Do train companies lose money from railcards?

Discussion in 'Fares Advice & Policy' started by faddy, 8 Jan 2017.

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  1. faddy

    faddy Member

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    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: 8 Jan 2017
  2. najaB

    najaB Veteran Member

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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.
     
  3. yorksrob

    yorksrob Veteran Member

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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.
     
  4. greatkingrat

    greatkingrat Established Member

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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.
     
  5. najaB

    najaB Veteran Member

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    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).
     
  6. Andrew1395

    Andrew1395 Member

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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.
     
  7. faddy

    faddy Member

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    Why? Reduced marketing of them?

    Are Disabled Person's Railcards "generative" in your opinion?
     
  8. Richard_B

    Richard_B Member

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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
     
  9. yorksrob

    yorksrob Veteran Member

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    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.
     
    Last edited: 8 Jan 2017
  10. John @ home

    John @ home Established Member Fares Advisor

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    A useful description of Railcards is in the wiki article Concessionary fares on the British railway network.
    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.
    Agreed.
    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.
    Agreed.
    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:
     
  11. Andrew1395

    Andrew1395 Member

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  12. Qwerty133

    Qwerty133 Established Member

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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.
     
  13. fowler9

    fowler9 Established Member

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    Christ, if only you were as free as a disabled person.
     
  14. Hadders

    Hadders Established Member

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    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.
     
  15. thedbdiboy

    thedbdiboy Member

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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.
     
  16. fowler9

    fowler9 Established Member

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    You know what Qwerty133 I'd rather pay full fare than qualify for a disabled persons railcard but maybe you know better.
     
  17. 185143

    185143 Established Member

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  18. ashworth

    ashworth Member

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    I reached the age of 60 almost 3 months ago in October and one advantage of reaching 60 was to be eligible to purchase a Senior Railcard. It was my first ever railcard because way back when I was in my late teens and early twenties the current form of a Young Persons Railcard was not then available. In the 3 months that I have had a railcard I have used it, or am intending to use it, in the following ways:

    1.
    Local journeys into my nearest city for leisure, shopping etc. where the return fare with railcard is often less than £5. Previously I would probably have used my car or even the bus for such journeys.

    2.
    Longer journeys, up to about 50 miles, for days out using Off Peak Day Returns. Fares of up £20 or so with a railcard are quite acceptable to do regularly, but I wouldn't do anywhere near so many of these journeys if I was paying the full price of perhaps £30+.

    3.
    Medium distance journeys to or from short break holiday destinations or to stay with friends/relatives. Mainly journeys of between 50-100 miles. Before I used to look for the cheapest possible fares by using advance purchase, splitting, longer slower routes or even quietly using fare anomalies and loopholes! I know that these are still available at an even cheaper rate with my railcard but I am enjoying the flexibility of walk up Off Peak Returns at a more reasonable railcard price.

    4.
    It's now really only long distance fares, where I will try to get the cheapest fare by using advance tickets or splitting. Here now I also have the advantage of the railcard reductions. Therefore this is the only type of journey where I am spending less in rail fares than I was before.

    In all the other cases 1-3, I am making journeys I wouldn't have already been making or in many cases spending a little more than I would have done by making use of more flexible and convenient tickets at a reduced price rather than going for the cheapest, but often inconvenient option.
     
    Last edited: 8 Jan 2017
  19. faddy

    faddy Member

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    If only this forum had a like button.
     
  20. MarlowDonkey

    MarlowDonkey Member

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    Around 5 years ago, the other advantage was that you could also get the bus pass for free bus travel. That's now receding into the distance as if you are now 60, you have to wait another 5 or 6 years.

    Presumably the Railcard being commercial marketing rather than a benefit is immune from the increases to State Pension age.

    Going back to the original question, it doesn't seem as if Railcards are directly subsidised, rather it all washes through as a condition of being granted the franchise. If you are awarded a franchise, you may be expected to operate services at times when there is little or no demand. It's part of the cost of being granted a monopoly.
     
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