Robin Barlow – Director. Robin has more than 20 years experience working in the transport sector and in government. He has worked for the Commonwealth government as an economist at the Industry Commission and for the Queensland Government where he held a number of senior positions within TransLink.
Pricing and fare modelling
Fare and pricing strategy
NineSquared consultants have significant experience in the development of pricing strategies across a range of transport sectors including public transport services, road pricing and airports.
Pricing and fare setting can be an effective lever to achieve organisational goals. At the highest level consideration needs to be given to how the structure of pricing will affect demand and whether the level of revenue that results is sufficient to cover costs. In some instances, this is not a trivial task – particularly in public sector entities that are subject to policy considerations including, the impact of pricing on congestion and environmental considerations. In some instances competition may constrain pricing decisions. And the structure of the industry may also impose constraints – industries that have high peaks in demand may require specific structure to ensure pricing contributes to meeting strategic organisational goals. In this regard, our experience includes consideration of:
1. How fares and pricing structure align to stated organisational goals
2. Consideration of the issues constraining pricing options and the impact of addressing them in the pricing strategy
3. Modelling the impact of pricing options
4. Providing advice on pricing design and structure to ensure goals are met in an efficient way.
Fare and price modelling
Our pricing strategy engagements are often underpinned by the use of sophisticated modelling techniques to identify the factors that are most important in pricing decisions. Many engagements, for example, require the estimation of elasticities to allow the impact of pricing decisions on demand and revenue to be calculated. We have experience in using a range of elasticity and demand modelling techniques including the use of stated preference and revealed preference surveys.
We have specific experience in the modelling of public transport fares to understand the impact of changes in both the level and structure of public transport fares on patronage and revenue as well as mapping the impact of fare changes on users. Our public transport fares experience include modelling the consolidation of public transport fares across several operators, changes in the general fare level and changes in product mix as well as forecasting future revenue and patronage outcomes based on changes in the underlying economic conditions and changes in service levels.
Australian regulators rely heavily on the building block model to determine prices for regulated enterprises. This model builds up each element of an organisations costs (asset chargers, operating and maintenance costs, expected tax etc.) to estimate a maximum allowable revenue which is then used as the basis for determining prices. Ninesquared has built building block pricing models for major rail and port organisations and in doing so has developed a detailed understanding of the complexities of the model, particularly with respect to the roll forward of the asset base and the integration of capital expenditure into the pricing.
Please contact one of our experts for more information on our capabilities and experience.
Tom Frost – Director. Tom is an economist who has been consulting to industry and government for almost 20 years. He has extensive experience in the provision of regulatory and economic advice to clients. He has provided advice to clients across Australia and internationally regarding investment in transport infrastructure.
A selection of recent projects is shown below: