BC Ferries loses revenue on discount programs, in spite of traffic increase

Derek Kilbourn

Sounder News

Tuesday, June 14 2016

BCF says it lost revenue because of the discount programs it ran on every route in the system this past year.

Programs which gave either a discount for passenger fares or vehicle fares did not produce and overall revenue increase, according to Darin Guenette, BC Ferries Manager of Communications.

Guenette said BCF believed it would lose money on the programs, but, “the loss was less than we forecasted.

“We saw an increase in reservations on the discounted sailings and saw a shift from passenger to vehicle traffic.

“When there was a vehicle discount, people got back in their car.”

Gabriola Ferry Advisory Committee members pointed out that one of the problems with the discount programs was they were system-wide, and did not provide sufficient incentives to regular users of the minor routes.

According to Guenette, all three promotions (50% off passenger fare, 50% off vehicle fare, 30% off passenger fare) generated additional vehicle and foot passenger traffic while increasing the percentage of traffic carried in off peak sailings.

The 50% vehicle promotion generated more additional traffic than the passenger fare promotions

Revenue from additional traffic did not offset the reduction in revenue resulting from the decrease in yield 

He said, “the overall revenue loss was less than forecast because of two reasons: on Major routes, we saw an increase in reservations on promotional sailings, and there was a shift from foot passenger traffic to vehicle traffic

As Heather O’Sullivan (on left in photo below) pointed out, the discounts for the program were on regular fares. For those who use the Experience Card system, the discount programs were essentially negligible.

Mark Collins, BCF Vice-President of Strategic Planning and Community Engagement (seen on right in photo) said, “we knew that going in, that we were applying a system-wide program, and that one-size-did-not-fit all.

“But it gave us an idea of how the network will react when we do these programs.

“What we did learn was reducing fares does not increase revenue. 

“We see the comment over and over that if BC Ferries were to reduce fares, they would make more money.

“This is early, but the data does not support that conclusion.”

Collins said the data does support studies done by BCF-hired economists who have said reducing fares won’t increase revenue.

“I know that’s not what people want to hear, but that’s what the data shows us.”

The real prize, according to Collins, is with fare flexibility is getting more traffic through the existing system without having to add more to the system.

BC Ferries is planning on introducing fare flexibility - similar to airlines - where fares would be lowered on less-utilized sailings to encourage those travellers who have the ability to be flexible to use those sailings.

“Flexible travellers get the discount, you get a net increase on traffic, so we’re working towards that on the major routes.”

Collins said BCF is not sure that fare flexibility it will work on minor routes (partly because it requires a ticket booth on both ends of a route) and there are the commuter flows to contend with.

“You never disrupt the commuter flow. So the model doesn’t fit perfectly on commuter routes.”