With no need for government funding, independent rail retailers could generate significant additional revenue for the railways
How and when to go from Saltburn-by-the-Sea to King’s Cross? I recently needed to get a ticket back home. So where do you start? Firstly, check one of the many so called ‘third party retailers’ (TPRs) – they often offer split tickets which can represent better value for money and other benefits such as loyalty points. Then check the LNER site – the operator of the main leg of the journey. Train company websites sometimes have good value tickets which are not made available to TPRs – plus loyalty schemes. So, a two-site check at least. In the end I got an advance single for some £35 on a train leaving Saltburn at 17:22. Quite good value.
So, the universe sketched out by Norman Baker (‘Ministers need new sources of funding’) and Nick Richardson (It’s time to rethink the issue of fares’) – both in the previous edition of Passenger Transport – rang partly true. Fares presentation can be confusing and fare levels sometimes expensive. Yes, the government needs private sector funding.
As the chair of Independent Rail Retailers, the trade body for the major sellers of rail tickets in Great Britain, I see first-hand the benefits that private investment brings to the industry. Our members are experts in their field, specialising in three key areas: selling tickets directly to passengers; providing travel management services to companies, charities and other organisations; and supplying – on a ‘white label’ basis – the IT that powers nearly all train company ticket websites.
So how can we spark a rail retail revolution?
The new government envisions a transport system that is reliable, safe, efficient, accessible, and affordable. While change is necessary to achieve this vision, third-party retailers in the rail industry are already excelling in these areas – and beyond. Labour’s aim to deliver a unified and simplified rail system, prioritising improved services for passengers and better value for taxpayers, aligns perfectly with the strengths of independent rail retailers.
Extra revenue at no cost to the taxpayer or government? That’s got to be good news.
As private sector businesses, retailers are motivated to boost sales, control costs and get more customers onto trains. And thanks to the commission-based model, for every pound they generate in revenue, 95p is returned to the industry. That’s an exceptionally low cost of sale – and arguably less than it costs the train companies themselves once other costs such as payment processing, technology, customer support and marketing are taken into account. Extra revenue at no cost to the taxpayer or government? That’s got to be good news.
What’s better, and maybe even a little surprising to some, is that our members now handle around £5bn in ticket sales each year. That’s over half the industry’s passenger revenue. They’ve played a big part in the shift to digital ticketing, funding the rollout of barcode ticketing equipment across the network, and split ticketing. To remain competitive and grow as businesses, TPRs are focused on greater efficiency, effective cost management and – most importantly – encouraging more people to choose rail, which means finding new markets and making it easy to buy tickets. And it works: passengers trust them to get the best deal.
But there’s so much more we can do. It’s frustrating searching for the right ticket, relying on a limited question-and-answer format whilst others – e.g. airlines, hotels, Eurostar – utilise modern systems that allow for broader searches. Imagine the possibilities if you could ask “When can I get to Brighton for £5?” or tempt people with “Do you want to travel to Edinburgh this weekend for £20?”
Modernising how passengers find – or are tempted by – the right ticket for them is a key part of the rail revolution
Such advanced search capabilities and marketing strategies could boost passenger numbers and be further enhanced through the innovation that competition brings. Modernising how passengers find – or are tempted by – the right ticket for them is a key part of the rail revolution, and our members are engaged in financial modelling as we speak to illustrate what could be achieved in this area.
We also need to ensure that every retailer has access to all ticket types and fares. Currently, train companies and public authorities often create products, such as family tickets and pay-as-you-go fares, that TPRs are restricted from selling. Excluding 50% of the market for these products is simply counterproductive, undermining trust, reducing affordability and impacting revenue. It’s certainly a quick-win when looking at fairer commercial terms between state-sponsored and private retailers.
With a few straightforward changes and no need for government funding, independent rail retailers could generate significant additional revenue for the railways over the next five years. By implementing innovative, customer-centric, targeted strategies to fill empty seats, we can reduce the number of cars on the road and increase the overall appeal of rail travel.
ABOUT THE AUTHOR: Anthony Smith is chair of Independent Rail Retailers. He was previously chief executive of independent watchdog Transport Focus.
This story appears inside the latest issue of Passenger Transport.
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The post Steering rail to a prosperous future first appeared on Passenger Transport.