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An alternative framework to improve forecasting of passenger rail demand

The ‘Revisiting the Elasticity-based Framework’ study, or ‘Revisiting’ for short, is one of the largest and most comprehensive research studies into GB rail passenger demand in recent years. It created a new dataset of demand and demand driver data, which in itself will be an important resource for researchers going forward, and applied modern analytical techniques to freely estimate a set of demand elasticities. The findings from this study suggest that the factors affecting demand for passenger rail travel differ from standard industry expectations in a number of ways.

The study shows that passengers are more sensitive to both fare changes and journey time changes than previously thought, and that the cost of driving a car has a substantial impact on the demand for passenger rail travel—far larger than traditionally expected. Additionally, while both performance and journey time have an important effect on the demand for passenger rail travel, the evidence suggests that, with rail performance at historically high levels, efforts can now once again be focused more on speeding up rail journeys, due to the larger elasticities to changes in journey times.

The ‘Revisiting’ framework also considers how passenger responsiveness differs across ticket types and market segments. The recommended geographic market segmentation focuses on three main areas: London, the South East and East of England; non-London Core cities; and the rest of the country. This market segmentation is based on evidence that, within each of these segments, passenger responses to changes in prices and incomes are similar, but these responses differ between segments. For example, passenger perception of service quality is very important in some market segments, but less so in others. The DfT has compared the performance of the ‘Revisiting’ framework with that of the existing industry forecasting framework (the Passenger Demand Forecasting Handbook—PDFH), and comments: ‘At a national level we are broadly content that the Revisiting study outperforms the PDFH methodology.’1

It is hoped that the DfT and other industry stakeholders will continue to consider the implications of the ‘Revisiting’ study, with an aim of improving the industry’s ability to forecast the demand for passenger rail travel in Great Britain and ultimately leading to its adoption into industry guidance.

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1 Department for Transport and HS2 Ltd (2012), ‘The Economic Case for HS2: Value for Money Statement’, January, p. 36.