Virgin trains want an end to fares regulation to use "yield management"

[Justin Smith]

Virgin trains are calling for an end to fare regualtion so the they can use "yield management" to maximise income. Yield management basically means charging very little for some seats (the ones people don't really want) and a huge amount for others. Yield management is the model used by Easy Jet and other low cost airlines.
In fact Tony Collins (Virgin chief executive) actually says "we need to move people to off peak trains, and the only way to do that is through price".
The thing is that, unlike the airlines, the railway system is subsidised because it is regarded as a public service. Even car drivers who never use the trains don't mind (too much) paying a bit of tax for the railways, not for altruistic reasons but because they want to keep cars off the roads so they can save time themselves.
But when are the roads most crowded ? At peak times ! And that is no co-incidence because the early morning and the late afternoon is when people need/want to travel, even, in most instances, for leisure.
If I go away for the day it'd be absolutely pointless leaving mid morning and then not starting off back till 7.00PM. I, and most others, would just go by car.
Tony Collins should stop whining and realise the railways are operating a public service.
Whether the Tory government consider the railways a public service is, of course, another matter.

 

[wibble]

Utilities are all privately operated public services and are pretty free to charge what they like - why should the railways be any different?

The airlines are effectively subsidised (they don't pay tax on aircraft fuel) but have successfully used yield management.

 

[Justin Smith]

Utilities are all privately operated public services and are pretty free to charge what they like - why should the railways be any different?

The airlines are effectively subsidised (they don't pay tax on aircraft fuel) but have successfully used yield management.

I think you'll find that the utilities, those you don't have any choice over using, like water, are price regulated. As for the others the authorities can and do apply preasure if they think the prices are getting too high.

I agree with you on the untaxed fuel thing for airlines, but apart from that the airlines are not subsidised, unlike the railways, not that I'm saying the railways shouldn't be subsidised because they're a public service and the roads are too full.

The fact is I very much object to paying taxes to subsidise the railways if I'm then being told by them that I can only travel when I want to if I pay an extortionate fare.

 

[wibble]

I agree with you on the untaxed fuel thing for airlines, but apart from that the airlines are not subsidised, unlike the railways, not that I'm saying the railways shouldn't be subsidised because they're a public service and the roads are too full.

I didn't say the airlines were subsidised, but they effectively receive a subsidy if they are not paying for tax on fuel.

The fact is I very much object to paying taxes to subsidise the railways if I'm then being told by them that I can only travel when I want to if I pay an extortionate fare.

When you pay into general taxation, you don't have any choice as to where your money goes. Personally, I disagree with giving the elderly free bus travel, but threre's little I can do to change it.


I think that the railways should be self funded, but there are several issues that need to be addressed first (much of which has been discussed in other posts):
- Franchises: Micromanagement by the government; should they be changed to managed contracts (as with some PTEs); longer franchises with realistic terms (i.e. realistic premia paid to the government) etc...
- Rolling stock charges: TOCs seem to be paying far too much for leasing stock. Should rolling stock be managed through one industry or government owned company?
- Other costs: Are TOCs paying too much for Network Rail track access? Are they paying staff too much (I know this is a contentious issue!!)

 

[Metroland]

Airlines receive PSO grants, subsidy to Airbus and Boeing, subsidy to local airports, and the connections to them, such as road improvements and so on and so forth. And subsidy to ATC. But essentially they are flying between major population centres at times people want to use them, so they can operate commercially most of the time. Ground based public transport needs to compete with cars.

Obviously Virgin trains want to do this.

The British public has some choices to make.

It can have a non-commercial railway that uses subsidy to support non-commercial services at off peak times, and keep fares low to compete with cars, which most people only compare the marginal cost of with rail travel (that's fuel and parking costs).

In Europe they have no problem with this, that's why there is big, long trains, with lots of electrification and relatively cheap fares.

Or it can have a commercial network, that is run on the basis of yield management, and probably smaller in size.

On top of this, if they public doesn't want to subsidise public transport to make it more attractive for people to use and get cars off the road, it must accept road pricing. Which Stephen Glaister of the RAC was on the radio this morning promoting.

 

[gordonthemoron]

Surely Virgin already use yield management for their Advance tickets?

 

[tony_mac]

says "we need to move people to off peak trains, and the only way to do that is through price".

I think that should read

says "we need to move people to off peak trains, and the most profitable way to do that is through price".

Virgin already have some of the largest differentials between peak and off-peak fares.

 

[Metroland]

To an extent, but I suppose what they mean is they want all tickets to be priced per demand as per Airlines.

Further to the RAC:

According to Prof Glaister, to gain public support a system of charging motorists per mile would have to be backed by:

* A cut in fuel duty and abolition of vehicle tax
* Roads run at "arm's length" from the government, perhaps by a privatised utility
* A guaranteed sum of revenue put aside to pay for the work and a regulator to ensure it was done efficiently
* More reliable journey times and compensation for delays

Prof Glaister said: "Some form of 'pay-as-you-go' system is inevitable because of the benefits it will deliver for motorists and the country, and the lack of a credible alternative. [IE Rail is costing too much subsidy to get people out of cars, so this would be another way to do it].

All this appeals to people that want to reduce the public cost of transport.

http://news.bbc.co.uk/1/hi/uk/10504764.stm

 

[yorksrob]

Utilities are all privately operated public services and are pretty free to charge what they like - why should the railways be any different?

The airlines are effectively subsidised (they don't pay tax on aircraft fuel) but have successfully used yield management.

One could equally ask why not.

Certainly in the field of bus transport for example, a more heavily controlled fare structure such as the one used in London has apparently been more successfull in attracting passengers than the deregulated fare structures in other cities. Looking at my local West Yorkshire Metro website the local councillors are looking for more control over fares structures rather than less.

 

[swt_passenger]

In fact Tony Collins (Virgin chief executive) actually says "we need to move people to off peak trains, and the only way to do that is through price".

He could move a whole load of people to off-peak trains simply by ending the perk only his TOC gives to railcard holders travelling on Offpeak tickets.

Surely he can't have it both ways? In effect he's saying 'we want more people to use our offpeak trains, but we'll allow railcard holders to use our peak trains anyway'...

 

[Justin Smith]

Surely Virgin already use yield management for their Advance tickets?

You`re right there.
In fact all the TOCs use "Yield Management" already, the difference between some of the advance fares and "turn up and go" is astronomical.
If Virgin want to go even further with this one dreads to think what kind of fares they`ll end up with.

All of this doesn`t get away from the fact that if tax payers have to pay massive fares to use the trains when they actually want to, (typically as much, or more, than it costs to drive there with only one person in the car......) they may very well question whether they want their taxes to go to the railways at all.
--- old post above --- --- new post below ---

He could move a whole load of people to off-peak trains simply by ending the perk only his TOC gives to railcard holders travelling on Offpeak tickets.

How do you mean ?

 

[Dreadnought]

On Virgin Trains if you buy an Off Peak ticket with a railcard you can travel on Peak services whilst those of us who do not qualify for railcards can only use Anytime tickets to travel on the same trains.

Every other TOC would only let you on a Peak service with a discounted Anytime ticket.

 

[Justin Smith]

On Virgin Trains if you buy an Off Peak ticket with a railcard you can travel on Peak services whilst those of us who do not qualify for railcards can only use Anytime tickets to travel on the same trains.

That sounds perverse.......

 

[Nick W]

Given how cheap the fares available on low-cost airlines are, it's hard not to be in favour of this. I would however demand that the premium payments are based on train utilisation such that Virgin are forced to fill up the trains off peak to make a profit.

That sounds perverse.......

How often do you think 16-25 railcard holders and senior railcard holders would travel in the peak and therefore hand over money to Virgin if they had to pay full fare?

 

[yorksrob]

How often do you think 16-25 railcard holders and senior railcard holders would travel in the peak and therefore hand over money to Virgin if they had to pay full fare?

If we're contemplating going over to full yield management, why should 16-25 and senior card holders expect to travel in the peak at all if they can't afford the peak price?

Personally I wouldn't like to see an introduction of full unfettered yield management (certainly on the inter-city routes I frequent). At the moment, if you book early enough, you can usually get a good price on all except the business trains arriving in London for before 9:00am. Personally I wouldn't like to risk more trains becoming out of bounds altogether for a minimal price improvement. Such a move would make me less likely to travel.

 

[Nick W]

If we're contemplating going over to full yield management, why should 16-25 and senior card holders expect to travel in the peak at all if they can't afford the peak price?

I don't think there's any expectation, however yield management works by grouping the potential buyers by the price they're willing to pay. On the whole 16-25 years olds and seniors tend to have less money at their disposal the middle aged. Obviously, Mr Phil F.E. Riche the 22-year old graduate investment banker and Mr I. d'Oler the 45 year old slob are exceptions to this but in general it holds.

Personally I wouldn't like to see an introduction of full unfettered yield management (certainly on the inter-city routes I frequent). At the moment, if you book early enough, you can usually get a good price on all except the business trains arriving in London for before 9:00am. Personally I wouldn't like to risk more trains becoming out of bounds altogether for a minimal price improvement. Such a move would make me less likely to travel.

I would be surprised if yield management would mean an end to the deals you're getting. Are the trains generally full and standing at these times or is there room for more?

 

[yorksrob]

I don't think there's any expectation, however yield management works by grouping the potential buyers by the price they're willing to pay. On the whole 16-25 years olds and seniors tend to have less money at their disposal the middle aged. Obviously, Mr Phil F.E. Riche the 22-year old graduate investment banker and Mr I. d'Oler the 45 year old slob are exceptions to this but in general it holds. ?

I'd thought the idea of yield management was to try and predict the number of passengers who'd be willing to pay for seats on a given train for a particular price regardless of age band. The point is, the under 25's and over 60's already get their 25% off so if they can't pay the remainder of the peak fare, why should they get priority over 25-60's who also can't pay the peak fare.

Or, to put it another way, what difference does it make to the train operator what age the customer is as long as they're paying for the same type of ticket (taking into account the necessary concession of course).

I would be surprised if yield management would mean an end to the deals you're getting. Are the trains generally full and standing at these times or is there room for more?

It's not just the deals though. Since the TOC's already have the freedom to provide a considerable range of tickets on all their trains, what additional freedoms would the TOC's be asking for? Presumably the ability to put up walk on fares even further without hindrance.

 

[tony_mac]

At least airlines can compete with each other - to a rather greater degree than rail companies anyway.

When I first flew to Dublin, you could buy a walk-up ticket for a sensible fare (£55 return as I recall, although it was some years ago).

Now that Ryanair have a monopoly, any ticket bought on the day costs at least £200 one way. They know that if you need to travel quickly, you have no other option.
Many rail passengers have no choice about when they travel, and often no practical choice but to travel by rail and with the TOC that has the franchise.

Are Virgin's peak time trains really that full? I haven't travelled on many, but they have always looked pretty quiet to me.
They already chage 4* the off-peak price, how much more do they want to put it up?

 

[Flying Snail]

I'd thought the idea of yield management was to try and predict the number of passengers who'd be willing to pay for seats on a given train for a particular price regardless of age band. The point is, the under 25's and over 60's already get their 25% off so if they can't pay the remainder of the peak fare, why should they get priority over 25-60's who also can't pay the peak fare.

The idea of yield management is to use price to shape demand to the available resources and more importantly to enable better utilisation of the resources.

In other words they will try and flatten out the peaks and troughs so services will be busy but not over-subscribed in the peaks with most if not all the cheap fares moved to traditionally less busy services.

They could even go as far as cutting peak capacity, providing extra peak capacity for short periods is just not very efficient. It would be more profitable to remove a % of peak demand rather than having to provide the extra rolling stock and staff necessary to service peak demand that is un-needed for the majority of the service.

The only way I can see them being able to move to a proper yield-managed system would be to virtually eliminate walk-up fares and force all but the very wealthy to pre-book well in advance. They could then use a proper YM booking engine similar to the low cost airlines that alters fares in real time in response to actual demand as well as pre-programmed fare levels based on predicted demand.

Or, to put it another way, what difference does it make to the train operator what age the customer is as long as they're paying for the same type of ticket (taking into account the necessary concession of course).

Because they would rather sell a seat to a full fare passenger than one getting a discount.

It's not just the deals though. Since the TOC's already have the freedom to provide a considerable range of tickets on all their trains, what additional freedoms would the TOC's be asking for? Presumably the ability to put up walk on fares even further without hindrance.

That is it in a nutshell. They have no control over walk-up fares, get rid of them and they will be able to pre-plan their services based on actual passenger numbers.

 

[mathmo]

Are Virgin's peak time trains really that full? I haven't travelled on many, but they have always looked pretty quiet to me.
They already chage 4* the off-peak price, how much more do they want to put it up?

I travelled with Virgin recently - 5.30pm out of Euston on a Friday evening. I expected the train to be heaving but I estimate only about 60% of seats in Standard were taken. I used my railcard and an Off-Peak ticket (which I thought was a pretty good price for the journey) but would never have paid the Anytime fare, even with a third off - it's extortionate! I would have travelled later or used my car. This is one train but I don't understand why they need to price people off services if they aren't full...

I think the idea of abolishing walk-up tickets at a reasonable price is awful - a major benefit of train over plane is that you can just jump on a train with a walk-up ticket as is convenient and get there. If every ticket was an Advance then I'd use my car a lot more - it leaves when I want it to...

 

[yorksrob]

Because they would rather sell a seat to a full fare passenger than one getting a discount.

In this case, we were talking about a situation where holders of over 6o and under 25 railcards were allowed on to a peak time train with only an off-peak ticket so they wouldn't even be paying anywhere near the full peak fare anyway. I was asking why these particular passengers paying less were any more desireable than the 25-60 passengers paying less from a TOC point of view.

With regard to the issue as a whole, I'm aware that the railway needs to manage demand to an extent. I just do not believe that they should have carte blanche to set fares as they wish - even if they might make the railway on the face of it, more efficient.

I think the most important point is that the railway is not a low cost airline. Whereas people generally have a high degree of flexibility in booking their fortnight in Malaga, or their stag do in Prague, the railway is perceived as a public service (and why not - it's certainly funded like one!) which is vital for large numbers of people to go about their business across the country, visiting relatives and going to job interviews etc. I don't believe it would be acceptable to the public as a whole, to make all inter-city walk on fares the preserve of the very rich. Perhaps someone should do a survey of some sort to establish whether this is the case.

The other factor is the market served by the railway. Whereas the majority of flows served by low cost airlines have very little competition by land or sea, passengers within the UK typically have a choice of modes between destinations, therefore even less well off passengers may require a certain amount of flexibility ti be tempted onto the railway, as opposed to just the rock bottom advanced price.

 

[Justin Smith]

Given how cheap the fares available on low-cost airlines are, it's hard not to be in favour of this. I would however demand that the premium payments are based on train utilisation such that Virgin are forced to fill up the trains off peak to make a profit.

I have to say that we`ve never managed to get one of those much vaunted super cheap fares from any airline even when we`ve booked months in advance.
The point is that turn up and go travel is already horrendously expensive, often even more expensive than me driving.
So the question is, as a tax payer, why should I want to subsidise a service that`s not letting me travel on it when I need to / want to ? Or at least not without ripping me off......
--- old post above --- --- new post below ---

How often do you think 16-25 railcard holders and senior railcard holders would travel in the peak and therefore hand over money to Virgin if they had to pay full fare?

Not very often, but I thought that`s what they wanted !

I`m actually even more annoyed now. What you`re telling me is that I may well get on a "peak" service, having paid a huge amount (with no railcard, don`t get me on to that......) and possibly not get a seat, because the train has people on it who not only used a railcard but got an off peak ticket as well ! ? !
Surely there`s been some mistake here.......

 

[shinkansen1966]

From memory, some years ago, Virgin Trains and Railtrack cooked up some revenue sharing agreement based on the anticipated extra tickets sales generated from the upgrade to 125mph WCML and then the 140mph service we were 'promised'. The WCML upgrade cost billions more and after financial difficulties, Railtrack turned into Network Rail. Instead of being the money spinner, the DfT now spends millions each year subisiding Virgin Trains.

Make no mistake: the WCML upgrade has been a financial fiasco, leaving the taxpayer out of pocket. I suggest Virgin Trains keep quiet about any fares ideas they have, take instruction from the DfT and do as they are told.

In my opinion, VirginTrains has been little more than vehicle for taxpayers money and the track access charges they in turn pay Network Rail. If they loose their franchise, I shan't miss them....

 

[Failed Unit]

I find the peak pricing does cause problems but there is no simple way of solving it short of banning walk up tickets altogether which I am sure Virgin will welcome with open arms.

Example I have personally seen
The 1430 London - Newcastle (last train super off peak is valid on) is much more busy then the 1500 London - Glasgow service (first peak service).
The 1900 London - Newcastle service when it was the first service off-peak tickets were valid on use to be extremely busy.

0915 (3 car) Edinburgh - Glasgow is much more busy then the 0900 (6 car)

People will alway make the effort to use the first / last train which off-peak tickets are not valid on. The TOC's don't help themselves in the morning either as they could all offer cheaper tickets for trains arriving before 0800 to even out the load a bit. (C2C I am sure has done this). Again on my Scotrail experiences the 0700 Edinburgh - Glasgow service is quite in comparison to the 0730, so if the 0700 was an off-peak service it would reduce overcrowding. A lot of people are season ticket holders so it would make little difference.

On East Coast I tend to find the busiest trains to Scotland out of KX are between 1000 & 1300. The 1700 has priced of only the hardened traveller.

Virgin have thier own issues, look at the Scotland routes, mainly carrying fresh air around north of Preston, do they offer cheaper tickets to fill these seats between Scotland and Preston, not really!

 

[Lampshade]

Virgin have thier own issues, look at the Scotland routes, mainly carrying fresh air around north of Preston, do they offer cheaper tickets to fill these seats between Scotland and Preston, not really!

I travelled from Euston to Preston last week (10:30 departure) and at a guess I'd say there were at most 30 people on the whole train with very few continuing to Lancaster hock:

 

[Matt Taylor]

On a slightly different tangent, road pricing is very successfully applied in Singapore and unlike having a fixed congestion charge they have varying prices to drive on the roads depending on how busy each road is, it is another form of yield management and works very well by ensuring prices are raised when a road gets busy and lowered when the roads are quiet.

http://matthew-taylor.fotopic.net/p55525464.html

Whilst I see why Virgin would want to move to this model I do forsee huge problems integrating a secondary ticketing structure into what is already a very complicated system.

 

[Geezertronic]

The EBW trains are rammed during the peaks when I use them. The 1823 EUS-WVH and 1843 EUS-CRE (via Birmingham/Wolverhampton) seem busier than ever.

I usually struggle to book an Advance Ticket for the 0720 BHI-EUS and have to book and travel on the 0741 BHI-EUS (which starts at BHI)

 

[gordonthemoron]

If Virgin think yield management is such a good idea, why are they unable to use it to fill trains such as the 10:30 mentioned by 91107?

 

[Geezertronic]

If Virgin think yield management is such a good idea, why are they unable to use it to fill trains such as the 10:30 mentioned by 91107?

Speaking for myself (and probably many other users of peak services), I have to be in London before 9am so a non peak service would be no good for me. Virgin (and other TOCs) know this so really they have you by the balls.

A similar sort of principle works for the way home whereby I don't want to be hanging around for a non peak train for the return journey

 

[Failed Unit]

Speaking for myself (and probably many other users of peak services), I have to be in London before 9am so a non peak service would be no good for me. Virgin (and other TOCs) know this so really they have you by the balls.

A similar sort of principle works for the way home whereby I don't want to be hanging around for a non peak train for the return journey

It makes you wonder how much TOC's are prepared to push the price up of peak services. Considering the anytime ticket that is the only choice for most Virgin passengers to get into London is already unregulated I think it is the shoulder peak that is thier target. Again Virgin have already been very good at extending the times that only anytime tickets are valid on!