TRENDS IN FARES DEVELOPMENT Alain Flausch Secretary General

TRENDS IN FARES DEVELOPMENT Alain Flausch Secretary General International Association of Public Transport Moscow Transport Council 2 nd October 2015

MAKE THE SYSTEM EFFECTIVE, EASY TO USE AND SUSTAINABLE Ø Ø Ø Ø Ø Legal framework for Public Transport Operator in Moscow (e. g. Quality standards) Extending the quantity of BUS LANES Priority for Public transport Enforcing the parking policy Optimizing the network design (straightening and expressifying) Enhancing transfer hubs Link with land use Safeguard future transport corridors Further developing the smart ticketing system (mobile phone) Developing an integrated rate card system with increasing role for season tickets Developing a rate card by zone Regular fare adjustments to cover increasing operating costs Developing an extensive passenger information system Making the system clean with a low CO² footprint (Gas, E-mobility, Hybrid) Developing the existing clean transport systems (Trolleybus, LRT) Developing a congestion charge system Developing the pedestrian zones and bike routes Developing parking and ride facilities The right mode of transport at the right place 2 UITP

FOCUSING ON REVENUES ü Enforcing a parking policy ü Developing a congestion charge system ü Links with Land use ü Development of smart ticketing systems ü Promote an integrated rate card system ü Developing a rate card by zone ü Regular Fare Adjustment 3 UITP

FUNDING BREAKDOWN Earmarked charges Investment ? General budget Commercial revenues Operations Expenditure 4 ? Fare revenue Funding UITP

WHAT IS RESILIENCE? There is no silver bullet, in a context of constrained available public funding, it is required: Ø Ø Cost effective service delivery Fares which reflect the quality expected by customers Development of other commercial revenue Creation of earmarking funding sources from indirect beneficiaries Ensuring a financially sound system enabling the longevity of the system and its capacity to resist to external shocks.

FAREBOX DOES NOT COVER OPEX 2. 5 Cost Coverage - Revenue /Total Operating Cost (2009) 2. 0 Non-Fare Commercial Revenue Fare Revenue 1. 5 Am = American (North/South) Eu = European As = Asian 1. 0 0. 5 6 As Eu Eu Eu Am Eu Eu As Eu Am Eu As Am Am As As As Am 0. 0 UITP Source: Imperial College London

WORD OF CAUTION 7 UITP

FARES TRENDS 1. Regions showcase different priorities in the definition of fares (social/environmental vs commercial) 2. Evolution of fares levels/structure show a preference for ease for to customers 1. Seamless travel 2. Integrated fares 3. Introduction of smart card mostly for customer care 4. However, some regions have implemented more sophisticated fare structures 5. Pricing is also used as a tool for demand management, especially for peak management 8 UITP

OPTIMISING FARE REVENUES Main challenge: reconciling different objectives of authorities, operators and customers Better quality and higher fares more customers Fare regulation and adjustments are deemed desirable: 1. Generating sufficient margins 2. Transparent and dependable income EMTA assesses that the fare revenues coverage in Europe of OPEX is on average 47%. 9 UITP

FARE REGULATION A sound fare policy should consider the position of all relevant stakeholders. Success factors Good practice case: Germany Governance Operators involved in decision making process Timing of review Annual review (optional) Adjustment mechanism Inflation + 1% Outcome (Germany): increased revenue per passenger, increased number of passengers, significant improvement of cost coverage rate, higher margin of manœuvre for service improvement. 10 UITP

FARE FORMULA 11 UITP

FARE STRUCTURE: NAVIGO PASS Fare integration project: Navigo Pass (Sept 2015) 1. Seasonal ticket: 70 EUR per month Increase of +3% of single tickets 2. Target: 3, 8 m commuters. 3. Dezoning of 1 -5 (excluding 6 and 7) Objective: increase ridership through seasonal ticket (annual, monthly and yearly), it is estimated that there will be 400 m less in fare revenues. 12 UITP

MAXIMISING FARES MTR HK Fare Revenue Strategy designed to maximise revenue from differentiated customers with varying price elasticity. Fare structure: distance based (mostly) Development of tailored tickets targeting: 1. Long distance commuters: up to 5 seasonal passes 2. Medium distance: City saver ticket 3. Short Distance passengers 13 UITP

REVENUE MANAGEMENT Providing the right service to the right customer at the right time (price discrimination, market segmentation) Ø Common in many sectors/industrues Ø Potential cost reduction and revenue increase Ø Facilitated by automated fare collections Possibilities for transport: time of day pricing, distance based pricing, premium services, loyalty schemes, etc… Tensions between Revenue Management and Fare Integration 14 UITP

SOLIDARITY PRICING IN GRENOBLE Concessionary fares set till 2009 provided prices discount established within a specific framework (tot 52, 000 free or quasi free). The new approach aimed to: 1. Redefine the socio-economic realities of the agglomeration 2. Include new categories (job seekers, young workers, etc) 3. Improve targeting of concessionary fares Outcome: 33, 000 users pay more thorugh increased fare, enabling 60, 000 users to benefits from solidarity pricing 15 UITP

FREE PUBLIC TRANSPORT Tallinn is the largest experiment with FREE public transport Outcomes: 1. Passenger demand rose by 3% with only 1. 2% in passenger demand the rest was dependent of quality/capacity increases 2. Higher levels of inhabitants registration as Tallinn residents 16 UITP

LOYALTY PROGRAMES Ø Ø Hong Kong’s MTR launched MTR Club Registration using Octopus Card Over 1. 1 million members Members accumulate points by ride or shop for exclusive gifts redemption Ø Assessment: • • 17 Club members spend 1. 8 times more than non club members Club members exhibit 5. 5% increase in spending per day over first year of use UITP

MARKETING PROGRAMMES Welcome Kit sent by Munich (Germany) Mobility organiser: overview about the most relevant information and offers in terms of transport and mobility in the city of Munich. Service card to order a test ticket for public transport and further information free of charge: 18 MVG city map Map of all PT lines Tariff and special offers Bike map Munich by foot (cultural/historical paths) UITP

CONCLUSION 1. Fares should reflect the quality expected by customers 2. Fares require to be adjusted on a timely basis 3. Smart cards and e-ticketing should be used as tools to implement a sustainable fare lelve, while retaining its social component, 4. Building a relationship with passengers to foster loyalty via special schemes, marketing or communication campaigns, 19 UITP