Consider aspects such as attractiveness, simplicity, brand loyalty (e.g. through period or multi-journey tickets) and benefits from new technology (e.g. smartcards, mobile and 'virtual' tickets). Consider fares restructuring at times of fares increases.
The development of a fare structure has to be based on defined objectives within the available financial framework. Evaluation and feedback must show whether the results meet the objectives. If not, modifications have to be made.
The objectives of the fare structure can be divided into:
Policy objectives: sustainable urban mobility, environment, mobility for all, reduction of car use and congestion, local economic development etc.
Financial / operational objectives: maximising revenues, increasing the number of passengers, more even spread of vehicle occupancy (peak and off- peak hours), maximising revenue predictability etc.
Normally the objectives are a combination of these two.
Simplicity is the most important requirement for the fare structure, because this will attract patronage. Keep the fare structure as simple as possible. Consider both financial / operational and policy effects of the fare structure. However, the fare level is a key issue, while attracting new passengers and selling spare capacity.
Increased simplicity can also be created by fare integration, i.e. a common tariff for the local and regional public transport systems. A prerequisite for fare integration is, however, a consensus regarding the financial conditions. Further information about fare integration is given in ►Background information: Fare integration between urban bus, regional bus and rail.
Based on the ‘simplicity goal’ three major fare strategies are prevailing in urban public transport:
Flat unit fares: unit price per trip, regardless of trip length and time of travel. Flat fares represent simplicity – for both regular and new customers. These are particularly attractive and easy to communicate to ‘occasional’ users (the risk of buying the wrong ticket is low). Also, a flat fare does not require advanced ticketing systems (the boarding point and destination of the passenger do not need to be checked), while it could, in addition, be combined with a very simple zonal structure or a time-component. From the suppliers’ perspective it does not maximise yields because the flat fare does not charge extra for customers with longer trip distances.
Zoning system fares: Many cities use a so-called zoning system (with geographical and time criteria), in which the price of the ticket is determined by the number of zones travelled. The zoning system could be seen as a simple approximation of area- and distance-based fares. A revised time-based fare zone system could be a solution as well. Zonal fares could, however, if properly designed, be seen as a good approximation to marginal cost pricing. Zonal fares are a prerequisite for integrated tariff schemes that are covering local and regional trips by different modes in a larger area.
Differentiated fares: Some cities use off-peak hour discounts or peak hour surcharges, and quality-dependent fares (e.g. for express buses). The major goal is a proper yield management and an attractive ticket offer during off-peak hours. However, differentiated fares imply some limitations in terms of simplicity: there is a lack of transparency as “different fares for the same trip” could cause confusion. Complex fare structures may require electronic ticketing such as smartcards.
Key trends and developments related to fare structures and payment options are as follows:
Simplification of fare structures: Despite the growth of electronic fare systems, operators / authorities continue to opt for simplified structures, generally choosing not to introduce fare zones or peak / off-peak differentials, while others have been eliminating or reducing the number of zones.
Increase in market-based pricing strategies: Operators / authorities are increasingly offering a range of payment options that segment the market based on frequency of use and willingness to prepay. These options typically include unlimited-ride cards as well as some form of discount option.
Electronic fare systems: The introduction enables the potential for introducing more efficient and equitable dynamic fares. Smartcards particularly enable the use of creative fare structures. The card can hold a variety of single tickets, period tickets and travel permits that are added to the card prior to travel. Smartcards are being progressively introduced; however at the moment they are primarily in larger cities in Europe (e.g. Oyster Card, London) and creative fare strategies are not yet being implemented.
Fare collection via mobile phones: This approach is growing in various European countries. Especially with flat fares for local trips a simple ticketing can be established, for instance. by using SMS as proof for paid trips.
PROCEED’s case study analysis shows that local experts regard “Tariffs” (integrated and consistent tariffs, simple tariff system, etc.) as among the most important success factors for HQPT.
It is crucial for the passenger to know how much he / she has to pay and for what. Systems that are too complex often fail (even if objectively in favour of the passenger).
The range of fares available also affects (and is affected by) the method by which tickets are sold (exclusively off-bus or a mixture of off-bus and on-board purchase) and whether off-bus ticketing uses mostly travel centres and local shops acting as agents, or automatic ticket machines.
Avilés (Spain): The introduction of a “Unique Ticket” scheme (integrated tariff scheme) has been an important effort and a great improvement for the users in terms of fare and ticket coordination. With the new integrated ticket, transfers between or within public transport modes are no longer penalised.
Brighton & Hove (UK): The flat fare has been a very positive feature since it was introduced in 2001: it is easy to understand and makes using the bus straightforward. Combined with a low-price all-day ticket which can be bought from the bus driver but can also be bought at a discounted price on-line or from travel centres, it contributes to the perception of the bus network as easy-to-use and good value.
Graz (Austria): Graz has a differentiated fare structure and provides high discounts for multi-ride tickets (13% on a 10-trip-ticket) and season tickets (e.g. monthly ticket is cheaper with only 19 trips per month compared to single tickets).
Jönköping (Sweden): Similar to some other Swedish cities, 40% discount on trips is given in off-peak hours (Mon-Thu 0900-1400 and 1800-2300, Fri 0900-1400, Sat / Sun 0400-1800).
Klagenfurt (Austria): The tariff comprises a monthly pass "Umweltschutz" (environmental protection) for a reduced price, but which is not valid during peak hours in the morning (before 0830). Since 2006 electronic tickets (smartcards issued for various municipal services in Klagenfurt) with a best-price guarantee have been in use.
Lippstadt (Germany): The tariff system of the greater area is based on a zonal fare system. In order to avoid different fares in the city buses, it was changed before the launch of the improved urban bus system: Today, the first fare stage ticket is valid for the whole city bus system. Previously the city was subdivided into four zones and it was necessary to buy a second fare stage ticket to go from one zone to another.
Luleå (Sweden): Similar to other Swedish cities, a 40% discount on trips in off-peak hours (Mon-Fri 0900-1400, Sun all day) is provided. Luleå has managed to increase both fares and patronage by careful monitoring and follow-up studies.
Abbas, K. (2003) Modelling bus transit operation: a basis for budgeting and fare determination. Proceedings from European Transport Conference 2003. Download: http://www.etcproceedings.org/paper/modelling-bus-transit-operation-a-basis-for-budgeting-and-fare-determination
Hodson, P. (2005) Price differentiation and fare integration in urban public transport. Proceedings from European Transport Conference 2005. Download: http://www.etcproceedings.org/paper/price-differentiation-and-fare-integration-in-urban-public-transport
Peter, Jan (2004) Tariffs in Regional Public Transport Systems. Institute for Economy and Transportation, Dresden University of Technology.
Since a trip with public transport does not necessarily start and end within the network of an urban bus system or on a regional rail line, there is a strong tendency in some European countries towards common tariff schemes for all public transport modes covering a whole area. Experience shows that a remarkable increase of passengers can be triggered by fare integration (e.g. Greater Cologne area: passenger increase of 41% between 1987 and 2005). Regional fare integration is widespread in several Central and Northern European countries, having often begun in greater metropolitan areas, but today available country-wide in some cases.
However, common tariff schemes are in effect a kind of public transport monopoly which might be seen as in conflict with fully deregulated markets. Consequently, a common tariff scheme is often part of a strategy to offer only a simple and easily-understandable single “public transport user interface” to the customer (although there are a number of operators behind it). “One region, one timetable, one ticket” facilitates access to public transport and can contribute to increased ridership figures.
When considering a common tariff scheme there are several problems to solve:
Through ticketing can often result in a gap in revenues which has to be balanced, as transfer passengers no longer have to purchase a second ticket).
Where previously operators might have set their own fares this right no longer exists, having been transferred to a single central unit.
Integrated fares imply a shift from slower (bus) services to faster parallel (rail) services, whereas different tariff systems in the past acted to prevent people from mode shift.
Different existing fare levels between operators may be a challenge.
Examples of methods in use to share the revenues from a common tariff scheme are:
Reimbursement method: The revenues from ticket sales of all carriers are "pooled" and subsequently shared according to the actual transport performance (e.g. performed passenger-km). The method responds to the actual demand, and can be used with different size of operators, but requires extensive surveys of actual ticket use.
Accounting method: Each carrier receives shares from registered ticket sales as far as its services are concerned (sales data such as origin, destination, lines used, are registered in databases). The method responds to the actual demand, and no additional survey is needed, but a differentiated accounting is required which is often difficult to obtain at a local level.
External user method: Each carrier keeps its revenues from ticket sales, but revenue for users with tickets issued by other carriers (transfer passengers) are claimed from other operators. This is a suitable method if the carriers are of similar size, and external user figures are low. The method responds to the actual demand, and the effort required for small-scale surveys is modest.