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Discounts for Distance: Improving the competitiveness of trains for very-long-distance journeys

(Very-)Long-distance trips make seat capacity utilisation more even

On an intercity train service, demand varies both along the line and during the day. Demand composed out of rather short trips (one or two stations) is heavily influenced by the size and distance of the cities (horizontal axis of the diagram below) and by the time during the day (vertical axis of the diagram below, divided in peak and counterpeak direction). Geographically, demand is higher in case of large cities close to each other. Peak hours are given by human activities like commuting to and from work, business trips before and after conferences or meetings as well as the interest of leisure travellers to make most out of a day trip.

As a long-distance train runs through the diagram above diagonally, the combinations of different sections on the route and different hours of the day leads to a big demand variation. If the train is primarily used for short-to-medium-trips and the trainset is dimensioned for the section with maximum demand, this means poor average occupancy. (left side of the diagram). Passengers travelling during a whole day over many hundred kilometres don't create peak hours and cross more urbanized areas as well as remote regions with low demand for transportation. They automatically contribute to more even demand, at least over distance and hours of the day (right side of the diagram). But even in the context of seasonal peaks, the demand caused by very long trips is at least less concentrated to some hours of the first and last day of a long weekend than the peak of short-to-medium-distance trips.

Step 1: Combination of off-peak offers by third-party or cross-operator ticketing systems

Most train operators already today offer cheaper tickets (or larger quotas of cheap tickets) for trains of lower expected occupancy in order to optimise capacity utilisation and to attract more price-sensitive target groups when it is possible to accommodate these passengers within existing capacity at close to zero marginal costs. Because of both railway liberalization and national fragmentation of incumbent operators, very-long-distance journeys usually involve multiple operators. This means, that in order to make use of the favourable temporal and spatial demand characteristics of very-long-distance trips, passengers need a system creating a single ticket with seamless applicability of passenger rights out of the offers of different operators for different sections of the route.

Such a system can be operated by a third-party vendor or by operators which sell tickets not only for their own trains. It is a precondition for the competitiveness of such combined long-distance tickets that operators make all their offers available for third-party vendors or ticketing systems of other operators, including the cheapest offers within their yield management schemes. In order to avoid inappropriate costs for first and last miles, the operators, authorities or transport associations responsible for local train tickets should participate as well.

In order to satisfy different target groups of different sensitivity to price, travel time, interchanges and flexibility, a ticketing system should propose a wide range of itineraries: For passengers with higher willingness to pay, the system should offer the fastest and the most convenient connections that are as close as possible to the desired departure or arrival time. For these itineraries, both cheaper off-peak and more expensive peak offers are combined, depending on the availability of off-peak fares on the individual parts of journey.
For more price-sensitive passengers, the ticketing system should propose various congestion avoidance solutions in order to compose (nearly) the entire journey out of off-peak offers:

  • temporal shift of the whole journey (e.g. from Saturday to Thursday or 11:00-23:00 instead of 7:00-19:00)
  • targeted use of trains that are during peak hours on line sections of lower demand or run in counterpeak direction
  • shift to a slower, but less congested route
  • breaks or extended interchange times during peak time
  • use of regional services where less congested than long-distance trains (e.g. in the morning peak leaving an urban agglomeration).
  • combinations of these solutions

Similar to all systems selling tickets for journeys with interchanges, it must keep a balance between popular, short travel times through short interchanges on one hand and dissatisfaction of passengers plus costs for compensations in case of broken interchange connections on the other hand. In most cases, broken interchange connections can be solved at moderate costs by the use of the next train but connections involving a night train or the last train of a day should include longer transfer times.

Step 2: Specific off-peak discounts for very-long-distance trips

A well-known disadvantage of very cheap off-peak tickets is cannibalization: Yield management schemes with low fares for the use of poorly to moderately occupied trains do not only attract new passengers or shift demand from peak hours. There are also passengers which would anyway travel in off-peak hours even if they had to pay the regular price. In case of very-long-distance trips, the significance of cannibalization should be smaller than for short-to-medium-trips, because price sensitivity should be higher: the main competitor for trips over short to medium distance is the car, over very long distance it's the plane. As a significant part of costs and fare components in passenger aviation is independent of distance (airport fees, take-off and landing etc.), plane ticket prices increase less than proportional to the distance and so does the willingness to pay for train tickets.

Together with the significant travel time disadvantage over 6-8 hours of travel time, there is a low probability to lose yield from very-long-distance travellers with high willingness to pay because of too cheap tickets.

Therefore, specific off-peak discounts for very-long-distance trips would be a win-win-win situation:

  • For operators: Better capacity utilization at lower risk of cannibalization

  • For passengers: cheaper tickets over very-long-distance trips

  • For our climate: modal shift from aviation as the most problematic mode of passenger transportation
For practical implementation in the context of multi-operator ticketing, such specific discounts must be offered to the ticketing systems under the condition, that the entire journey (including parts of the route covered by other operators) exceed a certain distance and/or travel time.

Contact: Harald Buschbacher * * * E-Mail * * * Website