Will HS2 require premium fares?

[HSTEd]

And yet, Concorde made a profit catering exclusively to business traffic. If you're charging more per ticket you don't need as many people to be willing/able to pay.

Concorde's cost base was entirely different to HS2 though.

Railways are bulk transport systems, the best way to make money is to pile it high and sell it cheap.

The marginal cost of more seats is absolutely tiny, and the marginal cost of standees is essentially zero.

Also add in the political driver to ensure the line is full and seen to be full......

Post HS2 the cheapest way for the railway to carry passengers between Nottingham and Manchester is likely change at Birmingham Interchange, for example.

 

[yorksrob]

I’m surprised this question comes up so often. It’s always seemed to me that whatever the DFT said, “high fares” are an article of faith for objectors. Many mainstream news articles were aimed at objectors, and still are, so that’s what they’re going to write.

But comparison with HS1 seems futile, because people do clearly accept the small premium. IIRC the HS1 domestics were also almost guaranteed to be a white elephant by objectors.

Given that classic services have been allowed down so much, is not surprising that people are accepting a premium.

If South Eastern were running their 56 minute Ashford - Charing Cross service, I expect plenty of people would choose it. But there's no incentive to provide it in the first place.

 

[py_megapixel]

My hope is that HS2 will be priced similarly to the current WCML services - the WCML service pattern then rejigged for the what are currently the fastest services to stop more frequently, providing more places with direct services, and with the prices reduced somewhat to reflect that they are now providing a slower service which is not the top tier.

It would be nonsensical for HS2 to undercut the classic WCML. Unless, that is, service frequencies on there are to be cut massively. For example, it might makes sense for Manchester to be cut back to 1 Pendolino per hour, freeing up some capacity. With any luck we could see the second trains per hour to Macclesfield, Northwich and Buxton that Northern promised way back at the start of the Arriva franchise.

 

[zwk500]

Concorde's cost base was entirely different to HS2 though.

Railways are bulk transport systems, the best way to make money is to pile it high and sell it cheap.

The marginal cost of more seats is absolutely tiny, and the marginal cost of standees is essentially zero.

Also add in the political driver to ensure the line is full and seen to be full......

Post HS2 the cheapest way for the railway to carry passengers between Nottingham and Manchester is likely change at Birmingham Interchange, for example.

I'm aware railways and airlines are very different. The point was that although cheaper fares were available plenty of people paid a premium for a fast service.

Given that classic services have been allowed down so much, is not surprising that people are accepting a premium.

If South Eastern were running their 56 minute Ashford - Charing Cross service, I expect plenty of people would choose it. But there's no incentive to provide it in the first place.

But could SE keep running their 56 minute service with all the other service increases that were needed to serve people closer in than Ashford? I'd bet that shifting capacity onto HS1 and slowing down classic line services overall gave a far better service to far more people. Also, the domestic HS1 services are a sop in exchange for building the line. HS1 is there to connect London to the continent, and Eurostar have been filling their trains quite handily.

 

[edwin_m]

It's only stupid to have fares higher than people will pay. If enough people are willing to pay a premium, why cost yourself more money by holding prices artificially low?

Not everyone is willing to pay the same amount, so passenger numbers will gradually diminish as fares get higher. Assuming there is enough capacity to carry the passengers (which HS2 probably has and current WCML doesn't), there is a fare level that maximises revenue, and a lower fare level that is maximises socio-economic benefit. Since the purpose of HS2 is to benefit the economy and society not to make money, this lower fare level should be used - probably with the proviso that it should cover operating costs.

And yet, Concorde made a profit catering exclusively to business traffic. If you're charging more per ticket you don't need as many people to be willing/able to pay.

It covered its operating costs, probably nowhere near paying off the government-funded development costs. If there had been a Concorde across the Atlantic every 30min then they would mostly have been empty, with most passengers opting for the slower but much cheaper subsonic flight. That will also happen with HS2 if the fares are set too high.

 

[yorksrob]

I'm aware railways and airlines are very different. The point was that although cheaper fares were available plenty of people paid a premium for a fast service.

But could SE keep running their 56 minute service with all the other service increases that were needed to serve people closer in than Ashford? I'd bet that shifting capacity onto HS1 and slowing down classic line services overall gave a far better service to far more people. Also, the domestic HS1 services are a sop in exchange for building the line. HS1 is there to connect London to the continent, and Eurostar have been filling their trains quite handily.

The not taken forward new South Eastern franchise was supposed to include a return of fast services on the mainline, so the paths had been found.

Traveling down on the line a couple of weeks ago, it was noticeably quite popular, particularly from London Bridge.

 

[HSTEd]

I'm aware railways and airlines are very different. The point was that although cheaper fares were available plenty of people paid a premium for a fast service.

The problem with the assumption here is running more Concorde flights was very expensive because it would have required more airframes etc.

The cost of HS2 is fixed no matter how many trains run on it - since running costs of trains are extremely low compared to capital costs of building it etc.
Indeed the running costs of HS2 will likely be lower than on the classic lines - which is the opposite of the situation with Concorde/slower airliners.

So it's a fundamentally different Laffer curve - and given long assessment timescales I would be willing to bet the optimum price is very low due to huge quantities of additional induced traffic.

 

[Western Lord]

And yet, Concorde made a profit catering exclusively to business traffic. If you're charging more per ticket you don't need as many people to be willing/able to pay.

Concorde made a profit in the same way as I could make a profit running a local taxi service using Rolls Royce Phantoms, i.e. if you gave them (and the spares) to me for nothing so that all I had to do was put fuel in them and pay the driver.

 

[Tetchytyke]

Railways are bulk transport systems, the best way to make money is to pile it high and sell it cheap.

Sadly it isn't. It's better to sell one ticket at £300 than sell five tickets at £50. That's the Virgin/Avanti way, and it'll continue on HS2. After all HS2 is now a premium experience!

Are there any high speed lines anywhere in the world that fit that description?

Spain is full of gleaming shiny white elephant high speed lines, that weren't needed and only got built due to widespread bribery and corruption in the construction industry.

 

[HSTEd]

Sadly it isn't. It's better to sell one ticket at £300 than sell five tickets at £50. That's the Virgin/Avanti way, and it'll continue on HS2. After all HS2 is now a premium experience

Better to sell fifty at £20!

HS2s capacity is essentially unbounded, especially when we look at trains accomodations used on journeys of comparable journey time.

Avantis method makes at least some sense because it is forced to price people off peak trains - HS2 will not be.

 

[mmh]

Better to sell fifty at £20!

HS2s capacity is essentially unbounded, especially when we look at trains accomodations used on journeys of comparable journey time.

Avantis method makes at least some sense because it is forced to price people off peak trains - HS2 will not be.

We must also remember how badly Avanti performs financially ......

Well, it's essentially unbounded between London and Birmingham. Elsewhere, not quite so. Are we to assume it's going no further then?

 

[NoRoute]

Given the huge cost of building HS2 you would hope the benefit of the faster travel times and new facilities would have at least some additional value to travellers, such that they would be willing to pay more for HS2 compared to travelling on the WCML and contribute towards the cost.

If people are not willing to pay any more to travel on HS2 over the WCML, that would indicate they do not value what it offers, so from a commercial perspective it hasn't been designed to meet their needs, so is a mis-allocation and waste of resources, when either the WCML or a regular speed line would have sufficed. I suspect in practice ticket prices will be somewhat higher, but not high enough to justify the investment into HS2.

 

[The Ham]

I agree. I am sure there will still be premium fares at certain times (and will there still be first class provision?) but with increased capacity, it makes business sense to fill seats and that means affordable prices, special offers etc.

It was always one of those anti-HS2 arguments that doesn't make sense, except that it's easy to convince people that if you're spending billions building a new line then of course the fares are going to be extortionate (hence the claims it would only be used by rich people).

That said, I also agree that there will be some sort of premium compared to going to the 'classic' way, much as it's already cheaper to take slower services from London to Birmingham if you're willing to give up your time to save money. It's all about choice and planning ahead.

Pay of why this for latched onto was the business case was based on business travelers' time being valued at £50/hour. This was then assumed to be the hourly pay of the be individual, whilst in fact it's based on their charge out rate.

The former would mean a very high salary (circa £95,000), whilst the former would be for a be much lower salary, potentially about 1/3rd (circa £30,000).

 

[SynthD]

If people are not willing to pay any more to travel on HS2 over the WCML, that would indicate they do not value what it offers, so from a commercial perspective it hasn't been designed to meet their needs, so is a mis-allocation and waste of resources, when either the WCML or a regular speed line would have sufficed. I suspect in practice ticket prices will be somewhat higher, but not high enough to justify the investment into HS2.

You’re looking at it individual by individual. I could walk down a major a road if I were all alone, but we have to share with others sharing the same intention. That’s why it’s not a waste.

It depends how long you give it to justify itself.

 

[Bletchleyite]

Given the huge cost of building HS2 you would hope the benefit of the faster travel times and new facilities would have at least some additional value to travellers, such that they would be willing to pay more for HS2 compared to travelling on the WCML and contribute towards the cost.

If people are not willing to pay any more to travel on HS2 over the WCML, that would indicate they do not value what it offers, so from a commercial perspective it hasn't been designed to meet their needs, so is a mis-allocation and waste of resources, when either the WCML or a regular speed line would have sufficed. I suspect in practice ticket prices will be somewhat higher, but not high enough to justify the investment into HS2.

The purpose of HS2 is to free up classic line capacity, so this argument is flawed.

 

[JonathanH]

If people are not willing to pay any more to travel on HS2 over the WCML, that would indicate they do not value what it offers, so from a commercial perspective it hasn't been designed to meet their needs, so is a mis-allocation and waste of resources, when either the WCML or a regular speed line would have sufficed.

The services people are used to on the WCML won't exist any longer though so they have a choice between faster than now services on HS2 and slower than now ones on the WCML.

 

[NoRoute]

You’re looking at it individual by individual. I could walk down a major a road if I were all alone, but we have to share with others sharing the same intention. That’s why it’s not a waste.

But you would expect a car driver to be willing to pay something more for the convenience of using a good quality a-road, than driving along a dirt track. If you want to walk along the middle of the a-road, you shouldn't be using it.

The purpose of HS2 is to free up classic line capacity, so this argument is flawed.

The purpose changes depending on the argument, one day it's capacity, the next it is speed, then it's economic growth. If the purpose was capacity then you build a lower speed, lower cost line by avoiding a lot of the additional land and engineering cost necessary to deliver the high speed.

The services people are used to on the WCML won't exist any longer though so they have a choice between faster than now services on HS2 and slower than now ones on the WCML.

Quite possibly, but those faster services still provide some additional benefit and providing them has come at a huge expense, so some increase in ticket priices to cover that huge investment cost is necessary.

 

[mmh]

But you would expect a car driver to be willing to pay something more for the convenience of using a good quality a-road, than driving along a dirt track. If you want to walk along the middle of the a-road, you shouldn't be using it.

Not a driver or a more rural person then, I'm guessing? I completely expect the motorways (the HS rail links, if you will) to be far higher quality than my local roads. We're paying for all of them after all, just like HS2. Just like all the "A" roads where yes, you may well have to walk in the road.

 

[172007]

As I understood HS2 was going to go to a stack em and rack em model. Cheap fares brings in more money.

 

[NoRoute]

Not a driver or a more rural person then, I'm guessing? I completely expect the motorways (the HS rail links, if you will) to be far higher quality than my local roads. We're paying for all of them after all, just like HS2. Just like all the "A" roads where yes, you may well have to walk in the road.

I've not made my point clearly, I'm suggesting that a better quality road has some added 'value' to the driver, a major A-road is better than a B road, with a dual carriage way better still and a motorway even better. If you were paying a toll to use the road, you'd expect to pay more to use the better quality road, to reflect that it provides a better service and has cost more to provide.

 

[py_megapixel]

I've not made my point clearly, I'm suggesting that a better quality road has some added 'value' to the driver, a major A-road is better than a B road, with a dual carriage way better still and a motorway even better. If you were paying a toll to use the road, you'd expect to pay more to use the better quality road, to reflect that it provides a better service and has cost more to provide.

On the contrary, you might expect financial incentives not to use the roads that are already over capacity or which are worse suited to large traffic volumes, to discourage you from using them. That's what we see with the congestion charge in London, and with free parking and cheap bus tickets from out-of-town park and ride locations.

 

[edwin_m]

I've not made my point clearly, I'm suggesting that a better quality road has some added 'value' to the driver, a major A-road is better than a B road, with a dual carriage way better still and a motorway even better. If you were paying a toll to use the road, you'd expect to pay more to use the better quality road, to reflect that it provides a better service and has cost more to provide.

A toll on a motorway will often discourage people from using it, so they will use the older roads that often go through towns and cities that the motorway bypasses. Similarly many people might continue to use the WCML services for journeys like London-Birmingham, crowding out the intermediate passengers who are supposed to benefit.

 

[The Ham]

Given the huge cost of building HS2 you would hope the benefit of the faster travel times and new facilities would have at least some additional value to travellers, such that they would be willing to pay more for HS2 compared to travelling on the WCML and contribute towards the cost.

If people are not willing to pay any more to travel on HS2 over the WCML, that would indicate they do not value what it offers, so from a commercial perspective it hasn't been designed to meet their needs, so is a mis-allocation and waste of resources, when either the WCML or a regular speed line would have sufficed. I suspect in practice ticket prices will be somewhat higher, but not high enough to justify the investment into HS2.

.

Quite possibly, but those faster services still provide some additional benefit and providing them has come at a huge expense, so some increase in ticket priices to cover that huge investment cost is necessary.

Whilst the building of HS2 will cost a lot, the operation of the services will be much cheaper.

I'll demonstrate this by taking about the number of coaches needed.

Currently running 9 coach trains at a frequency of 3tph requires 135 coaches, now under HS2 with 16 coach trains also running 3tph we'll need nearly double the coaches right?

Well, no. Currently the round trip from London to Manchester back to London is about 5 hours, with HS2 built it will be 3 hours.

That means that rather than it being 9 coaches*3 times an hour*5 hours round trip (135) it will be 16 coaches*3 times an hour*3 hours round trip (144), so only a small increase in the number of coaches needed.

However if 1 in 3 trains are 12 coaches long than the numbers then there's a need for 150 coaches, which means it's likely that the existing services would require more rolling stock to run the same frequency of service.

However that's for a train with seats for 1,100 rather than a maximum of 600,

Now whilst rolling stock is only one element of the costs of the railways, what other costs are there? Staff costs, well the same time savings will still apply, so actually they will fall. As a driver working a 35 hour week, could currently (if you could maximise their driving hours) do 7 round trips, under HS2 would be able to do 11.

What other costs? Maintenance. With fewer coaches is likely that this would be cheaper, although because they will be running faster it's possible that there would be some additional costs, however it's unlikely that it would add more than the reduced rolling stock lease costs.

Therefore it's most likely that the running costs overall would be lower. However to be robust I'll assume that all costs are equal to what they currently are whilst still nearly doubling the capacity.

Therefore, let's say that the average ticket which we were looking at costs £100 and we could ensure that we could fill the train to the same percentage full as before. In which case to generate the same total income we'd only need to sell the tickets for £55.

As such there's little advantage in increasing prices significantly above the existing prices.

 

[NoRoute]

Whilst the building of HS2 will cost a lot, the operation of the services will be much cheaper.
...
Now whilst rolling stock is only one element of the costs of the railways, what other costs are there? Staff costs... What other costs? Maintenance.

The cost of construction is part of the operating costs, the circa £50+ Billion pound construction incurs interest costs which must be paid and the infrastructure doesn't last forever, the rails are steadily wearing out as services run over them, the signalling and electrical infrastructure ages for every year it is in use, the civil engineering structures are steadily degrading. So the interest costs, plus the depreciation of the asset are part of these operating costs.

 

[Tetchytyke]

HS2s capacity is essentially unbounded, especially when we look at trains accomodations used on journeys of comparable journey time.

Avantis method makes at least some sense because it is forced to price people off peak trains - HS2 will not be.

Virgin/Avanti's method has nothing to do with capacity- the last and first off-peak trains out of London are rammed, the first and last peak trains are practically empty- and everything to do with revenue maximisation. They don't charge £300 for an anytime return to Manchester for any other reason than the fact that they can. I see HS2 worsening that mentality.

The only way I'd expect anything else from HS2 is if they follow the depressing OuiGo model, with the only cheap seats being on certain special trains which have been specifically designed to be as unpleasant as possible to travel on.

 

[stuu]

Spain is full of gleaming shiny white elephant high speed lines, that weren't needed and only got built due to widespread bribery and corruption in the construction industry.

The Spanish system is based on the logic of all provincial capitals having access to the network, rather than based on strict BCRs. I know the construction industry is very much entwined with the government, but then they build HSR for at least 10 times less per km than HS2 will cost, so perhaps it's not all bad

 

[Tetchytyke]

they build HSR for at least 10 times less per km than HS2 will cost

As they should do, given that Spanish lines go through empty countryside and HS2, well, doesn't.

I don't see HS2 bringing lower fares because a) someone has to pay for it and b) railway pricing doesn't work on simple supply-and-demand.

As I said above, I do see them bringing in the depressing OuiGo model. That would leave them able to brag about cheap headline fares whilst simultaneously making the experience so horrific that anyone with any money will avoid the cheap trains like the plague.

 

[Trainbike46]

It is important to remember though that the WCML currently already charges premium fares, both compared to journeys across similar distances in europe as well as compared to other mainlines in the uk.

For example on the London - scottish central belt route without railcard:
-london-glasgow (any permitted): £196.50 (anytime) £112.60 (off-peak) £23.50 (cheapest advance)
-london-Edinburgh (via York): £173.00 (anytime) £82.20 (off-peak) £20.00 (cheapest LNER advance) £4.90 (cheapest LUMO advance)

Arguably the london-edinburgh passengers get a better quality for their money as well: half-hourly service instead of hourly to glasgow, and (in my opinion) more spacious comfortable trains.

The reason for the higher price is that the WCML is running at capacity, and the high prices are either price gouging or demand management (depending on how cynical you are, I guess!)
So charging at current WCML prices would already be charging a premium price, and the much larger capacity should mean that tickets don't have to be more expensive, the extra money needed would come from selling more tickets.

 

[JonathanH]

£20.00 (cheapest LNER advance) £4.90 (cheapest LUMO advance)

I think it might be worth checking a journey planner to see if those fares are actually offered.

 

[HSTEd]

I don't see HS2 bringing lower fares because a) someone has to pay for it and b) railway pricing doesn't work on simple supply-and-demand.

HS2 pays for itself by reducing the amount of money swallowed by the money pit that is classic railway operation.

Even the vaunted ICWC (supposedly the most commercially attractive operation in the UK) operator doesn't cover overall costs and requires net subsidy from the state.

It will be cheaper for the railway to move passengers on HS2 than not, the cheapest way to get someone from London-Solihull (as an example) will likely be doubling back from Moor/Curzon Street. The same will apply for almost all journeys that can reasonably be done by HS2.

Conventional railway will cost several times more per seat to operate what HS2 will.

All attempting to charge premium pricing from the HS2 seats does is leave HS2 essentially empty and the passengers travelling on trains that may as well be powered by burning banknotes.

== Doublepost prevention - post automatically merged: 18 Apr 2022 ==

As I said above, I do see them bringing in the depressing OuiGo model. That would leave them able to brag about cheap headline fares whilst simultaneously making the experience so horrific that anyone with any money will avoid the cheap trains like the plague.

Can they really make the experience that grim given that the bulk of the passengers will be on the trains way less than 90 minutes?
Birmingham passengers off in 45, East Midlands in 52, Manchester passengers in 71. (38, 45 and 64 from OOC)