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Study for BC Ferries Urged Steep Fare Hikes at Busy Times
Report advised way to make more money yet carry fewer, FOI reveals.
A BC ferry nears Bowen Island. Photo by ericflexyourhead from Your BC: The Tyee Photo Pool.
A 2007 study produced for British Columbia Ferry Services Inc. found the publicly owned company could maximize its revenues by raising regular fares by 75 per cent, if the province's ferry commissioner would allow such a large hike.
The proposal included charging more at the times when people were most likely to want to travel, and dropping fares at other times. A more recent report suggests that hike could be made without seriously decreasing traffic levels, a finding disputed by critics who say ferry fares are already too high.
The Hamilton, Ontario, company Transportation Economics & Management Systems, Inc. wrote the June 15, 2007 technical report "Revenue Yield for Selected Routes" for BC Ferries (available on sidebar).
Related Document
The report was released to The Tyee this week without a fee, following the involvement of the BC Information and Privacy Commissioner's office. The Tyee filed the original request, for all reports on ferry fares and price elasticity, in Oct. 2010.
Elasticity is a concept economists use to measure the relationship between demand and price. As the price of a good or service goes up, demand will generally decrease. But, as the report suggests may be the case with BC Ferries, the decrease in demand may not be as dramatic as the jump in price, allowing the company to make more money despite carrying fewer passengers.
Flexible pricing
"The elasticities derived in this study show that there is significant pricing flexibility and that by using time of day, route, trip purpose pricing the overall revenues of BC Ferries can be increased under the caps set by the regulator," the TEMS report said.
"BC Ferries is clearly in a position to begin to increase revenues by using a flexible pricing policy," it said. "The overall potential revenue gain for the seven routes studied from using a flexible pricing system is $21.8 million or an increase of 10.8 per cent over the existing fare structure in 2010."
While BC Ferries provides discount fares on some sailings through its Coast Saver promotions, it is yet to implement the kind of wide scale flexible prices described in the report.
The report was to look at how demand differs during different seasons, by trip type (business, commuter, social, tourist and commercial) and at various times of day. "Results indicate positive opportunity to introduce a flexible pricing system that offers higher fares in congested periods and lower fares for uncongested periods. In addition, the system will offer significant discounts for regular users, and more market based fares for tourists and business travelers."
If not for the commissioner's caps, which keep BC Ferries' increases to set amounts, the company could produce much more revenue, the report said. Referring to a chart included in the report, it said, "It can be easily seen that the unconstrained maximum of the revenue lies approximately at a 75 per cent increase in the premium fare combined to a 25 per cent increase in the discounted fare."
Since 2003, when the Crown corporation was quasi privatized, BC Ferries' fares have gone up by about 70 per cent on the major routes between Vancouver Island and the Lower Mainland and by 80 per cent on the minor routes, according to a chart on the ferry commissioner's website.
By 2007, when the TEMS report was written, fares had already risen significantly.
Fares already high
People who live in ferry dependent communities are already saying the fares are too high and that it is decreasing ridership, said NDP ferry critic Gary Coons.
"It's huge," he said. As fares go up, seniors can't visit their families and people reduce the number of trips they make. Discretionary ferry travel gets cut from people's plans, he said. "The impact is on tourism and business."
The Ferry Advisory Committee Chairs have been arguing for years that rising fares are pushing down traffic levels, he said.
In 2009 the FACC published a six-page report called, "What do you get for $20 million?" It looked at the months starting in 2008 when the provincial government put in enough money to reduce rates by 33 per cent in an attempt to stimulate traffic. The funding was part of then premier Gordon Campbell's response to the growing financial recession.
"In the view of the FACC, it is the inescapable conclusion that the 33 per cent discount substantially stimulated traffic," the group found. "This establishes beyond any doubt that traffic is clearly sensitive to fare discounts and to fare increases."
While many factors affect ridership, the report allowed, it stressed that the dominant one causing the declines "has been and remains the rapid and substantial increase in fares combined with imposing fuel surcharges."
Major transition
In the past, said Coons, BC Ferries' own records have estimated that for every 10 per cent hike in fares, a ridership decline of seven per cent should be expected.
The ferry company's more recent reports suggest the relationship between fares and ridership is not so dramatic.
The report "Performance Term 3 Forecast and Measurement of Demand Elasticity for British Columbia Ferry Services Inc." prepared by InterVISTAS Consulting Inc. and dated May 31, 2011 was released to The Tyee as part of the response to the FOI request this week, though it has been available on the ferry commissioner's website since July, 2011. (It is available on the sidebar.)
The report says the Northern routes are the most price-sensitive and the minor routes the least. A 10 per cent fare hike would cause a 5.6 per cent drop on the Northern routes and a 1.2 per cent drop on the minors.
The major routes and the route between Horseshoe Bay and Langdale are in the middle, where a 10 per cent hike would cause a 2.8 per cent drop in traffic.
InterVISTAS cautioned, however, that BC Ferries traffic appears to be "in the middle of a major transition." Despite high fuel prices and a global recession, BC Ferries traffic was "largely flat" with only a small net decline between 2003 and 2011, it said.
"In the 1990s there appeared to be stable relationships with key drivers such as population and gasoline prices," it said. "Today, however there are major changes underway... What our investigation has found is more ambiguous relationships between traditional traffic drivers and actual BCFS traffic, than were found in the past."
There are, in other words, many unknowns when it comes to predicting ferry traffic and the effect of raising rates.
But the reports on fare pricing highlight a tension between running BC Ferries as a business and as a public service. Raising the rates and flexible pricing are consistent with the course the Liberals put the company on in 2003. But Gerry Coons and other critics of that course argue this may not be the system the public wants or needs.
Ferry commissioner Gord Macatee is reviewing the Coastal Ferry Act and is expected to report his findings at the end of January. He launched the review last May, two weeks after becoming commissioner, in response to public concern over large proposed fare increases and the affect they would have on ferry-dependent communities. ![]()




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Grania
20 weeks ago
No more trips for me....
I remember going over to Vancouver at least five times a year. Have now not been for about five years since I am now on a fixed income as a senior. It is very difficult, with knee issues, to go as a foot passenger.
Ed Seedhouse
20 weeks ago
I remember the days when it
I remember the days when it was honorable for people to work in jobs to serve people without thought of profit, when government could be seen to be working and making life better for people.
I was myself privileged to serve more than thirty years serving the people at Victoria's public Library system. There are still a crew of folks their who work hard because they believe in and like to serve others with no thought of charging them directly.
But nowadays if you are thinking of a life spend serving the public, you are regarded as a chump and a loser. Public office is used as a tool to move on to "higher" and "better" things that allow you to squeeze more money out of the system with little thought for the consequences.
Well, I am just an old fogy I guess, but I feel good that I was able in a small way to play a part in making a lot of people's life slightly better by providing books, records, movies and so much more to people without regard for their social position or wealth. And I think the loss of respect for public service is a sad, sad thing.
alive
20 weeks ago
Waste of money
So, somebody suggested that if you raise the fares you would make more money?
How much was paid for this gem of wisdom?
I got a newsflash for the ferry corporation: Nobody travles for the fun of it anymore!
So "elasticity" makes no sense --- people travel when they have to and they have no alternative.
If government agencies would simply do their basic job, and quit all that fancy inter-office BS, they would not need million dollar management --- and THAT would save money!
Van Isle
20 weeks ago
I wonder what the ratio of
I wonder what the ratio of management to union employee is at BC Ferries? I was told by an BCF employee a couple of years ago that there was a hiring freeze for managers. He also told me that (in his opinion) that a lot of them were "just a bunch of fuck-ups".
morechatter
20 weeks ago
Its why CEOs make the big money
Because CEOs have no problem sticking it to the average guy who is just trying to get to his job.
And who pays the CEOs enormous salary but the average guy himself.
The less for more government coming on down the line while giving you a line no less. BC Rail was sold just before the public gravy train came in as the little train that couldn't is making a bundle shipping BC resources. CEOs pay little taxes, another expense for tax payers who got to come up with the extra 75% to stay on the job.
pianosaurus rex
20 weeks ago
discounted trips
Grania;
If I recall correctly the ferry is free for seniors Tuesday-Thursday weekly or used to be anyways. Check it out. Also I have encountered last year a mid-week discount Wednesday sailings at 50% off.
Car and driver total $45.00
zalm
20 weeks ago
Bah
Shouldn't this whole article be a sidebar on the "Risky Dix" thread? It's been more-than-adequately pointed out by Shreck and others that the canard of the BC Fiberals "lowering" income taxes (especially for corporations) has been more than matched by a massive and wide-ranging increase in user fees, extra charges, levies, assessments, tolls, imposts and surcharges, of which the suggestion of Ferries fare increases and time-of-day pricing is only one more example.
Sure, you can always charge more for ferry fares, and there will still be someone who will travel. But the object of civil service, is not to maximize revenue, but instead to maximize service, all the while bearing in mind the efficiency of the system.
Thus Seedhouse says it best - anyone who buys into the logic behind "market" pricing for ferry fares, considers the rest of us
"chumps". Ten-to-one you see this in the regular media in a few days, complete with Fraser Institution editorials on the front page for why it should be so. And yet another front in the war on the commons opens up.
Wake Up
20 weeks ago
For the Record...
In case any government or ferry employees who have any influence at all read this column, I wanted to add my story of ferry woes.
I only go now to Victoria when, twice a year, I travel for work and the ferry is paid for. My grandmother lives up island and is over 90 now, and I regret to say that I cannot afford to visit her regularly as the ferry costs are an add-on.
I do drive up from Victoria after finished work and stay for a few hours. We are feeling the pinch though with gas prices, etc
slowthinker
20 weeks ago
Ed Seedhoouse says "I
Ed Seedhoouse says "I remember the days when it was honorable for people to work in jobs to serve people without thought of profit, when government could be seen to be working and making life better for people."
As did companies...now it's all about what is in it for me.
gsarahs
20 weeks ago
No Vision
Where are the leaders with a vision similar to those who created BC Ferries, BC Hydro and ICBC?
Clearly these idiots in power now have no clue as to nation/province building, like back in WAC's day. All they are good at is nickel and diming us!
RickW
20 weeks ago
As the ferry system is part of the highway system.....
....and if it is required to break even or make a profit, then the rest of the highway system should be subjected to the same.
Vox.Pop
20 weeks ago
Consultants - Humbug!
As an ex-management consultant I will share a little secret. The successful consultants produce a report with the recommendations that the client wants; that's how to get to do another assignment. These ferry reports illustrate this practice exactly - the consulting firms delivered what Emperor Gordo wanted his people to see: jack up the prices, just like any neo-con economist would predict. Oh, and let's hide all this behind economic doublespeak & mathematical mumbo-jumbo. No-one knows what the impact of a price increase is until it happens - the world is too complicated for simple models. But this is what you can expect from the BC Liberals - it is the hidden agenda behind 'smart meters' so they can jack up the prices on a monopoly service. Time to throw out the bandits.
DPL
20 weeks ago
Let's not forget that all the
Let's not forget that all the food,building supplies, and tourists has to get over to the island by some ferry, or not get there at all
Skywalker
20 weeks ago
Is there anything the BC Liberals have touched...
...that isn't royally screwed up yet. BC Ferries is suppose to be part of the highway system. When the traffic gets clogged we build more highways and overpasses and bridges. RickW is right on. If they came up with this product of a brain fart for highways people would throw the bums out in an instant.
PL1313
20 weeks ago
Question
It seems to me that the Ferry Corporation could increase ridership, flexibility and fill those large ferries if they lowered fares slightly during peak times and dramatically during non-peak times. To most of us the Ferries are part of the highway system. Didn't Campbell take the tolls off the Coquihalla Highway? Isn't the government building, expanding and maintaining our highways at huge expense? At what point does the Ferry System become a business and the rest of the highway system is free?
kmdyson
20 weeks ago
Part of the road system?
It seems to me that the water route to places only accessible by ferry are part of the road system. Fares should cover costs only...no profit...get rid of the PPPs all they do is cost tax payers excessive amounts to pay CEO and private sector upper management salaries and bonuses...utterly stupid and completely ineffective cost wise...when are we finally going to realise that the Austrians and the Chicago school is poor economic ideology...and should be kicked to the curb...
gomer
20 weeks ago
tolls
The User Pay argument would resonate with everyone if ALL bridges, mountain passes, sections of highway system that had high per mile construction cost and/or high maintenance costs were also User Pay. The penalizing of citizens of one part of the SAME country/province because of where they live is the core of the problem.
Granville
20 weeks ago
Meh!
This is the part in the movie where we pay for the decision to buy the Flensburg Follies. The next part is where we pay for the damage to the ferry terminals, done by the ramming.
Then come the enquiries:
1. Why did we buy foreign ships, with foreign parts suppliers?
2. Were all those collisions accidents, or sabotage?
Both were acts of sabotage, in my opinion. Buying the oversized spirit-class ships was a mistake, and was an act of sabotage against the BC economy.
There is no way the five recent ramming of the ferry terminals were all accidents. Just look at the timing for one thing. It is getting to be so obvious that anyone with a grain of knowledge would automatically avoid travel on a long weekend or a holiday. How many more "accidents" are required before they are investigated?
Yes, I realise the legal implications of accusing the ferry workers of sabotage. It is a serious accusation and it needs to be followed up. David Hahn was was a stooge, but even he could not get to the bottom of the Queen of the North sinking. Some BC Ferry workers are criminals and they should be charged. People have already died and there will be more deaths if the RCMP do not take action.
As for increasing he fares; as long as the ship makes the whole trip and not just part of it, I will gladly pay for the privilege of walking off alive.
snert
20 weeks ago
Granville
FWIW Two of the larger ferries are now on their last legs. The local shipyards will most likely be tied up with federal contracts. I guess that means the replacement ferries will still need to be built off shore.
rlbolin
20 weeks ago
Variable time and Day Rates on BC Ferries
Sounds a lot like BC Hydro's plan for power rates. Did they drink the same brandy?
Granville
20 weeks ago
Variable rates are a good idea to spread the traffic load
My concern is with passenger safety. Two people have died because of crew negligence. More "accidents" are going to happen, especially before a long weekend, which is when the "equipment failures" seem to happen.
I am not concerned with a few dollars on the fare, but with my own personal safety and the safety of other passengers. Ther ferry service is usually impeccable and I do not want to cast aspersions on the majority of the crews, who provide excellent service in a demanding environment.
That said, a few crew seem to know exactly which which button to push to make sure an "accident" happens at the most inconvenient times. Am I the only person who is suspicious?
paisley
20 weeks ago
Hahn and Liberals = pork barreling
The latest rumour I heard from some people in the marine business is that the door hinges were damaged on the ferry that smashed into Duke Point Terminal. A contractor that had been approached to facilitate repairs requested that BC Ferries ask the ship builder to supply specifications for the doors and the contractor would have repairs done in a matter of days. Apparently the German company refused to supply the data...which means that the German builder will have to undertake the repairs. I can't say if the doors need to be completely rebuilt but I can say "gee thanks you incompetents" for creating BC jobs and keeping maintainence cost effective and efficient. Liars and Villains to be certain have made the decisions that are costing us dearly.
Here's an idea to save money for riders. Take these ridiculous, newly and likely outrageously expensive "imitation granville island tourist trap terminals", sell them to some sucker that actually thinks they are plausible money makers and use that money to reduce fares. Most importantly don't forget to fire the idiots that approved them.
RMS
20 weeks ago
re: No Vision
"Where are the leaders with a vision similar to those who created BC Ferries, BC Hydro and ICBC?
Clearly these idiots in power now have no clue as to nation/province building, like back in WAC's day. All they are good at is nickel and diming us!"
I agree with the sentiment however: BC Ferries and BC Hydro were both created by WAC Bennett and the original "tea-totaling Socreds" however, ICBC was created by the Dave Barrett NDP government. Three great ideas by two very different political parties.
igbymac
20 weeks ago
There truly is not limit
... on the madness that is politics.
And people vote for this shite??
Anyone want to storm the Bastille with me?
RickW
20 weeks ago
snert
Don't hold yer breath. The Cons are backtracking so fast, you'd swear they had
two faces.....eyes in the back of their collective head.snert
20 weeks ago
RickW
I'm not. As mentioned before in another thread, remember the Polar 8.
http://en.wikipedia.org/wiki/Polar_8_Project
RickW
20 weeks ago
Polar 8
Thank you, Mr. Mulroney......
Madmac
19 weeks ago
Ferry Rates
The more they charge the fewer people will use the ferries. We are in the tourist industry and as the rates have gone up the number of our clients who go to Vancouver Island, gulf islands, Sechelt peninsula, etc. decline. We haven't been on a ferry for over 5 years.
I understand costs have risen but think it's time we finance the ferries the same way we finance all of our highways and bridges. If they need to make money then let's have a toll on the entire system. That would be fair.
Granville
19 weeks ago
Whatever the cause, Nanaimo traffic patterns have been disrupted
Seeing the cars lined up for the ferry and their egress fromn the ships, it is like turning back time. Nanaimo road traffic has become congested again, almost as bad as it was before the Parkway was built.
The story about the Flensburg builders refusing to provide the plans for the welding repairs sounds apocryphal, it is hard to imagine that BC Ferries did not include all plans in the purchase specs.
BC shipyards have built prefectly acceptable vessels until the FastCats were commissioned. Those ships were built with insurmountable political interference and the builders werre penalised for their failure.
My concern is for public safety. No one has been charged with obstruction of justice in the sinking of the Queen of the North yet. Now would be a great time to score one for the right team. (Of course their lawyers would argue that too much time has elapsed for charges to be laid, but the RCMP should try anyway).
zalm
19 weeks ago
Hah...
"The story about the Flensburg builders refusing to provide the plans for the welding repairs sounds apocryphal, it is hard to imagine that BC Ferries did not include all plans in the purchase specs. "
You've never had a hospital built. If as-built plans show up at all, they're mark-ups stolen by maintenance and operating staff from the contractors before they leave the site, because they'll never come from the architects or the consultants.
I've seen exactly 2 sets of as-builts in my professional life, and only one was correct, while the other was simply tender drawings stamped "as-built", including the chiller that was never installed. Two out of more than 400-hospital projects. A sorry state of affairs that may well extend to other branches of public service that insist on paying bottom dollar for top-quality work.