OC Transpo 2009 Marketing Plan. A quality experience

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1 OC Transpo 2009 Marketing Plan A quality experience

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3 T ABLE OF C ONTENTS 1. INTRODUCTION 1.1 Background page Overview page Objectives page MARKET D EFINITION 2.1 Transit usage page Demographic change page Fare payment page Off-peak market potential page PRODUCT D EFINITION 3.1 Convenience page Capacity and reliability page Affordability page Ease of use page PRICING 4.1 Fare level page Tickets page Student eligibility page Upass page Concession fares page Seniors page Ecopass page Daypass page October 2008, Transit Services Branch (i)

4 C ONTENTS ( CONT D ) 5 COMMUNICATION S TRATEGY service improvements page Safety and security page Customer appreciation page Transitway signage page Web services page Park and Ride page Environment page Cleanliness page Events & community development page Bayshore station page Transplan page RCMP page Off peak service page Affordability page Priority seating page Consolidated point of contact page Automated next stop announcements..... page Online trip planner integration with STO.. page Christmas food drive - 25th year page SALES T ARGETS 6.1 Fare products page Average price page Other revenue sources page Establish advertising value page October 2008, Transit Services Branch Page ii

5 OC Transpo Marketing Plan integrated service, communication and pricing strategies increased customer-base increased revenue : cost ratio investment in service quality & convenience balanced fare media to attract new riders and reward existing riders 2009

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7 1 I NTRODUCTION 1.1 Background Marketing strategy and activities play an important role in retaining and attracting public transit riders in Ottawa. Marketing of transit services optimizes the mix of price, product, social responsibility, service delivery and promotion - in a way that will satisfy consumer needs for mobility as well as achieve the best possible balance between revenue and cost, and thus minimize dependency on municipal taxation. Successful marketing can maximize the potential for sustainable growth of public transit, which will help reduce Ottawa's use of private automobiles, ease the requirement for future investment in city roads, as well as reduce greenhouse gas emissions. In late 2007 and early 2008, OC Transpo surveyed both employees and the public to determine the attitudes of the providers, recipients and potential recipients of OC Transpo services. Results obtained from these two major surveys, as well as the necessity of responding to population growth, transportation demands and significant changes in gas prices, form the basis for strategies outlined in the OC Transpo Marketing Plan for There is a clear consensus in survey results that, for OC Transpo to succeed, convenience, reliability, and high levels of service availability, must be the foundation for delivering customer service excellence - and these in a way that is both friendly and affordable. The OC Transpo Marketing Plan considers problems and opportunities that have been identified in the market, existing and potential transit products, and an assessment of consumer needs and attitudes, including trends in purchasing behaviour. This analysis relies on measurement of Ottawa market characteristics, as well as basic marketing and economic principles, and comparison with experiences in other transit jurisdictions of similar size in Canada. The transit market in Ottawa is strong in terms of ridership. Ottawa has always had a high modal split in favour of transit use amongst commuters, and compares favourably even to Toronto and Montreal, where subway service is provided. Since 2001, there has been an average annual increase in public transit ridership of 2.4 %, and in 2008 ridership growth to the end of July was 4.8% over 2007 levels. Some of this recent ridership growth is attributable to population growth, and to the transit fare structure and price differential between various fare media, especially discounted or concession fares. The marketing plan is based on strategies that not only increase mobility across the population, but also increase ridership in a way that 14 October 2008, Transit Services Branch Page 1-1

8 increases revenue, as well as increase transit s modal share and ridership per capita.. Opportunities exist in 2009 for continued growth and success of public transit in Ottawa. Service, marketing and operating plans have been developed to build on the patterns of growth established since The 2009 version of the OC Transpo Marketing Plan extends to all products and services provided under the conventional service banner - i.e., it does not include Para Transpo services. 1.2 Overview In 2008, ridership has increased at a rate higher than the increased investment in service hours, and higher than the rate of population growth. This ridership increase was influenced by several factors, including prior years service investment, high gasoline costs, increased traffic congestion, increased marketing and promotion, and effective service design - i.e., effective positioning of service. When growth is well planned and managed, the new customers it brings to transit will become committed, long-term riders, willing to pay for high quality service. The higher service levels required to adequately meet demand will benefit all riders - new and existing - through an overall increase in capacity and reliability. This in turn will reduce the rate of ridership attrition, creating growth that is sustainable. However, rapid growth like that experienced in 2008 also presents challenges - specifically: i) in the areas of service availability and reliability, which are our ability to deliver service that meets demand, and ii) in the area of trip experience, which is the general impact of crowded buses and schedule disruptions on all riders. These challenges are reflected in customer attitudes as measured by comments and survey results. Complaints about over-crowding and missed trips increased by 75%in the period January to July 2008, compared to the same period in Poorly managed, rapid growth can create undesirable operating conditions and eventually displaces as many riders as it attracts. OC Transpo is nevertheless well positioned in 2009 to capitalize on a strong demand for service, provided we invest in areas where we have the capability of delivering service consistent with our standards for quality, and provided we position new service where there is a known demand from identifiable market segments. 14 October 2008, Transit Services Branch Page 1-2

9 The opportunity also exists in 2009 for improving the revenue-cost ratio if we provide new service where we can attract new customers that pay full fare rather than simply providing more rides to existing customers. The marketing strategies outlined in this plan are designed to expand the customer-base by: i) providing and promoting valued service to potential new riders; ii) delivering and communicating high standards of service-quality to retain existing riders; and iii) promoting the convenience and advantages of using less-costly service options, such as travel during off-peak times. Ridership and revenue projections for 2009, shown in Figure 1.2, are based on a 5.7% increase in service hours over 2008 levels, a 7.5% increase in fares effective July 1, 2009, and an increase in ticket prices effective January 1, This magnitude of growth also assumes an increase in the transit customer base, resulting from promotional campaigns and service positioning which are directed towards attracting new riders. Figure 1.2 Projected 2009 ridership, revenue and service levels ridership service hours fare revenue increase over previous year increase over previous year millions % 5.70% % 1.90% % 3.20% % 5.50% October 2008, Transit Services Branch Page 1-3

10 1.3 Objectives Revenue Cost Ratio Ottawa city council has established a target revenue:cost ratio of 50% for transit. Between 1999 and 2008, the r/c ratio has in fact reduced from 58% to 48.8%, in spite of increased investment in service: OC Transpo revenue : cost ratio 70.0% 60.0% 50.0% 40.0% year In 2008, the ratio has dropped even though ridership has increased. In 2009, however, the marketing plan forecasts an improvement to 49.8%. Revenue opportunities exist in four areas: i) attract new riders at times when the cost to provide service is lower; ii) increase fares to keep pace with transportation costs; iii) adjust differential between fare products to take advantage of demographic changes and purchasing habits, without undermining social objectives for concession fares; and iv) develop sources of revenue other than fares. Ridership Ridership will increase by 5.1% in 2009, if population growth continues, economic activity remains at current levels, and the cost of operating a car remains high. This 5.1% is also based on service and operations plans that provide the right mix of capacity and reliability, designed to: i) meet the current high demand for peak-period commuter service; and ii) develop less-costly off-peak service at sufficient levels to attract new riders. 14 October 2008, Transit Services Branch Page 1-4

11 OC Transpo image The identity and public reputation of OC Transpo and associated services influence people s decisions whether or not to use transit. Transit riders need positive reinforcement that they have made the right choice, and potential new riders need to have confidence that OC Transpo will be a good alternative to car travel. Brand quality is continuously reinforced at every possible opportunity, from the quality of transit publications, to vehicle cleanliness, livery design, and positive media coverage. In 2009, social marketing efforts will be concentrated in the following areas: i) technological innovation, such as mobile service information via the website; ii) positive environmental impact, including the Green Rewards program, Virtucar, and hybrid diesel-electric buses; iii) Transitway identity, starting with 25th anniversary recognition in 2008, and including a major re-design of signage at stations; iv) community relations, especially through development of partnerships with events and major community destinations; v) profiling of positive and popular transit role models within the community; and vi) reinforcement of the desire to preserve a safe and secure travel environment. Annual publication of performance levels will also contribute to a positive image of OC Transpo. Customer satisfaction levels measured in the 2009 Usage and Attitude Survey will, it is expected, reflect a continuing improvement in the general reputation and image of OC Transpo. Simplify navigation In 2008, 29% of infrequent riders believe the transit system is difficult to figure out and use, which represents a barrier to attracting new riders to transit. Wayfinding and navigational signage in Transitway stations will be redesigned, customized and upgraded in 2009, in an effort to: i) simplify use of the system for new users, and encourage more use and more efficient use of the system by all users; and ii) improve the physical environment and commuting experience at stations. Service design changes introduced in 2009 will also simplify the network by reducing the number of schedule and route variations. The 2009 Usage and Attitude survey will measure riders perception of the relative simplicity or complexity of the service. 14 October 2008, Transit Services Branch Page 1-5

12 Develop social media The internet has emerged in the past decade as the communication medium of choice for transit riders; this is clearly reflected in the usage rates at octranspo.com (Figure 1.3.2), a reduced demand for print and call-centre services, and a high satisfaction rating by octranspo.com users, 92 % of whom rated the site as either effective or very effective. Internet-based communication, however, is still in its infancy. Recent improvements in the areas of high-speed access, wireless access, mobile devices, and the proliferation of social media such as RSS feeds, mobile browsing, and alerts and blogs, are an opportunity for OC Transpo to continue to improve the convenience of transit service for all riders. There is an intrinsic relationship between the characteristics of internet social media, and the needs of transit riders, particularly the needs for mobility, customization, and customer input. In 2008, the octranspo.com web site is being migrated to a new web platform, allowing the development and provision of social media services and capabilities in Internet communication channels, traffic levels and customer satisfaction ratings will continue to be measured through October 2008, Transit Services Branch Page 1-6

13 2 M ARKET D EFINITION 2.1 Transit usage Figure 2.1 shows the distribution of travel mode choice across Ottawa in In total, 67% of travellers use a car as their primary travel mode, either as a driver or a passenger, and this segment of the population represents, in broadest terms, the potential market for new transit customers. Many people in this 67% segment use transit occasionally - once a week or less - but do not use transit to commute, so transit is not their primary means of travel. Figure 2.1 Primary means of transportation bike 2% walk 5% public transit 26% car 67% OC Transpo Usage and Attitude Survey, April 2008 Commuting to and from work or school is the main reason people travel within the city regardless of travel mode, and because of its high frequency, commuting choices ultimately influence important transportation commitments and decisions such as investment in a car, or in a second car, or in a transit pass; commuting options also influence geographic choice of residence. Once these major decisions are made by an individual or a family, the ability to influence or effect a change in modal choice is reduced. When an individual s commuting circumstances change - either a new job or new residence - they will typically re-assess transportation options, including choice of travel mode. Introduction and promotion of new transit services - such as new bus routes, stations, or increased service levels - are important opportunities to attract new riders. Other variables such as cost, traffic congestion and concern for the environment also present opportunities for people to reconsider their transportation options. When considering options, it is the perceived convenience of transit, relative to a car, which most people say influences their decision. Convenience can be defined in 14 October 2008, Transit Services Branch Page 2-1

14 many ways, including travel time, speed, necessity of transfer, walking distance, frequency of service and waiting time. After convenience and its related factors, affordability is the most compelling reason for using transit - mentioned by 32% of Ottawa residents. 2.2 Demographic change Ottawa s population is aging. By 2031, people aged 65 or older will make up 20% of the population, compared to just 12% in Figure 2.2 Allocation of population by age group, 2006 to % 13% 15% 16% 19% 20% % 20% 21% 20% 19% 19% % 23% 22% 22% 23% 23% % 22% 22% 21% 20% 19% % 22% 21% 20% 20% 20% % 100% 100% 100% 100% 100% source: City of Ottawa Research and Forecasting Transit is currently over-represented by students and young people, who form a significant part of our customer-base, and is under-represented by seniors, who make up only 10% of the customer-base. Typically, student transit riders have rapidly converted to automobile use after they enter the work force, and as their income increases. Student populations will continue to be a significant captive ridership base in the future, and the challenge of retaining these riders as their commuting habits change, will also continue. Meanwhile, the market segment for whom we provide the highest rate of subsidy (seniors) is expanding, which means that even if transit usage increases proportionally within this segment, revenues will decrease. The conclusion drawn from predictions for demographic change in Ottawa, is that the best opportunity for real growth - that is, growth in per capita ridership and rev- 14 October 2008, Transit Services Branch Page 2-2

15 enue - lies in the middle, with commuters. Starting in 2008 and continuing for the next 10 years and beyond, transit marketing strategies will pursue a larger share of the transportation market aged 20-64, in order to maintain current patterns of ridership and revenue growth. 2.3 Fare payment OC Transpo customers can pay fare using cash, tickets, or period-passes: Figure 2.3 Ridership and reveue by method of fare payment, 2007 Method of payment (people) Ridership (trips) Passenger revenue tickets cash all passes 50% 13% 37% 21% 3% 76% 27% 7% 66% all passes adult student ecopass community pass seniors daypass other passes 22% 31% 13% 2% 5% 1% 2% 26% 23% 14% 1% 2% 1% 0.1% In recent years, ticket usage has increased relative to pass usage. Tickets serve three primary purposes: i) they make individual trip-payments affordable for economically disadvantaged riders, compared to cash ii) they reduce the cost of processing and handling fare revenue, from boarding through to cash deposits. iii) they provide a mechanism and incentive for mid-frequency riders - (between 1 and 8 trips a week) to commit to a certain level of transit use, even though a period-pass may not be worthwhile. Effectively, tickets function as a shortterm period-pass. If a commuter rides the bus 20 days in a month, and pays with tickets, the price in 2008 (80) is almost the same as the price of an adult monthly pass (81). Whereas in 2001, the price of a pass equated to only 17.5 days of ticket travel. 14 October 2008, Transit Services Branch Page 2-3

16 2.4 Off peak market potential Shift workers, service-industry workers, students and seniors travel predominantly during off-peak times, when transit is less convenient due to low frequency of service, and when car travel is more convenient due to reduced traffic congestion. In general, there is more unused capacity in the transit system during off-peak times, schedule-adherence is good, and riders can get a seat. On the other hand, service is less direct for many trips, so more transfers are required, and frequency is low, so riders wait longer for transfers and arrivals. Off-peak commuters can be attracted to transit by offering higher frequency service during off-peak times. The 20% of post-secondary students who do not use transit regularly can also benefit from higher off-peak service levels, for travel to recreational activities and parttime jobs. The convenience of off-peak service influences the overall net value of transit for families with one car, or with secondary school-aged children who may have parttime jobs. Although ridership potential is high amongst seniors, and operating costs for offpeak travel are relatively low, the revenue potential from seniors is also low because of the high level of subsidization offered to these pass holders. 14 October 2008, Transit Services Branch Page 2-4

17 3 PRODUCT D EFINITION The strategy to attract people to transit is always based on increasing convenience, affordability, and comfort, including safety and ease-of-use. Marketing efforts in 2009 will focus on positioning service products to meet these needs, and defining the products in these terms. 3.1 Convenience In 2009, the OC Transpo service plan calls for an increase of 5.0 percent in service hours within the urban transit area, plus an additional 0.7 percent to cover potential service increases outside the UTA in Stittsville, and a one-time operational cost increase related to construction at St. Laurent Station. The total 5.7% increase does not include any service reductions which may be required as a result of low performance on some routes. The increase in hours accompanies the growth of the bus fleet and is intended to both accommodate increasing transit ridership and improve the convenience and reliability of transit service to attract new customers. More than half of the 5.0 percent increase planned for 2009 is allocated to attract new customers or promote increased use of the system by current customers. Most people - frequent, infrequent, and non-transit users alike - define the relative attractiveness of transit versus automobile in terms of convenience. Figure 3.1 Why former transit riders stopped using transit Transit too expensive 1% Changed jobs 8% Other 18% Transit is inconvenient 24% Poor service/reliability 12% Moved 12% Bought or began using a car 25% OC Transpo Usage and Attitude Survey, April October 2008, Transit Services Branch Page 3-1

18 Even when the word convenience is not used, preferences are often expressed in terms of speed, transfer time, waiting time, and walking distance, which are also measures of convenience. Arguably, moved or changed jobs may also have meant that transit became inconvenient as a result of the move. When we try to quantify convenience, we find that almost half of transit users (frequent and infrequent - 45 %) feel that waiting 6 to 10 minutes for a bus is acceptable. This equates to a minute frequency of service, because, on average, passengers would arrive at a boarding location 6-10 minutes, or less, before arrival. 81% of transit users say they would use the bus more often if wait times were reduced to 5 minutes, which equates to a 10 minute frequency. Amongst non-transit users, wait times are identified by 48% of survey respondents as a reason to switch their travel mode to transit. The 2009 transit service plan proposes significant service improvements to increase ridership on major routes at non-rush-hour times and away from the Transitway. Increases are proposed in the midday, evening, and on weekends on services such as Routes 86, 101, 106, 118, so that those routes run at least every 15 minutes at most times. The hours of service on Route 95, the spine of the entire transit system, are proposed to be increased to 24 hours a day, 7 days a week. And earlier service in the morning and later service at night is proposed to and from the airport on Route 97. These changes will encourage increased use of the entire transit system at all times of the week, and will improve service for shift workers, service workers, students, shoppers, seniors, and visitors. Transplan 2009 will also begin to identify opportunities to exchange low-revenue premium services, for a high-frequency, regular fare commuter service which may require a transfer. Where overall travel time and wait times are reduced, a reliable transfer is not a barrier to commuting by transit. 3.2 Capacity and reliability Of the planned 5% increase in 2009 service, more than a quarter is allocated to increase capacity on routes on which ridership is growing, and approximately onesixth is allocated to improve the reliability of service, in response to increasing traffic congestion and travel times on some city streets. The capacity of service will be increased on busy routes to accommodate observed increases in ridership. In the early part of the year, this will mean service increases on services such as Routes 1, 7, 8, 24, 70, 86, 95, 96, 97, and 118. Additional capacity will be provided starting in mid-2009 to the new RCMP headquarters in Barrhaven. 14 October 2008, Transit Services Branch Page 3-2

19 The routes on which service capacity will be increased in September 2009 will be identified from passenger counts to be taken in the fall and winter of New and increased service will be provided from the four new park and ride lots under construction, at Millennium, Chapel Hill, Leitrim, and Riverview. Three of these lots are at locations off the current rapid transit route network, and new routes will be developed through the Transplan 2009 planning and consultation process. Construction at each of the four lots is expected to be complete for the first phase of each of the lots to open in September The Transplan 2009 planning and consultation process will also address possible service changes: i) in Orleans, in response to continuing urban development; ii) in the Westboro and Carlingwood area, to be coordinated with the transportation management implementation plan approved by Council to be conducted starting in 2008; and iii) in other growing areas and other parts of the City where travel needs are changing. Bus travel through the central area, on Albert and Slater streets, is detrimental to service reliability, commuting comfort, and operating cost. Street capacity restrictions in the central area increase pressure to optimize vehicle capacity and cost-effectiveness for all peak-period travellers. Low-performing routes with unused capacity can be replaced with a more reliable, quicker, more frequent, less expensive service which may require a transfer, but will not discourage existing riders from using transit. Transplan 2009 will consult with riders about these concepts. Other initiatives to mitigate travel conditions in the central area include electronic bus arrival signs, improved boarding platforms, and improved streetscapes at waiting areas. In addition to the 5% service increase identified above, the 2009 service plan also includes an allowance for improved service from Stittsville, which will be the subject of consultation this fall, and a one-time amount for additional operating costs required as part of an infrastructure rehabilitation project in 2009, at St. Laurent Station, to be funded from the project budget. Fleet availability will be increased in 2009, providing a greater number of buses from the active fleet during weekday peak-periods, thereby improving service delivery and schedule reliability, and also supporting the 5% service increase without additional buses. 14 October 2008, Transit Services Branch Page 3-3

20 3.3 Affordability After convenience, cost is the biggest consideration for people in their modal choice assessment - and in Ottawa, most people recognize that transit is inexpensive: Figure 3.3 Why transit riders stopped using other modes of travel (percent of respondents; multiple reasons permitted) Transit more convenient Transit less expensive Better for the environement No access to a car Parking not available Transit is faster Parking too expensive Transit serves my area well Transit suits my schedule No other choice Traffic Weather Feel safe on public tansit Too far to walk Punctual & reliable Price of gas Less stress Other OC Transpo Usage and Attitude Survey, April 2008 In July 2008, transit fares were increased by an average of 7.5%, but the demand for service and purchase of passes has not been noticeably affected. The high cost of gasoline and other rising transportation costs have created a market where the reaction to transit price increases of this magnitude, is relatively inelastic. Automobiles are an increasingly expensive luxury for those commuting to and from work. This is especially true if costs other than gasoline are considered such as insurance, parking, maintenance and repairs, and the rising cost of new vehicle financing. In 2008, many large North American car makers announced the discontinuation of car leasing options. This will inhibit many car buyers from obtaining no money down, low interest monthly car payments. The current and increasing cost advantage of transit is an opportunity to adjust price structures and premium service offerings without discouraging existing riders. Also in 2008, Council identified a probable 7.5% fare increase for both 2009 and In 2009, this increase is the basis for forecasted revenues. 14 October 2008, Transit Services Branch Page 3-4

21 3.4 Ease of use Improved transitway wayfinding and mobile web services will be introduced in 2009, to simplify travel. Improved access to information provides riders with the flexibility to travel more frequently, and also provides the ability to use the service more efficiently. This can result in faster travel times, reduced waiting, and ultimately, more independence and control over the whole travel experience. The investment in transitway wayfinding is important mainly to new and infrequent users, and by simplifying their initial experience with the system will help convert those users to regular transit riders. Simplified, customized wayfinding also encourages all riders to confidently use the system for more than routine trips. Mobile transit information services add a measure of convenience for all users, and also facilitate navigation. Automated next stop announcements, alerts, and cell-phone access to automated travel planning services will all be offered in 2009, and will be featured in 2009 marketing campaigns. Service design considerations such as the number of routes operating in one area, variations in schedules by day or by season, variations in routing, and route naming practices, all contribute to the relative simplicity or complexity of the transit service. Although transit demand is not consistent at all times, and service must be adjusted to meet demand, operating efficiencies and refinements also are balanced against the advantage of making service consistent, understandable and predictable. In September 2008, simplified and more direct transit routes were introduced in southeast Ottawa. In 2009, similar design improvements will be developed for the Westboro community. Service levels have typically been adjusted 4 times per year to reflect changes in demand - in January, April, June and September. Even a small change in the service level - as in April - ripples through the network and affects bus schedules on many trips, including all express commuter trips. In 2009, the April service change will be limited to only those few routes which serve colleges and universities. Service levels on other routes will be maintained at their January levels, through until June, when primary and secondary schools are out. This approach will add only a few service hours to the annual budget, but will eliminate one seasonal schedule change for most riders. 14 October 2008, Transit Services Branch Page 3-5

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23 4 PRICING 4.1 Fare level Transit fare media pricing has historically been organized on the basis of: i) rewarding and retaining more frequent and longer term users of transit; ii) recovering 50% of operating costs through the fare box; iii) responding to the needs of individuals who require economic assistance; iv) providing higher-priced premium services which offer reduced travel time or fewer transfers. By the end of 2007, average transit fare per ride was 1.30, and in July 2008 after the introduction of new transit fares, increased to 1.40 per ride. The average fare paid in Ottawa compares favourably to the average fare paid at cities across Canada. Figure Average fare paid at Canadian cities, 2007 Vancouver Toronto Gatineau Winnipeg Hamilton Ottawa 1.30 Calgary Edmonton Montreal source: Canadian Urban Transit Association 2.00 The average operating cost of each ride provided by OC Transpo in 2008 is almost 3.00, and like all transportation costs in Ontario is rising - due mainly to the continuing rise in transit fuel costs, but also due to increasing commute distances, traffic congestion, and labour and fleet costs. The Ontario transportation price index (Figure 4.1.2) is comprised of costs associated with the purchasing, leasing rental and operations of both public and private vehicles. Transportation costs are rising in the transit sector, which increases the pressure on fares, but are also rising in other transportation sectors, which increases the attractiveness of transit. 14 October 2008, Transit Services Branch Page 4-1

24 Figure Change in fares, inflation, and personal transportation costs, 2002 to 2007 cumulative percentage increase 25.0% 20.0% 15.0% 10.0% Average transit fare, Ottawa Consumer price index, Ottawa Personal transportation costs, (CPI) Ontario 5.0% 0.0% To maintain a desirable revenue cost ratio approaching 50%, it is necessary that transit fares also continue to increase. In 2008 Ottawa City Council anticipated that an average 7.5% fare increase would be required in 2008, 2009 and 2010; this requirement is confirmed by the analysis and pricing strategy developed to support the 2009 marketing plan. The 7.5% fare increase in July 2008 did not discourage many people from using transit; transit price-sensitivity in the current marketplace is relatively low, especially within the large commuter segments. If fares are increased by 7.5% in 2009, it is expected that the net ridership increase for the year will be 5.1% greater than in 2008, taking into account both the demand elasticity resulting from the fare increase and the planned additional hours of service. After July 1, 2009, the average fare collected per ride will be 1.51, contributing to an overall 2009 revenue:cost ratio of 49.8 %. Figure shows the new prices for transit passes to be recommended for introduction July 1, The relative distribution of prices across the many categories of passes is designed to generate the highest possible revenue, without discouraging price-sensitive riders. 14 October 2008, Transit Services Branch Page 4-2

25 Figure Pass prices, July 2009 July 1, 2008 July 1, 2009 Percentage increase Adult Regular Pass Adult Express Pass Adult Rural Pass Adult Annual Regular Pass Adult Annual Express Pass % 5.0 % 4.6 % 2.3 % 2.6 % Student Regular Student Express Student Rural Student Regular Semester Student Express Semester Student Annual Regular Student Annual Express % 4.2 % 4.3 % 4.2 % 4.3 % 4.2 % 4.2 % Senior Pass Annual Senior Pass Community Pass % % 0.0 % Ecopass Ecopass Express Ecopass Rural % 7.4 % 7.0 % DayPass 7.25 (on the bus) 6.50 (pre-purchased) % cancelled - In January 2009, ticket prices should be adjusted from 1.00 to Cash fares should not be increased at any point in Figure shows the resulting cash and ticket fares to be paid in each ride category. Figure Ticket and cash prices, January 2009 July 1, 2008 January 1, 2009 Percentage increase O-Train ticket % Adult cash Express cash Rural cash Child cash % 0.00% 0.00% 0.00% Adult ticket Express ticket Rural ticket Child ticket % 15.00% 15.00% 15.00% 14 October 2008, Transit Services Branch Page 4-3

26 4.2 Tickets Since 2001, ticket prices have increased at a lower rate than pass prices, with the result that monthly passes are an increasingly less attractive option compared to tickets. Figure shows how, by 2008, 20 days of ticket use in a month cost about the same as a monthly pass - and for commuters facing an average 21 work days each month, pass purchase and ticket purchase are roughly equivalent. Figure Ticket value in round trips, compared to monthly pass price, jan-jun jul-dec 2009 Regular adult pass price / month Regular ticket fare / trip Equivalent number of round trips jan-jun 2009 jul-dec 2009 To keep pace with an average 7.5% higher price, tickets must be priced at 1.08, which, to simplify sales transactions, would result in a 1.10 purchase price. However, to restore the attractiveness of monthly pass purchase, tickets should increase by more than passes - hence the recommended 1.15 price. In 2008, it is evident that current low ticket prices are eroding pass purchases. This effect is undermining the strategy that converts infrequent and moderate frequency riders, into committed transit users who are willing to purchase a photo ID and monthly pass. When ticket pricing has the effect of drawing down pass purchases, previously committed transit riders move onto a less firm transit footing, and are more likely to reduce their transit use, either through occasional exposure to alternate means of travel, or through consideration of the fact that they are paying for each ride and want to economize, or both. 14 October 2008, Transit Services Branch Page 4-4

27 Figure Fare revenue from tickets, compared to adult regular passes, Annual sales revenue ( millions) Tickets Adult Regular Passes Tickets have no expiry date, so rides not taken in a particular month are equivalent to lost revenue. Passes, however, are fully paid in advance, and like any subscription program reward both the user - by offering more service at no additional cost - and the provider, by securing a minimum level of revenue. Given the current high demand for transit, the competitive price advantage over cars, and the necessity of restoring a preference for transit passes, the recommended ticket price change should occur as soon as possible - on January 1, A January 1st implementation date will also have the effect of attaining a portion of forecasted 2009 revenues prior to the July 1st pass price increase, and thereby minimizing the negative impact on ridership resulting from the July 1st increase. For adult riders, OC Transpo tickets are priced at 67% of the corresponding cash fare; across Canada, on average, this ratio is closer to 78%. The Canadian Urban Transit Association (CUTA) reports that in Winnipeg, for example, tickets are priced at 87% of cash fares; this compares to 84% in Calgary, 82% in Toronto and 73% in Montreal. At 1.15 each, and with no change in cash fares, OC Transpo ticket prices will be 77% of the adult cash fare. At 2.30 per trip, adult ticket prices will be closer to the STO ticket price in Gatineau, which is OC Transpo express ticket fares - at would be 25 cents higher than the express fare charged by STO. This adjustment to OC Transpo ticket pricing provides for better parity in fares between STO and OC Transpo. OC Transpo ticket vendors, paid a 1% commission on ticket sales, will benefit from a slight increase in revenue beginning January 1, 2009, partly compensating for 14 October 2008, Transit Services Branch Page 4-5

28 reduced fare media sales in recent years, lost to increases in demand for EcoPass, annual, community and semester passes. 4.3 Student eligibility In Ottawa, OC Transpo does not limit the age of students entitled to receive discounted transit fares. The STO in Gatineau, on the other hand, limits student eligibility at 21 years of age, as does Winnipeg transit. In Toronto, transit fare discounts are not offered to post-secondary students, so the effective age limit is less than 20 years. Figure shows full time student enrollment by age at the universities of Carleton and Ottawa, and Algonquin College. Figure University and college enrollment by age, Students aged 21 or older Students aged 25 or older Full-time enrollment % of % of in 2007/2008 Number enrollment Number enrollment University of Ottawa 28,929 15,785 55% 6,331 22% Carleton University 18,852 7,464 40% 3,327 18% Algonquin College 13,200 6,586 50% 2,702 21% Total 60,981 29,835 49% 12,360 20% If Ottawa was to cap eligibility for full time student transit fares at 21 years of age, it is estimated transit revenue would increase by approximately one million dollars annually. However, 49% of Ottawa s 60,000 post-secondary students would be affected, and would no longer be eligible for a discount. In order to more appropriately align the eligibility of concession fares for full time students, it is proposed that eligibility in 2009 be capped at 24 years of age, effective with the school year. This action will increase transit fare revenue by approximately 350,000, annually, and by 175,000 in Figure shows that income is low for young people, including students, and the requirement for subsidization is presumably higher. The need for fare concessions is considerably less for people over the age of October 2008, Transit Services Branch Page 4-6

29 Figure Income distribution by age of household maintainer, Ottawa High Income Middle Income Low Income 100% Percentage of Ottawa population 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% under Age of Household Maintainer source: 2001 Census 4.4 Upass For several years, universities and colleges in Ottawa have discussed the introduction of a Universal Transit Pass (UPass) with OC Transpo. The UPass would be mandatory for all full-time post-secondary students, and be paid at the time they pay their tuition. To offer such a program without reducing net transit revenue, in 2008/2009 the monthly pass price would have to be 50 per full time student. Many students in Ottawa reside in Gatineau; any UPass offer must necessarily be developed in conjunction with the STO. Based on market research conducted to date and discussions with STO, this monthly pass price would be acceptable to STO. Figure 2.4 College and university student transit usage in Ottawa Full-time students using transit as primary travel mode to/from campus Full-time students using transit once a week or more for any travel purpose University of Ottawa Carleton University Algonquin College Cité collegiale 58% 81% 60% 84% 52% 73% 39% 66% source: surveys, Ottawa Transit Services Branch 14 October 2008, Transit Services Branch Page 4-7

30 While the monthly price of 50 is much lower than the current regular monthly student pass price of 62.65, student leaders have felt that a mandatory transit pass purchase is not desirable. Currently transit use is very high among Ottawa students attending universities and colleges, as shown in Figure 4.4. The introduction of student semester and annual passes has also provided students with significant discounts - 10% and 12% respectively. If a UPass were to result in increased ridership, additional budget would be required to meet the demand for service. 4.5 Concession fares In recent years, ridership has grown more rapidly within the market segments using discounted and concession fares, than it has in segments paying full fare. Just over 38% of transit rides taken in 2007 were paid at a concession rate, with an average fare paid of less than 1 per ride. This includes seniors, students and community pass users. In total, these riders contributed approximately 25% of 2007 fare revenues. As with tickets, concession fare prices have not increased at the same rate as annual passes (Figure 4.5). Figure 4.5 Cumulative fare increase for concession and discount media, compared to adult regular passes, % Percentage increase over % 16% 12% 8% 4% 0% Adult Regular Pass Regular Ticket Price Student Regular Pass Senior Pass Community Pass Students and community pass holders are the most price-sensitive transit consumers, and 2009 fare increases for these markets are planned at a lower rate than the aver- 14 October 2008, Transit Services Branch Page 4-8

31 age 7.5% increase, to reduce the risk of losing ridership, and to respect the fact that people in these markets have lower income. Concession fares that do not involve transit price discounting are also offered, in the form of free tickets provided by OC Transpo to the City's Employment and Financial Assistance Branch, amounting to 27,000 tickets a month or 324,000 in Seniors The July monthly pass price for seniors will be increased at the same rate as other adult monthly passes. Relative to other market segments, the seniors discount for monthly passes, at 67%, is as great as the Community pass. Seniors relative household incomes are higher than students, and seniors also can take advantage of an additional 12% discount by purchasing an Annual Seniors Pass. In 2007, the Senior s Summer Special was introduced, offering free bus service to seniors on Wednesdays, in July and August. In 2008, this program was expanded to include Wednesdays in June. Reception in both years was very positive, with numerous testimonials about the effectiveness of the program in increasing the mobility of people who are frequently isolated withing the community, and are not recently accustomed to taking transit. In both summer programs, the free service on Wednesdays did not reduce the demand for monthly seniors passes. Numerous other social and recreational programs for seniors also are scheduled on Wednesdays. In 2009, the Marketing Plan calls for an expansion of this program to run yearround, with seniors allowed to ride for free on every Wednesday. This will provide an uninterrupted opportunity to promote and coordinate transit-incentive programs for seniors, and also will facilitate the operation of other seniors-oriented programs throughout the year. If conventional transit is successfully positioned as an intrinsic part of daily life for seniors, the demand for ParaTranspo service will also be reduced. 4.7 Ecopass Ecopass subscribers receive a discount on their monthly pass purchase. In December 2007, a motion by City Council was approved to set the Ecopass discount at 14% on July 1, 2008, 13% on July 1, 2009 and 12% effective July 1, At the same time, the discount on annual passes would increase from 10% in 2008, to 11% in 2009 and 12% in Thus at about the time smartcards become available, all long-term pass subscriptions would have an equivalent discount, and the distinction between Ecopass and annual pass purchase would simply be a preference for method of payment. 14 October 2008, Transit Services Branch Page 4-9

32 The 2009 OC Transpo Marketing Plan includes a price structure which sets the Ecopass discount at 12%, effective July 1, 2009, and similarly applies a 12% discount to all other adult and senior annual passes on July 1, This action will: i) still maintain a reasonable price benefit for these passes; ii) recover the increasing cost of administration brought about by rapid growth in Ecopass; iii) align the Ecopass discount closer to the STO s current discount of 10%; iv) reduce the proportion of the overall 7.5% fare increase to be borne by other riders; v) not significantly reduce the demand for Ecopass subscriptions; vi) assign a greater proportion of increasing Express bus operating costs to Express bus users. At the end of August 2008, there were 23,364 subscribers in the EcoPass program, 65% of whom were federal government employees. The EcoPass program currently provides over 22 million in annual revenue. Two programs are required to manage federal government and private sector EcoPass participants, which, with rapid program expansion in the past two years, adds to administrative costs. 4.8 Daypass Daypass advance-sale vouchers have been available for sale for almost 10 years at OC Transpo authorized vendors or sales offices. OC Transpo buses also provide Daypass transfers, in exchange for cash payment made on the bus or deposit of the Daypass voucher. Vouchers have been priced 75 cents lower than the on bus purchase - which is currently This difference was intended to encourage development of a market for day passes that was similar to tickets, but there has been limited uptake. On Sundays and stat holidays, Daypasses are eligible to be used as a Family Pass. In 2009, the Marketing Plan calls for discontinuation of the advance-sale vouchers in favour of a reduced on-bus price of It is expected that this action will increase revenue as well as lower cost. Also, to support the planned additional Saturday bus service on weekends, it is recommended that a Family Daypass be made available on Saturdays, as well as Sundays and holidays. This new marketing feature will not only encourage transit use on weekends, thereby increasing ridership, but it will benefit retailers and event organizers who will be in a better position to promote transit use. 14 October 2008, Transit Services Branch Page 4-10

33 5 COMMUNICATION S TRATEGY Communication efforts supporting the marketing plan are either: i) part of a targeted marketing campaign that connects a specific, narrow market segment with a specific product offering; or ii) part of a social marketing campaign that influences brand quality, image and reputation. Most campaigns contain elements of both: for example, an event staged at the opening of a new park & ride lot will be targeted towards a specific subset of commuters in the vicinity of the lot. Media coverage of the event, however, might talk about the place of that lot within the City s broader transportation plan, or about the comfort provided by security features at all park & ride lots. In both cases, regular commuters - whether commuting to work or school or other regular daily activity - are the primary and most sought-after market segment. Once committed to transit travel, commuters contribute to sustainable growth in a travel routine which can potentially last for decades. Targeted campaigns Each new station, park & ride lot, rapid transit route, schedule increase or information service planned for 2009 is an opportunity to promote transit to potential new riders, or promote better service to existing riders. Decisions about the relative convenience or inconvenience of transit are partly based on very specific, individualized travel options - for example, specific walking distances and conditions, particular departure and arrival times, travel times compared to a specific car trip, individual parking options, comfort levels on the bus or at a transfer location - and so on. Informed decisions about the convenience of transit require access to this individualized level of information. This requirement tends to run contrary to the massive amounts of routing and schedule information which are published to riders and prospective riders. A successful transit promotional campaign must therefore be targeted in a way that connects a specific, narrow market segment with a specific product offering: for example, employees at the General Hospital campus, connected with high-frequency off-peak service to the new Millennium Park & Ride lot in Orleans. Targeted marketing of transit services is effective because it offers customization to the individual s level - simple points of access to the service which eliminate the complexity and uncertainty of a large system. 14 October 2008, Transit Services Branch Page 5-1