a new issue, but it is even more pertinent in the context of the health crisis, with operators hard hit, user behaviour becoming both more demanding and unpredictable, and mobility less routine. So what fare policy should be adopted? How can profitability and efficiency, flexibility and sustainability be reconciled? Can a pricing policy be a lever for managing crowds in transport networks? Can pricing have an impact on urbanisation and the shape of the city?
We asked our experts these questions. From Australia to Brazil, via Asia, the UK and France, our international network of consultants worked together to answer them. For a month, we shed light on the subject, informed by local experiences.
Fares are fundamental to the operation of public transport since they form a major source of income for operators. The increase or decrease of the fare does not require any particular investment. Fare variation is therefore a means of improving public transport patronage, while at the same time allowing operators to increase their revenues at a lower cost. Please note, however, it is generally considered that a fare increase leads to a decrease in patronage. So how can revenues be increased through fares? Our answers in 7 points.
1. ENSURING TICKET PRICES MATCH WITH THE WILLINGNESS AND ABILITY TO PAY
Public transport pricing is of course all about social inclusiveness, but it should also recognize that fares should not be so cheap that they create a huge burden on the public funds to provide subsidies. In Jakarta for example we have benchmarked the fares and find that even when spending power is considered across different countries, the fares are among the lowest in Asia. We also carried out a survey to demonstrate that people could afford to pay more. This suggests that there is a chance to increase the fares. As for Singapore, fares are kept low to promote PT usage but also to make it accessible to all.
2. SET INCOME-RELATED TARIFFS
On the other hand, providing an affordable fare for low revenue groups such as students, the elderly, the most fragile socio professional categories and a higher fare for the rest according the ability to pay for each group is a leverage to increase demand and thus revenue.
3. MORE VOLUME = MORE REVENUE
This is a basic principle but the way the fares are structured can help to attract passengers. Low fares in Singapore ensure this accessibility but also help contribute to a high public transport mode share. Also, the system makes it seamless for transfers by basing the fares on distance instead of number of boardings.
Similar systems exist elsewhere for example in Shanghai where there is a discount for the second and subsequent boarding. However, such schemes would tend to reduce the average fare per journey where a transfer is made, meaning that either a single journey ticket price needs to increase, or the total volume needs to increase to cover the loss.
4. ENCOURAGE PASSENGERS TO USE PUBLIC TRANSPORT
In order to encourage passengers to use the metro more frequently instead of at private car or taxi which are very popular in China, Shanghai Metro offers its loyal users a 10% reduction in the monthly fare once 70 yuan (9 euros) has been spent.
5. CHARGE PREMIUM SERVICES
Services such as rail offer a premium in terms of travel time and comfort over say bus travel. So, it is reasonable for these modes to have a premium fare; this also reflects the increased operating cost. This principle may also apply for example to direct or limited stop express services compared to standard stopping services.
6. MODULATE PRICING ACCORDING TP PEAK/OFF PEAK HOURS
Latest ticketing systems and account-based ticketing allow for the possibility of fares to be varied by time of day. For example, to offer early bird discounts such as in Singapore and Hong Kong for travel to central areas. Similarly, off-peak fares could be lower to encourage the demand and fill seats which may otherwise be empty.
UK rail networks are a classic case of a range of ticket prices for different time periods. Even in urban areas such as Greater London, fares are all higher before 9.30 AM, then cheaper afterwards. This peak pricing enables revenues to be maximised during the busiest period.
7. ADAPT THE PRICING ACCORDING TO PREMIUM/RESERVED/TIME OF TRAVEL
More applicable for inter-city journeys but a whole range of fares is possible to charge based on the type of seat (premium, economy, bench etc.), whether the seat is reserved and date/time of travel.
In the end, we can see that in order to increase their revenues, it is in the interest of operators to modulate their fares according to the types of users and journeys. Our SYSTRA experts are at your disposal to answer all your questions on the subject!