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Old 8th January 2017, 10:30   #1
faddy
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Default Do train companies lose money from railcards?

Someone posted yesterday on UK Hot Deals about the Disabled Person's Railcard. A lot of the comments there link this railcard to "the benefits culture" and suggest that it's taxpayer subsidised. (I think the suggestion is that they cost the rail companies money and so increase their need for subsidy rather than that there is a subsidy directly related to these railcards)

I've always assumed that railcards benefit the rail companies by increasing leisure travel by more than enough to cover the fare discounts. Is my assumption correct for railcards in general, and for the Disabled Person's Railcard in particular?

Last edited by faddy; 8th January 2017 at 10:41. Reason: Added the bit in brackets
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Old 8th January 2017, 11:01   #2
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Many people make railcard-discounted journeys that otherwise would be made by other means or not at all. 2/3 of something is better than all of nothing in my eyes.
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Old 8th January 2017, 11:09   #3
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A railcard is a sunk cost to the traveller, so it encourages them to travel more than they would have done anyway (which is why they're aimed at discretionary leisure travel).

It's a win win situation for the TOC's because they also gain the £20 or so for the railcard itself.
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Old 8th January 2017, 11:36   #4
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If the extra journeys generated outweighed the loss of revenue then presumably the TOCs would want to introduce a national railcard for everyone.

As they haven't done so I suspect the railcards are subsidised and wouldn't exist in a pure free market.
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Old 8th January 2017, 11:41   #5
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Originally Posted by greatkingrat View Post
If the extra journeys generated outweighed the loss of revenue then presumably the TOCs would want to introduce a national railcard for everyone.
Railcards exist to promote discretionary, off peak travel in user groups who might travel otherwise (young people are more likely to travel by coach, couples/families are more likely to travel by car) or not at all (disabled, seniors).
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Old 8th January 2017, 12:10   #6
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The mechanic of generating revenue by creating a subset of passengers who can access discounts is much debated. At privatisation railcard sales fell to below BR rates, as many pricing managers considered them abstractive (offering more discount than generative revenue that would not be gained if the railcard did not exist). The non mandatory cards were at risk, notably the Network Card, and it had the scope of discount slashed. Recently with a new national railcard launched to mimick the groupsave type of approach, you would conclude that most cards are generative - but discount groups are closely managed to achieve that. Many cards are bought for a single long distance trip, and marketing is focussed on giving holders reasons to make extra trips. Like the 2for1 offers on London attractions.
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Old 8th January 2017, 12:17   #7
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Quote:
Originally Posted by Andrew1395 View Post
The mechanic of generating revenue by creating a subset of passengers who can access discounts is much debated. At privatisation railcard sales fell to below BR rates
Why? Reduced marketing of them?

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Originally Posted by Andrew1395 View Post
, as many pricing managers considered them abstractive (offering more discount than generative revenue that would not be gained if the railcard did not exist). The non mandatory cards were at risk, notably the Network Card, and it had the scope of discount slashed. Recently with a new national railcard launched to mimick the groupsave type of approach, you would conclude that most cards are generative - but discount groups are closely managed to achieve that. Many cards are bought for a single long distance trip, and marketing is focussed on giving holders reasons to make extra trips. Like the 2for1 offers on London attractions.
Are Disabled Person's Railcards "generative" in your opinion?
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Old 8th January 2017, 13:37   #8
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If I couldn't get a railcard I would usually make my long distance trips by coach or driving, so it will increase the money's taken by the railway from me, and I suspect that it induces much more demand that it loses in revenue because people would also otherwise choose not to travel
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Old 8th January 2017, 15:33   #9
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Quote:
Originally Posted by greatkingrat View Post
If the extra journeys generated outweighed the loss of revenue then presumably the TOCs would want to introduce a national railcard for everyone.

As they haven't done so I suspect the railcards are subsidised and wouldn't exist in a pure free market.
Actually, Railfuture did some work on this a few years ago and concluded that a national Railcard would increase revenue:

http://www.railfuture.org.uk/National+Rail+Card

The suspicion is that the railway would get the extra revenue but perhaps more passengers than they knew what to do with.

The Network railcard did a brilliant job of filling off-peak commuter trains with paying customers that would otherwise have been lightly loaded.

One issue is that a lot of TOC's want people to travel when the TOC wants, hence the proliferation of advanced purchase tickets. Railcards tend to encourage the public to travel when it feels like it, rather than planning three months in advance.

Then there's the problem of getting however many TOC's to agree on terms and conditions, rather than four business sectors. Still, they managed it with the Two Together one.
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Old 8th January 2017, 16:07   #10
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A useful description of Railcards is in the wiki article Concessionary fares on the British railway network.
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Originally Posted by faddy View Post
I've always assumed that railcards benefit the rail companies ... . Is my assumption correct for railcards in general ... ?
Participation in the Young Persons, Senior and Disabled Persons Railcard schemes is mandatory for all train companies. There is a considerable amount of evidence that your assumption is correct for the other Railcards, which train companies choose to offer. For example, the introduction of a hefty minimum fare (now £13) for weekday use of the Network Railcard followed complaints by some train companies that this particular Railcard was losing them money.

Another example is the way in which the Two Together Railcard was introduced. There was a 12-month trial in the West Midlands and the national launch of the Railcard did not take place until the results of the trial had convinced the train companies that this Railcard was likely to generate additional net income.
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If the extra journeys generated outweighed the loss of revenue then presumably the TOCs would want to introduce a national railcard for everyone.
Agreed.
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Originally Posted by greatkingrat View Post
As they haven't done so I suspect the railcards are subsidised and wouldn't exist in a pure free market.
I don't agree. The train companies' difficulty with a national Railcard is that it would reduce the effective cost of long journeys. If a national Railcard were introduced at a cost of £30, at 2017 prices an Off-Peak Return from London to Newark, Lancaster, Cardiff, Taunton or beyond would reduce train companies' income with a single use of the Railcard.

Income from the non-compulsory Railcards is monitored to ensure that they generate additional net income.
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Originally Posted by Andrew1395 View Post
The mechanic of generating revenue by creating a subset of passengers who can access discounts is much debated. At privatisation railcard sales fell to below BR rates, as many pricing managers considered them abstractive (offering more discount than generative revenue that would not be gained if the railcard did not exist). The non mandatory cards were at risk, notably the Network Card, and it had the scope of discount slashed. Recently with a new national railcard launched to mimick the groupsave type of approach, you would conclude that most cards are generative - but discount groups are closely managed to achieve that. Many cards are bought for a single long distance trip, and marketing is focussed on giving holders reasons to make extra trips. Like the 2for1 offers on London attractions.
Agreed.
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Originally Posted by faddy View Post
I've always assumed that railcards benefit the rail companies ... . Is my assumption correct ... for the Disabled Person's Railcard in particular?
Quote:
Originally Posted by faddy View Post
Are Disabled Person's Railcards "generative" in your opinion?
Given that the Disabled Person's Railcard is mandatory, I would be surprised if a large amount of money has been spent analysing whether, on the whole, it is generative or abstractive. But the actions of ATOC show that it is a product they wish to promote, suggesting at the very least that it is not significantly abstractive:
Quote:
ATOC Celebrates 25 Years Of The Disabled Persons Railcard

On 6th September 2006, the Association of Train Operating Companies (ATOC) and BT will host a 25th Anniversary celebration where past, present and future of the card will be commemorated.

Four key announcements will be made during the event:
  • The launch of the new three year Disabled Person’s Railcard
  • Extended eligibility for the DPRC to include a further 160,000 people
  • Launch of a Human Rights Award for disabled people’s favourite Train Operating Company to be run as part of the Royal Association for Disability & Rehabilitation’s (RADAR) annual Awards
  • ATOC issues a call for feedback from disability advocacy organisations as to their views on rail travel and disabled people over the next 25 years.

https://web.archive.org/web/20070928...rsons-Railcard
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Old 8th January 2017, 21:29   #11
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[QUOTE=faddy;2837079]Why? Reduced marketing of them?

Partly reduced marketing, partly that TOCs analysed revenue from their narrow bottom line rather than collective benefit and did not expand the range of products railcards could get discounts on and introduced restrictions, partly because in the early years marketing directors thought of BR products rather negatively and wanted to innovate their own discount TOC only initiatives.

I would have thought Railcards will evolve into annual subscription based apps, where your individual use and spend will trigger different levels of discount and bespoke offers. In the past there was lots of angst about the lack of tracking data on railcard usage (by individual card rather than collective revenue reporting).
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Old 8th January 2017, 22:51   #12
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The only issue I have is that the disabled persons railcard is cheaper than the other railcards and doesn't have the same restrictions, as it seems unfair that a disabled worker can get a discount in the morning peak while travelling to their paid job but students have to pay full fare (if under £12) to get to their (unpaid) lectures.
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Old 8th January 2017, 23:22   #13
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Quote:
Originally Posted by Qwerty133 View Post
The only issue I have is that the disabled persons railcard is cheaper than the other railcards and doesn't have the same restrictions, as it seems unfair that a disabled worker can get a discount in the morning peak while travelling to their paid job but students have to pay full fare (if under £12) to get to their (unpaid) lectures.
Christ, if only you were as free as a disabled person.
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Old 8th January 2017, 23:34   #14
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Quote:
Originally Posted by Qwerty133 View Post
The only issue I have is that the disabled persons railcard is cheaper than the other railcards and doesn't have the same restrictions, as it seems unfair that a disabled worker can get a discount in the morning peak while travelling to their paid job but students have to pay full fare (if under £12) to get to their (unpaid) lectures.
Have you any idea how hard it is as a disabled person?

Giving the disabled a discount on rail travel is the absolute least we can do.
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Old 8th January 2017, 23:53   #15
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The Railcard range is revenue generative. 16-25, Senior and Disabled are mandatory anyway but they are all cash positive. The one that has always been most marginal is Network Railcard but even that has survived several reviews.
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