by Antoine Belaieff, Lead, North America, FAIRTIQ
The 5-Year Fare Policy report presented at the Toronto Transit Commission (TTC) Board’s February 10, 2022 meeting proposes to replace monthly passes with fare caps, beyond which a user no longer pays. Enrolment is automatic, no pre-purchase is required. The report also recommends supporting the flat fare and the free two-hour transfer across all modes, plus various discounts based on age and income. Some proposals are struck from further consideration, such as free fares, peak/off-peak pricing, group travel discounts, a loyalty program, and reducing benefits for seniors and children. Regional fare integration is mentioned in the context of ongoing discussions with the province and other municipalities.
Toronto is not alone in examining its fare practices. Riders around the world have adjusted their transit use to their new lifestyles, and agencies are rushing to adjust their services and fares.
Here are a few observations gleaned from agencies in Europe and North America.
1. A big toolbox helps meet more objectives, so never say never
A fare structure remains fairly constant over time, guided by design principles — such as flat fares and free transfers. Fare levels do as well. However, promotional activities limited in time and space to focus can achieve specific ridership or revenue objectives — of course as long as they remain consistent with general principles.
For example, lower off-peak or weekend fares can help drive ridership and reduce crowding. Applied judiciously, they can help drive demand where capacity exists, draw attention to new service offerings, and lower prices where and when ability or willingness to pay are lower. This nimbleness helps better match fluctuating demand patterns and customer needs.
2. Rewards do work
When carefully targeted and designed, rewards do work. Among FAIRTIQ’s clients in Europe, some provide a bonus: ride five days in a month, get 5% off your spend, credited to you the following month. In markets that provide the bonus, the number of frequent riders is 12% higher than in markets that do not have it, and the business case is positive. People do respond to incentives when they are well marketed and respond to a need.
The Occitanie region of France wanted to deeply discount train rides for youth aged 16–26. Together with the French railway SNCF TER and FAIRTIQ, a program was set up in which the first 10 trips cost 50%, the next 10 are free, and after 20 trips, each trip builds a 10% credit towards future trips — creating an incentive to travel over and over again. The number of riders in that age group increased by 35% in months, and the pilot is being extended.
Credit: La Région Occitanie
Peak and off-peak fares are more common in the Asia-Pacific region. In Singapore: tap in before 7:45, get 50 cents off your fare. Sydney offers a more traditional 30% off in both AM and PM peaks, weekdays only. Melbourne offers FREE rides on metropolitan trains when tapping on and off (i.e. done travelling) before 7:15am — it is expected that early birds will also travel early in the afternoon, but at full-price. As a result, it’s just another way to provide 50% off peak travel.
An agency in Switzerland is considering off-peak rewards to spread demand over the course of the day: ride 5 times off-peak this month, get 30% off-peak trips next month.
3. Experience yields clearer insights than models
Transit agencies tend to want to know precisely the financial impact of fare changes. The precise impact is even harder than before the pandemic since models based on 2016 surveys or 2019 ridership figures do not reflect today’s world. Depressed ridership is the perfect impetus to experiment, but patience is needed since the desired bump in ridership can be slow to ramp up. Immediate revenue shortfalls from discounts can make fare trials look costly at first, before the ridership materializes.
In our experience, marketing activities sustained over time are necessary to effect change, especially if riders don’t receive immediate communications about the cost of their trips. In the meantime, financial backstops above and beyond regular agency budgets are essential to mitigate short-term financial risks inherent to experimentation.
4. Capping is a great foundation to build on — let’s build on it
Capping is a hot topic in the transit industry the world over. Riders love not having to lend their money to a transit agency. They also love not having to compute how many trips they might take this month — how many shifts they might get, how many times their “hybrid” work policy might call them to the office. Capping takes the guessing out of the equation, and is such a great tool, that it gains to be known better.
Capping can apply to multiple time spans
Capping is frequently mentioned as a replacement for monthly passes. But caps can be set for different time spans, allowing customers to receive price protection, even if their usage is uneven through the month. For example, riders can receive a daily cap, a weekly and a monthly cap — all applied as the customer rides, without the need to opt in. The Nouvelle Aquitaine region of France and the French railway SNCF tested “Flexter”, a tiered system of caps including weekly, 20-ride, 30-ride and monthly caps — fares are optimized to the rider’s actual usage. The region and SNCF TER now plan to expand the policy to the entire region.
Credit: Et Compagnie
Capping facilitates regional travel
Capping can make multi-agency travel easier. Instead of harmonizing each fare or discounting each connecting trip, multi-agency caps can help provide relief for heavy users over a longer period. In the following example, a rider would continue to pay two single tickets between two municipalities, but a heavy user would pay less than purchasing two separate passes or paying up to two different caps.
Agencies must agree on revenue allocation rules when riders ride for free above the cap, and again, a financial backstop set aside to try multi-agency caps can help mitigate risks for agencies.
Capping can help reduce the cost of short-distance trips
Fare-by-distance has been controversial because of its potential impact on riders — especially low income — who have no choice but to ride long distances to and from work or school. A growing number of German jurisdictions are looking at e-Tarife or e-fares — a new type of distance-based fares.
Credit: Göttinger Verkehrsbetriebe
- The base fare is significantly lower, which makes short trips less expensive. A large number of low-income riders also ride short distances.
- A per-kilometre rate is applied
- A per-trip cap can be provided to ensure that no single trip costs more than a certain amount.
- A daily cap is generally provided as well (and can be augmented with a weekly or monthly cap). The daily cap can vary by distance (e.g. small, medium or large)
- This is facilitated by a check-in, check-out smartphone application that captures the origin and destination of the trip. Parallel sales channels with a range of alternative but still attractive products are maintained for users who cannot or will not use smartphones.
- Munich example:
- Basic price 1.10 € / concessions 1.00 €
- Validity 60 minutes
- 0.30 € per km / concessions 0.20 €
- Daily cap 7.90 € or 11.90 € based on distance travelled
Credit: Münchner Verkehrs- und Tarifverbund
With eezy, North Rhine Westphalia, Germany’s largest state with 18 million residents, went further and leverage e-fares to harmonize fares among its four transport associations, while letting them set actual fare levels. Each association sets its base fare, per-km fare and daily cap, and a statewide cap was also agreed upon. The state government set aside a €100-million backstop to mitigate revenue risk as the program is rolled out.
Credit: Verkehrsverbund Rhein-Sieg
More information on German fare innovation and their applicability is discussed in this blog post, with reference materials. Article on German e-fares by Mobilité consultants (machine translation).
Thinking like a region
The Toronto region is becoming increasingly interdependent and integrated. Riders will use an increasingly diverse range of services offered by different agencies to get from A to B, either within their municipality or to cross boundaries.
The report alludes to fare integration, and the region remains quite fragmented, with the notable exception of 905 agencies that already recognize each other’s transfers, and the GO-905 transfer discount. Experience from other jurisdictions shows that the right governance and funding certainty are needed to achieve integration, and that it can be done while respecting local autonomy as in Germany, Switzerland or closer to us in the Montreal area. Coordination needs both a bottom-up and top-down approach, with key financial concerns addressed upfront: integration introduces uncertainty, and uncertainty needs to be mitigated.
But if changes come too slowly, residents of the Toronto region will face fragmented, expensive and confusing fares, and ridership expectations for new services may not materialize, while congestion and air emissions worsen.
Putting it all together
Pricing is hard to get right, in any industry — let alone one that must respond to so many constraints and expectations. For agencies, it can have significant impacts on revenue, which can be difficult to predict. Customers want logical, legible and transparent pricing and that mobility only takes up a reasonable share of their monthly budget. Governments should keep their ridership and modal shift objectives in mind and provide the right governance foundation, financial tools and autonomy for agencies to deliver them.
The current crisis is an opportunity for reinvention, and now is the time to experiment nimbly while setting the stage confidently for long-term, sustainable change.
