ARE WE ON THE VERGE OF A FARES BREAKTHROUGH?
In the latest edition of Rail Review magazine, Paul Clifton has written a thoughtful article entitled ‘Are we on the verge of a fares breakthrough?’. The article highlights many of the well-known anomalies with the existing RDG fares structure, such as un-equal off-peak single and return fares and the savings offered by split ticketing. It also points out many of the issues and barriers to fares reform that have prevented earlier attempts, critically highlighting the link between the fares structure and franchise financing. It describes the detail of the RDG Action Plan aimed at addressing these anomalies through pilots with three TOCs, whilst assessing the revenue risk impact these solutions will have on Train Operators.
Andy Steele, Director of Corporate Strategy at SilverRail was asked to provide a peer review for the article, and the good people at Rail Review were kind enough to publish his thoughts on the topic – here is a copy of Andy’s response on the matter:
“As an independent supplier in the international rail market, we at SilverRail process over 1BN rail searches and 25M transactions every year. We supply global travel brands and rail carriers directly, which gives us a unique view of the industry. We have identified three policies that could simultaneously improve TOC margins and rail’s customer experience, whilst being achievable with minor adjustments to the current regulatory framework, and without incurring significant cost or risk to the industry.
Firstly, increased use of dynamic pricing. Despite some services having dynamic prices on the day of travel – due to the restrictions of the legacy inventory system – it is hard for customers to identify which train has the cheapest bookable seat. Improved technology that instantly displays the dynamic price of every journey in a day, and the best price for every day for the next year, combined with wider use of dynamic pricing on all services would mean that customers could instantly see which services would be the cheapest, and adjust their travel patterns accordingly, helping to increase capacity by smoothing the peak demand.
Secondly, RDG should enable universal retrospective payment authority with a best price promise. Currently customers face a lottery when they buy tickets in advance, taking a gamble that they are paying the best price. This gamble could be the low paid zero hours contract worker, who has to gamble on buying a weekly season ticket, which offers the best fare if they work five days that week, but not if they only work three. Or the traveller who is uncertain if they will travel back in the peak or off-peak or super off-peak. Perversely, many season ticket holders deliberately take the peak trains, because they have already paid for the peak services, and see no financial benefit from taking a quieter off-peak service, thereby accentuating peak demand. By enabling universal retrospective payment authority across the rail industry, customers could travel on a walk-on product, knowing that at the end of the day, week, month, they will have paid the best price for the journeys they made, including automatic compensation when the journey is delayed (“delay, don’t pay”).
Thirdly, realising that rail travel is just one mode amongst many, and looking at the wider mobility ecosystem, we advocate that the government should mandate that the third-party retail model offered by the rail industry, should be widened to apply to all modes in a fair and transparent manner. If third party retailers could distribute bus, coach and taxi travel, it would create a true market place for mobility services that could lead to an increased modal shift away from the reliance on the car, and to the benefit of the whole society.
Together, these three strategies would contribute towards the railway being able to deliver on a vision of excellence in customer experience – empowering the traveller to take control of their journey, and the train operators to harness the resurgence of rail and the significant business opportunity it presents.” If you are member of Rail Review, you can read the full article in the Q1 2017 edition on page 23 here, and Andy’s perspective on page 29.