Fares and fare structures

 
  railblogger Chief Commissioner

Location: At the back of the train, quitely doing exactly what you'd expect.
Over the past few months, it appears that several threads have become discussions on public transport fares, so I thought I'd create a thread specifically for that purpose.

My thoughts are that fares should be low enough to encourage public transport use, but high enough to sustain a good revenue base that can be used to pay for system upgrades.

So here what I think should happen:


  • Axing of Free Tram Zone

  • Axing of early bird free travel

  • Axing of weekend fare cap

  • Axing of regional off-peak fares

  • Replacement of Seniors Free Travel on weekends with free travel passes, similar to what they get on V/Line and the Mornington Peninsula buses

  • Reduction of V/Line periodical discount from 70% to 30% to match the Metro discount

  • More zones, with zone boundaries every 10km

  • Fares set as follows (daily fare shown):

  • Adult single zone fare $6.00 plus $4.00 for every additional zone
    Concession single zone fare $3.00 plus $2.00 for every additional zone
  • 2-hour fares would remain at half the daily fares.

  • V/Line coaches and other regional town buses intergrated into the zone system


I believe that this would result in a cost recovery level of at least 70%, mainly due to the increased revenue brought in as a result of the reduced/axed discounts. This money can then spent on projects that increase patronage and eliminate operational inefficiencies such as tram and bus priority, re-organization of bus routes, unpowered VLocity trailer cars, and single track duplications among others, bringing the cost recovery level to 90% through reducing the cost per passenger.
So, what do you guys think should happen?

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  kuldalai Chief Commissioner

The subsidy per pax carried on VLP is apalling at  $ 18 per pax, whereas  15 years ago it was $ 5  !!!!

This can be improved by both running the service more efficiently, and increasing revenue from the fare box.

The way to dramatically improve the cost recovery from the revenue aspect on VLP is as follows  :

1.  All one way tickets should be sold at the full fare rate.  Off peak tickets should only be available for return trips.

2.  Concession fares should progressively move to a 33 % discount off the full fare or  full off peak fare .

3. Periodical fares should be increased progressively above CPI to reflect something like a 33 % discount off normal full return fares.

The V/Line policy of differential pricing for peak and off peak services is quite sound and directs discretionary journeys to the Off Peak trips where there is the capacity. It has been determined on many occasions that revenue would fall dramatically if VLP discontinued Off Peak fares, and already overcrowded peak services would be placed under further pressure .

On the other hand the  peak commuter travel dictates the maximum fleet size, but brings in the poorest yield fare per seat per pax of the whole fare scale.  As such commuters should be charged more, but only when adequate capacity can be offered .  As such one can use pricing to some degree to choke off demand on commuter peak services .

From a marketing aspect the best way is to increase the periodical fares above CPI on an on going basis and then only when there is a fall off in demand, has the point been reached where one has achieved a fare table that the market will bear .

The idea of FREE  CBD tram travel  is  crazy, and in reality is the  Government  surrendering to rampant fare evasion on the tram network .
  railblogger Chief Commissioner

Location: At the back of the train, quitely doing exactly what you'd expect.
It has been determined on many occasions that revenue would fall dramatically if VLP discontinued Off Peak fares, and already overcrowded peak services would be placed under further pressure .
kuldalai

Forgive me for asking, but do you have a source?
  don_dunstan The Ghost of George Stephenson

Location: Adelaide proud
The idea of FREE CBD tram travel is crazy, and in reality is the Government surrendering to rampant fare evasion on the tram network .
kuldalai

I agree, they've given up. They would rather give it away for free than bother paying people to collect the fares. Every other alternative is too hard.
  melbtrip Chief Commissioner

Location: Annoying Orange
Over the past few months, it appears that several threads have become discussions on public transport fares, so I thought I'd create a thread specifically for that purpose.

My thoughts are that fares should be low enough to encourage public transport use, but high enough to sustain a good revenue base that can be used to pay for system upgrades.

So here what I think should happen:


  • Axing of Free Tram Zone

  • Axing of early bird free travel

  • Axing of weekend fare cap

  • Axing of regional off-peak fares

  • Replacement of Seniors Free Travel on weekends with free travel passes, similar to what they get on V/Line and the Mornington Peninsula buses

  • Reduction of V/Line periodical discount from 70% to 30% to match the Metro discount

  • More zones, with zone boundaries every 10km

  • Fares set as follows (daily fare shown):

  • Adult single zone fare $6.00 plus $4.00 for every additional zoneConcession single zone fare $3.00 plus $2.00 for every additional zone
  • 2-hour fares would remain at half the daily fares.

  • V/Line coaches and other regional town buses intergrated into the zone system


I believe that this would result in a cost recovery level of at least 70%, mainly due to the increased revenue brought in as a result of the reduced/axed discounts. This money can then spent on projects that increase patronage and eliminate operational inefficiencies such as tram and bus priority, re-organization of bus routes, unpowered VLocity trailer cars, and single track duplications among others, bringing the cost recovery level to 90% through reducing the cost per passenger.
So, what do you guys think should happen?
railblogger


- Free Tram Zone

Free Tram Zone was set up for tourism - people staying in Hotels (only travelling in CBD area) do not need to buy a myki


Weekend fare cap - should be replaced by an off-peak fare

More zones, with zone boundaries every 10km - this would work but from an user side of things, less zones is better compare to more zones

Reduction of V/Line periodical discount from 70% to 30% to match the Metro discount.

Brisbane and now Sydney with their smart-cards do not have periodical discounts fares.
Note most periodical discounts fares are used in peak time and which demand for public transport is at it's greatest.
Brisbane and now Sydney with their smart-cards offer different system - pay 8 or 9 Journeys in a week (Monday to Sunday) and then you get free travel for the week. Also there are 30% if a person travels in peak time.

V/Line coaches - it more likely the GPS side of the ticket system (for the zones) is not allowing the V/Line coaches to be include at the moment- But 684 bus has MYKI (684 bus has 13 zones), so based on this - The  Geelong to Ballarat bus should be include already now.

The other product you did not have on you list was the commuter club and in my view should be Axed




This is fares system (I think should be used for myki)


-----------------------------------------------------------single--------------------daily-------------weekly cap
-------------------------------------------- --------full-----------con----------full---------con-------full---------con
distance from Melbourne---------zone 1-------$2.60------$1.82------$5.20------$3.64------$20.80-----$10.40
zone 1-------0 to 60---------------zone 1- 2----$3.76------$2.63------$7.52------$5.26------$30.08-----$15.04
zone 2-------60 to 120-------------zone  1- 3--$5.96------$4.17------ $11.92----$8.34------$47.68-----$23.84
zone 3-------120+--------------------------------$8.16------$5.71------ $16.32---$11.42-----$65.28----- $32.64

off-peak : 30% discount of fare
Daily Cap: same as now
Weekly cap : same as Sydney: paid 8 journeys in a week (Monday to Sunday) and then you get free travel for the week
  g00r Locomotive Fireman

I don't buy the tourist argument.  All the cities around the world I have been to, I've had to figure out the system.  Including ones where you cannot buy on board.  Just because I couldn't pay a conductor a cash fare, didn't mean I stayed in my hotel room, you ask a driver, at a shop, ask a local and you get a ticket.  In the state of California, visiting LA and SFO I encountered 6 different ticketing systems.  I lost money by handing over notes to the one way slot in the bus, (putting in $1 notes, realising I didn't have enough and having to put in a $5).  I would have gladly bought a myki at LAX that covered me for every vehicle in the state, where I didn't have to worry about exact change.  So, the short version is,

The free tram zone is a joke.  The system should be user pays.
The Myki system was built on being customisable and based on zoning and distance and this is the way it should be configured.  As it has been pointed out on these pages previously, you can travel from Frankston to Werribee for a few dollars if you don't touch off along the way.

IMHO it should be based more like a taxi.

Lower the flagfall rate to encourage quick trips in the city (eg $2 for the first km)

For Example (haven't aligned these with current fares) but just as a guide..
Distance  Charge Total + Return (Daily) Total
0-1 kms 2 2         2  4
1-5         1 3         2  5
6-10         2 5         2  7
11-20 2 7         3  10
20-30 3 10         4  14

I think that fares should also be demand based.  Eg 0730 - 0930 and 1600 - 1830, and then dynamically based on demand.
Which would keep public transport consistently appealing, eg, sitting in a car on a freeway watching a train speed by while you're sitting still makes you wish you were on that train (aside from the deterrents such as crowding etc).  
Same goes for sporting events, if public transport is prioritised and is faster than driving, then people should be drawn to it if it's faster, more convenient and cheaper than driving (taking in to account peak hour driving).

Prices should drop off at low demand times, although people will travel when they need to travel, those who's travel is discretionary can/will take advantage of the discount.
  g00r Locomotive Fireman

Hrmm.. the price table didn't appear as expected.. Sorry
  woodford Chief Commissioner

Hrmm.. the price table didn't appear as expected.. Sorry
g00r

The forum software takes no notice of tabs and truncates multiple spaces, there appears to be no way on Railpage to display a multiple column table. Some forums allow this by the use of code quotes, such quotes display tabs and spaces within them  correctly.

woodford
  ZH836301 Chief Commissioner

Location: BleakCity
A good start, but you neglect the scale of periodical discounts against the bottom line.

I dont believe in periodicals whatsoever.  Affording massive benefits to the least price elastic customers who cause the largest contribution to operating expenditure makes absolutely no sense.

Id like to see periodicals up by four times and general fares up by two - this would achieve cost recovery, still offer cheaper fares than driving, and most importantly provide the funds required for expanded operations, with little impact on patronage.

Its only fair that PT users contribute to their transport like everybody else.
  g00r Locomotive Fireman

A good start, but you neglect the scale of periodical discounts against the bottom line.

I dont believe in periodicals whatsoever. Affording massive benefits to the least price elastic customers who cause the largest contribution to operating expenditure makes absolutely no sense.

Id like to see periodicals up by four times and general fares up by two - this would achieve cost recovery, still offer cheaper fares than driving, and most importantly provide the funds required for expanded operations, with little impact on patronage.

Its only fair that PT users contribute to their transport like everybody else.
ZH836301

I agree that we should pay for the things we use, but unlike many other services where costs are directly related to usage (e.g. Hospitals), public transport does have a fixed cost.  If tomorrow not a single person uses public transport, the cost would only drop by less than 1% due to savings in fuel.  If not a single person used hospitals tomorrow, millions would be saved in direct costs.

Conversely, if every vehicle tomorrow was at 90%+/- capacity then the costs would only be slightly higher than if they all ran at 10%, but the revenue.  
While the price of periodicals should perhaps be increased, there are bigger holes in the farebox to plug up, like the 'fat tax rebate - a.k.a free tram zone'.
I think it would be better to encourage revenue from more people than more revenue from existing people.  Less cars on the road has flow on effects such as
Reductions in;-
- Road trauma - burden to health care system & TAC
- Food supply chain - semi's use 45 l/100km on the freeway and about 160 l/100km in stop/start traffic
- Medical transport
- Pollution emissions - leading to reduction in health care costs
- Less cars on the road means more room for bikes - again, the health care flow on

Even though the tax on tax revenue from petrol is good for the fed govt. bottom line and eventually the Vic Gov, with cars no longer being built here, what's the benefit of pushing for the sale of them?  And for building more roads?
Buses are built in Australia (the bodies are at least).  

But back to your point.  More people using the system means the cost per user goes down, lets encourage more users and not penalise the (paying) ones.
  melbtrip Chief Commissioner

Location: Annoying Orange
A good start, but you neglect the scale of periodical discounts against the bottom line.

I dont believe in periodicals whatsoever. Affording massive benefits to the least price elastic customers who cause the largest contribution to operating expenditure makes absolutely no sense.

Id like to see periodicals up by four times and general fares up by two - this would achieve cost recovery, still offer cheaper fares than driving, and most importantly provide the funds required for expanded operations, with little impact on patronage.

Its only fair that PT users contribute to their transport like everybody else.
ZH836301

Personally I would like to see periodicals replaced by a weekly cap system (with 30% discount for people travelling in off-peak time)
  railblogger Chief Commissioner

Location: At the back of the train, quitely doing exactly what you'd expect.
g00r makes a good point, however we are playing catch-up, and probably can't afford for fares to be kept this low.
  alstom_888m Chief Commissioner

Location:
The biggest issue with the free tram zone is that it voids the ability for AO's to catch fare evaders (people who board outside the free tram zone) within the CBD.
  g00r Locomotive Fireman

GPS data isn't  saved on the cards,
Only the previous 5 trips (time, date, zone)
are stored along with running balance.
I'm thinking they would have to make tram zone, zone 0.
But even so, i don't believe you have to touch on in the free zone (espesh if aimed at pleasing tourists). So you will probably instead end up with AOs stationed at the zone border.
It would be smart if the driver disabled the readers just before reaching the zone border as a swarm of AOs board, to catch everyone in the act.
(I've done it on buses to tight asses who touch off just before the zone 1/2 overlap finishes)
  ZH836301 Chief Commissioner

Location: BleakCity
I agree that we should pay for the things we use, but unlike many other services where costs are directly related to usage (e.g. Hospitals), public transport does have a fixed cost.  If tomorrow not a single person uses public transport, the cost would only drop by less than 1% due to savings in fuel.  If not a single person used hospitals tomorrow, millions would be saved in direct costs.
g00r

You're still neglecting the fact that price elasticity is very low.

As an example, peak is of order -0.1 to -0.2, meaning even a large 50% fare raise would only see a small rough decline in patronage by 5-10% - the figures become even lower for heavily discounted periodicals.  Putting that in quantitative terms, a $500 million farebox revenue would be expanded to $750 million, or $600-675 million after subtracting patronage losses.  So you still have more revenue, with patronage losses offset by falling expenditures.

The argument you're trying to make is meaningless, as it could be similarly expanded to roads.

Conversely, if every vehicle tomorrow was at 90%+/- capacity then the costs would only be slightly higher than if they all ran at 10%, but the revenue.  
g00r

Incorrect.

Services could be reduced, and new rollingstock purchases offset for decades - similar to road use and expansion.

While the price of periodicals should perhaps be increased, there are bigger holes in the farebox to plug up, like the 'fat tax rebate - a.k.a free tram zone'.
g00r

Periodicals are the hole.

If you look at annual reports, the proportion of periodicals (and associated forfeitted revenues) is extremely high.

Free tram zones, early birds, and the like are just tinkering around the edges.

I think it would be better to encourage revenue from more people than more revenue from existing people.  Less cars on the road has flow on effects such as...yada yada
g00r

Irrelevant - refer to elasticity studies.

Even though the tax on tax revenue from petrol is good for the fed govt. bottom line and eventually the Vic Gov, with cars no longer being built here, what's the benefit of pushing for the sale of them?  And for building more roads?
g00r

You're ignoring the economic benefits of road transport - a common theme amongst those who try to isolate congestion expenses.

But back to your point.  More people using the system means the cost per user goes down, lets encourage more users and not penalise the (paying) ones.
g00r

Refer to first point - you must consider price elasticities.

Raising fares means more revenue since there is not a 1:1 correlation between fares and patronage.
  railblogger Chief Commissioner

Location: At the back of the train, quitely doing exactly what you'd expect.
@ZH836301 it appears you have completely forgotten about one crucial thing in your analysis - the relationship between the number of services and the number of passengers.

Declining services results in declining patronage as more and more people begin to choose the car due to it being much more convenient for them, resulting in relatively low patronage on the services that remain, so although the overall subsidy could be cut by reducing services, the subsidy per passenger carried would be much higher.

If you were to make public transport more convenient, you are much more likely to get a good return due to the high patronage.

Obviously though, your fare structure must allow for it.
  ZH836301 Chief Commissioner

Location: BleakCity
Does anyone have accurate Vline patronage figures for analysis?

From the 2013-2014 annual report we have (full/concession=.64/.36):

Trips: 14,474,749
Full fare: 9,263,839
Conc: 5,210,910

//A trip is counted as a single one way journey
//There is likely an irregularity due to change of mode (since rail+coach=total)

Farebox: $95,155,000
Avg fare: $6.5739
Avg full fare: $8.0169
Avg conc fare: $4.0085

//This assumes concession fares are half full fares
//Also assume split ratio is consistent (ie. same ratio everywhere)

Subsidy per fare: $19.48
Implied subsidy: $281,968,000
Full fare subsidy: $18.04
Conc fare subsidy: $22.05
Cost of providing conc: $20,888,000

//Implied subsidy is close to franchise grant, meaning coverage of opex only
//The cost of providing the concession benefit is the loss in revenue due to conc. fares
//The high cost relevant to concession qualified Victorians suggests major inequality

Avg fare (100% recovery): $26.0539
Avg fare (80% recovery): $20.8431
Avg fare (60% recovery): $15.63234
Current recovery: 25.2%

//Aiming for 80% recovery would be reasonable
//This would imply an average fare increase of 2-3x
//Complete fare modelling requires patronage data

Tickets sold: 3,123,870
Tickets sold (2012-2013): 5,777,525
Avg trips per ticket: 4.63

//Big drop in tickets post-Sunbury suggests higher periodical reliance within Vline
//Periodical holders have extremely low price sensitivity
//More detailed required regarding myki implementation (fare revenue did not drop significantly with Sunbury)

It's something of a pain in that the metro patronage data is easily found, yet the above equivalents aren't, yet vice versa for Vline - matching the two would provide the necessary data for me to produce prospective fares at certain patronage levels, and allow for testing of restructured fare rules such as distance based charging (to iron out issues such as the relatively high cost of short range metro transport, and associated low costs for long ranges).

At minimum an opex figure for Metro would be useful.
  railblogger Chief Commissioner

Location: At the back of the train, quitely doing exactly what you'd expect.
I think it might be best to contact PTV or the operators.
  The Vinelander Minister for Railways

Location: Ballan, Victoria on the Ballarat RFR Line
@ZH836301 it appears you have completely forgotten about one crucial thing in your analysis - the relationship between the number of services and the number of passengers.

Declining services results in declining patronage as more and more people begin to choose the car due to it being much more convenient for them, resulting in relatively low patronage on the services that remain, so although the overall subsidy could be cut by reducing services, the subsidy per passenger carried would be much higher.

If you were to make public transport more convenient, you are much more likely to get a good return due to the high patronage.

Obviously though, your fare structure must allow for it.
railblogger


ZH obviously doesn't remember the 1970's with very high fares compared to today and the corresponding decline in services leading to the contraction of country rail lines and the further loss of passengers.

Oh that's right, this is ZH's philosophy; fares go sky high, passengers desert the PT system, roads get further clogged leading to construction of more roads and the encouragement by stealth of cars over PT services which are funded less and less in a downward spiral of service contraction and cuts to rail maintenance until we have another Granville.

http://en.wikipedia.org/wiki/Granville_rail_disaster

We've been down this path before...it doesn't work..Exclamation

Mike.
  Camster Chief Commissioner

Location: Geelong
Been said before, but I don't really see a problem with free CBD trams. A very large number of people have already paid for their trip into the CBD anyway. If someone is fare evading from outside the free zone, then police the trams outside the zone.

We need affordable fares, as someone who can remember the high prices of a zone 1,2 and 3 ticket, I can say things have improved.
  railblogger Chief Commissioner

Location: At the back of the train, quitely doing exactly what you'd expect.
While I agree fares do need to be competitive, we need to sustain a good cost recovery level so we can use those funds to perform basic maintenance and upgrades.
  melbtrip Chief Commissioner

Location: Annoying Orange
Does anyone have accurate Vline patronage figures for analysis?

From the 2013-2014 annual report we have (full/concession=.64/.36):

Trips: 14,474,749
Full fare: 9,263,839
Conc: 5,210,910

//A trip is counted as a single one way journey
//There is likely an irregularity due to change of mode (since rail+coach=total)

Farebox: $95,155,000
Avg fare: $6.5739
Avg full fare: $8.0169
Avg conc fare: $4.0085

//This assumes concession fares are half full fares
//Also assume split ratio is consistent (ie. same ratio everywhere)

Subsidy per fare: $19.48
Implied subsidy: $281,968,000
Full fare subsidy: $18.04
Conc fare subsidy: $22.05
Cost of providing conc: $20,888,000

//Implied subsidy is close to franchise grant, meaning coverage of opex only
//The cost of providing the concession benefit is the loss in revenue due to conc. fares
//The high cost relevant to concession qualified Victorians suggests major inequality

Avg fare (100% recovery): $26.0539
Avg fare (80% recovery): $20.8431
Avg fare (60% recovery): $15.63234
Current recovery: 25.2%

//Aiming for 80% recovery would be reasonable
//This would imply an average fare increase of 2-3x
//Complete fare modelling requires patronage data

Tickets sold: 3,123,870
Tickets sold (2012-2013): 5,777,525
Avg trips per ticket: 4.63

//Big drop in tickets post-Sunbury suggests higher periodical reliance within Vline
//Periodical holders have extremely low price sensitivity
//More detailed required regarding myki implementation (fare revenue did not drop significantly with Sunbury)

It's something of a pain in that the metro patronage data is easily found, yet the above equivalents aren't, yet vice versa for Vline - matching the two would provide the necessary data for me to produce prospective fares at certain patronage levels, and allow for testing of restructured fare rules such as distance based charging (to iron out issues such as the relatively high cost of short range metro transport, and associated low costs for long ranges).

At minimum an opex figure for Metro would be useful.
ZH836301


It common Knowledge - Most people on the Peak V/Line services are full fare users and most people (full fare) are using MYKI pass.

It not concession users getting the biggest subsidy when using public transport - but it full fare user getting biggest subsidy fares when they buy a MYKI pass.

Melbourne to Bendigo - most people on train (full fare) is paying only around $11.80 to $16.28 for days travel.

Concession users normally have budget limitations and which means they're like to use myki money and in peak - it cost them $27.60 for a daily cap and even they travel in off-peak they pay: $19.32

What another heavily subsidy fare - Just look at the myki Commuter Club, before the 10% discount is already heavily discounted and then PTV goes give them another 10% of top of the heavily discount fare- what a joke!
  railblogger Chief Commissioner

Location: At the back of the train, quitely doing exactly what you'd expect.
It common Knowledge - Most people on the Peak V/Line services are full fare users and most people (full fare) are using MYKI pass.

It not concession users getting the biggest subsidy when using public transport - but it full fare user getting biggest subsidy fares when they buy a MYKI pass.

Melbourne to Bendigo - most people on train (full fare) is paying only around $11.80 to $16.28 for days travel.
melbtrip

It is all passengers, not just full-fare passengers. Also, the discount is actually more than that - $11.80/day as opposed to $55.20/day, or approximately 20% of the full cost.
  The Vinelander Minister for Railways

Location: Ballan, Victoria on the Ballarat RFR Line
While I agree fares do need to be competitive, we need to sustain a good cost recovery level so we can use those funds to perform basic maintenance and upgrades.
railblogger


Fare-box revenue only contributes the tiniest amounts to maintenance and upgrades, the remainder being allocated from PTV's annual budget OR on occasion as signed off dispensation from the Treasurer from consolidated revenue.

Mike.
  railblogger Chief Commissioner

Location: At the back of the train, quitely doing exactly what you'd expect.
That does not mean we cannot change our ways.

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