Saturday’s post on bus fares begat an interesting and considered crop of comments. Check them out if you haven’t taken a look yet.
- The relationship of fares to the weather in those areas relying on tourists or occasional travel
- The lack of fares incentives to capture occasional travel
- Motorists benefiting from a subsidy not available to bus passengers
- The perception that fares should only be marginally higher than the last time someone caught a bus, say, 20 years ago.
Get it wrong and there’s nowhere else to go, no other source of revenue, not in these deregulated days. In economic theory terms, the bus industry is a mature market, which means there is a limited ability to grow that market without considerable hard work. Make a mistake at fares revision time and you really threaten your business. There’s no cushion of latent demand on which to fall back.
The bus industry has traditionally “revised” fares (as it still euphemistically puts it) rather than withdraw service or make redundancies. On balance, this surely is a Good Thing. Those passengers who therefore complain about higher fares need to remember that this might well be preferable to facing a reduced service (or no service at all).
This means fare increases exceed inflation and have done so since Adam was a lad (since the mid-fifties, anyway). This also means that medium distance fares nationally have been moving towards their day ticket counterparts for quite some time (or in some cases day tickets have deliberately been priced marginally ahead of returns). For some return fares, the day ticket acts as a cap. Perhaps I shouldn’t’ve been so surprised as I was when I was a Stranger in a Strange Town.
The economic theory of fares was somewhat turned on its head by national free travel. But that’s another story...
7 comments:
It really concerns me that not much thought goes into fares setting.
Typically fares go up exactly the same amount based on what they were before. Normally this is based on fare stages from way back when.
Typically this doesn't reflect circumstances in certain areas that may have increased the cost* of operating buses (typically congestion, one way systems, traffic lights etc.) or indeed decreased costs (bus priority, relief roads etc.) - bearing in mind that fare stages way back when were probably based on equity (and subsidised lower fares) and so the competition not a real concern.
Obviously in many cases there will be a captive market that the operator can feel free to take advantage of. This includes councils who pay for free travel [who can't decide not to because the average single fare is too high**] but in other cases there is rail competition... as well as competition with walking.
Toy and electronic manufacturers will spend hours studying market elasticities to determine the price at which to pitch their products. When did a bus operator last do that?
*the link between cost and fares is a difficult issue and depends on who you believe. For public companies costs=income when you consider the cost of capital, which is why you make profits.
**though because of the no better or worse thing and the consideration of multi-journey products in average fare calculations this is another dead complicated one.
Incidentally, on my local route we only have singles or returns, fares increased by only 2.5% this year and it costs £2.85 for a 28 mile round trip.
I love living in a county with gross cost tendering.
"There’s no cushion of latent demand on which to fall back."
I think that (in the past, at least) operators believed that was the case, and that, even if there was some 'resistance' to fares increases, there was an hard core of passengers who had no option but to use the bus service. I would also hazard a guess that by the 1970s some operators may have believed that they were carrying little else than that 'hard core'. In my experience, working for an NBC subsidiary in the mid-70s that had acquired a former independent operator with significantly lower fares over parallel routes, that must have been case. How else could they have believed that they could simply increase the former independent's fares by a disproportionately high degree in order to 'bring them into line'?
I understand that experiments with reducing fares, from that era, often seemed to suggest that there was no benefit in doing so, so perhaps the attitude is understandable. However, I did get the impression that the 'winners' were those who had kept fares low, including short distance fares. By the time deregulation and competition came, I was working for another operator, and one of the managers commented that in a competitive situation success would depend on winning the marginal traffic. Somehow, if the ordinary single fares are unattractively expensive, I cannot see an operator gaining much of that marginal traffic.
Presumably it needs the sort of 'new initiatives' that deregulation, I seem to recall, was supposed to encourage.
My company sets its lower-end fares particularly high as concession reimbursement in our area is done on an average adult single fare for each route. If the fares start at £1.00 and see 10p increments to £2.50 this sees a lower average than the lowest fare being £1.30 rising at the same 10p increments to now £2.80.
It's one of the many ways in which adult fare paying passengers help contribute to the reimbursement shortfall operators face.
<< what is gross cost tendering?>>
Some of the difficulty, I suspect, comes back to the reluctance of some operators in publishing details of single/return fares (or even a sample selection thereof).
The times I've waited in an unfamiliar area for a bus with a handful of coins and no idea whether the fare is likely to be £1.50 or £4.50. You really cannot guess at it. Of course, a fare at the lower end of the scale will go a long way to generating a positive feeling of good value and the industry as a whole but one of at the other end of the scale causes resentment, a feeling of being taken for a ride (literally) and perhaps a vow to avoid using the bus (any bus) again in future.
Clearly value for money is a subjective issue but many operators could do a lot more to manage fare expectations.
What other commodities does one purchase without having an idea of the price prior to the point of payment?
How often does the poor driver receive an earful because he's asked a passanger for more than the passenger had anticipated? Why should he be in the firing line just because he's there, doing his job?
I see that First York have realised that lower fares might encourage more people to use the buses. Or at least, they have where competition is concerned.
Having gone head-to-head with Coastliner on the busy York to Leeds route, they have within weeks cut the fare to just £5 return.
What a shame they can't apply the same logic on the suburban routes where they have a monopoly, and charge an extortionate £3 return for a 15-minute journey.
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