Creating additional commercial revenues a bouquet of possibilities

Transcription

1 Creating additional commercial revenues a bouquet of possibilities German examples Arne Beck, BSL Management Consultants Leipzig, 17th April 2008

2 Agenda Organisation and funding of public transport in Germany Generating additional commercial revenues German examples Summary 2

3 The funding structure of local and regional public transport services in Germany is rather complex Scheme of funding structure in Germany (main aspects) Tax exemptions (especially tax on profits) Direct funding of rail infrastructure (BSchwAG, only for infrastructure of the DB AG) Local Authority Traffic Financing Act (LATFA, primarily funding of long term investments) Subsidies to transport associations PT associations (sometimes acting as PT Authorities) State LAFTA for infrastructure/vehicles Subsidies for regional rail transport Transport companies Passenger revenues Federal states (Länder) Regional funding (primarily funding of services) LATFA Compensatory payments (scholars, disabled passengers) Subsidies for public transport Local authorities (e.g. municipalities) Infrastructure (municipal part of LATFA-funding) public service contracts (funding of local services) and/or Simple deficit compensation Passengers 3

4 Currently more than 50 percent of public transport in Germany is funded by taxes Structure of revenues in German public transport [%] Passenger revenues 45% 8% Investment grants 12% 35% Compensation payment Loss assumption Facts Total funding of public transport: 14 to 16 Billion per annum Proportion of public funding: more then 50% (but will decrease due to reduced local budgets) Proportion of funding by passenger revenues: less than 50% (has to increase due to declining public compensation) Source: BSL-Analysis, VDV-Statistics, VDV-Annual Reports 4

5 Agenda Organisation and funding of public transport in Germany Generating additional commercial revenues Current share additional commercial revenues Overview of opportunities German examples Summary 5

6 The proportion of additional commercial revenues in German public transport companies is still low Revenue structure of some of the major German transport companies 1) 2% 1% 44% 45% 8% TC1 4% 6% 33% 50% 7% TC2 4% 9% 24% 57% 6% TC3 1) Companies with more than 450 vehicles (bus and rail) and more than 500 total line km, operating in cities with at least inhabitants 2) Revenues on selling assets, revenues from non PT subsidiaries, other revenues, etc. 3) Penalties on fare dodgers, damage compensations, etc. Alternative sources of non commercial revenues 2) Supplementary commercial revenues Budgetary resources by state and region Passenger revenues Others 3) 6

7 Agenda Organisation and funding of public transport in Germany Generating additional commercial revenues Current share additional commercial revenues Overview of opportunities German examples Summary 7

8 There are four common ways for public transport companies to generate additional commercial revenues Sources of additional commercial revenue Examples Additional commercial revenues Advertising Real Estate B2B-Business B2C-Business Stops Stations Residential real estate Service Stores Garage Driving school Touristic tours Vacation packages Vehicles (inside) Vehicles (outside) Industrial real estate (stops, garages, work yards) Consulting Event Trains Leasing trains for private events 8

9 Agenda Organisation and funding of public transport in Germany Generating additional commercial revenues German examples In the transport sector In other industries Summary 9

10 Advertising in stations or vehicles is a popular way to yield additional profit without further investments Advertising Options Cooperation with outdoor advertising companies such as JCDecaux, Ströer or DSM (Deutsche Städte Medien). These companies are in charge of Marketing the stations Marketing the vehicles In some cases building and operation of the stations 1) Independent marketing of stations and vehicles (i.e. Hamburger Hochbahn or üstra AG) 1) No additional revenues but savings due to outsourcing repair and maintains costs 10

11 Real estate management is a way to generate property income - especially for metro companies Real Estate Comments Revenues out of renting properties at stations to Kiosks Small bistros Shops etc. In some big cities: stations as shopping centre (e.g. Leipzig central station) More over, the number of company customer centers can be reduced through over-the-counter ticket sales at these shops 11

12 B2B- concepts offer potential for additional commercial revenues by improving capacity utilisation B2B-Business: Capacity utilisation Comments Improving capacity utilisation by selling services to other companies like Repair and maintenance of vehicles Washing of vehicles Driver training Creating subsidiaries to enter the consulting market (examples: VAG Nürnberg, Hamburger Hochbahn, BVG provided advice to the city of Athens for the Olympic Games) But: Risk of neglecting restructuring potential 12

13 B2B- concepts offer potential for additional commercial revenues even without further investments B2B-Business: Hairstyling in Hamburg Comments Free journey for the Dove Style Train" Dove hairstyling in the first. Dove Style Train on the way to work. It s Easy! Take the Dove Style Train and become your requested Styling for the day. In this way interested customers lern to know the new hairstyling collection of Dove Cross-selling of services to other companies by using public transport as a marketing platform: Dove Style Train, Metro Hamburger Hochbahn Leasing of train services The train is working each morning from 8:00 a.m. to 10:00 a.m. in Hamburg Source:

14 B2B- concepts offer potential for additional commercial revenues even without further investments B2B-Business: Letter boxes in Bremen Comments Next stop: CITIPOST Up from now, we have a new service for you: In every tram you can find the new blue letter boxes of the private CITIPOST: Buy the stamps of the CITIPOST - you can get them in almost every shop, which offer BSAG (VBN) tickets. Put the stamp on your letter Write the adress of the receiver on the envelope Go into the tram; buy a tram ticket (VBN ticket) Put the letter into the blue letter box (CITIBox). Almost every letter, which is putten into the box until h, will reach the receiver the next day. Cross-selling of services to other companies by using public transport as an additional platform for services: Installation of post boxes in tram vehicles (BSAG in Bremen) for a private post company Additional service for passengers, paid by private post company, with a positive image effect for BSAG Source:

15 Entering the tourist market offers a wide variety of sources to generate additional revenues B2C-Business Comments Using inhouse know-how to enter the tourist market (example: RailAway CH) Cross-selling of new services to customers Flirt/ DatingTrains (DB Regio) Leasing Trams/trains for private events (BVG Berlin, LVB Leipzig) Offering usual public transport service, passing points of interest, to tourists (double-deck bus line 100/200, BVG) Selling special trips to tourists such as: Panorama train (S-Bahn Berlin) Cabrio Tube (BVG) Guided city tours (BVG, Berlin) Party train (BVG) EbbelweiExpress (VGF, Frankfurt) Historic train tours (HHA, Hamburg) 15

16 Potential risks must be considered when evaluating opportunities of generating additional commercial value Chances and Risks Chances Risks Potential image improvement when taking professional approach (e.g. cooperation) Generating additional commercial revenue Potential image damage in case of unprofessional implementation (e.g. advertising) Potential image damage through unprofessional franchise partners (e.g. service stores) Risk of neglecting restructuring potential (e.g. offering B2B services) 16

17 Agenda Organisation and funding of public transport in Germany Generating additional commercial revenues German examples In the transport sector In other industries Summary 17

18 Airports are forced to increase their non-aviation-revenues Airports: Importance of non-aviation revenues Comments/facts Worldwide trend towards a rising share of nonaviation revenues due to decreasing revenues from aircraft landing and take-off charges Wide variety of non-aviation facilities and services: Retail sales Catering Parking Car rental Services Munich/ Frankfurt: increase of non-aviation revenues up to more than 50 percent of total profit Source: 18

19 Petrol stations have been transformed into convenience stores or even place-to-stay restaurants Petrol stations: Importance of retailing Comments/facts Petrol dealers currently get a 6 to 10 euro cent sales margin per litre of petrol/ diesel The majority of EU gas stations depends on their retailing revenues, gradually enlarging their convenience stores, revenue shares: Retailing: 84 percent On-premise & food services: 4 percent Gasoline: 6 percent Services: 6 percent Aral/BP currently operates 1,240 "Petit Bistro" and 22 Burger King restaurants and plans further investments of EUR 220 m in Germany Source: 19

20 Not just concentrating on coffee retailing tchibo has become one of the most successful retailers worldwide Tchibo: Expanding the retail business Comments/facts Largest purveyor (by value) of roasted coffee in several European countries, including Germany, Austria, Poland, the Czech Republic and Hungary Exploiting the close contact to the customer the coffee company has grown into many more sectors than just traditional coffee retailing Tchibo expanded to Poland in 1992, an instant coffee packaging plant was opened in Russia in 2004 It's coffee and retail business reached EUR 4 billion in revenues in 2005, making Tchibo one of the most successful retailers worldwide 20

21 It is rather difficult to transfer the experiences from other industries to the transport sector Transferability to the transport sector Proportion of additional commercial revenue Transferability to the transport sector Problems of Profitability Proportion of additional commercial revenue in the transport sector > 50% > 80% > 40% Advertising in stations Frequency Length of stay Service Stores Opening hours Availability Rail A Way Convenience Today: 2%-4% Perspectively: 5%-10% 21

22 Agenda Organisation and funding of public transport in Germany Generating additional commercial revenues German examples Summary 22

23 Despite the allure of additional commercial revenues the importance of passenger revenues should be in focus Conclusion The proportion of additional commercial revenues in German public transport companies is is still very low Looking at examples and success stories in and around the transport sector a lot of chances to generate additional revenue are feasible The main risks in trying to increase these revenues are image damages due to unprofessional implementation a tendency to neglect restructuring potential Regarding the existing risks TCs should not enter new sectors on their own Taking into account the currently low share of additional commercial revenues sinking revenues from public funding TCs should not forget to concentrate trying to enhance their passenger revenues 23

24 Despite the allure of additional commercial revenues the importance of passenger revenues should be in focus Importance of passenger revenues additional commercial revenue in [ ] Passenger revenue in [ ] Total revenues in [ ] Costs Level of cost coverage TC TC 1 5 Mio. 50 Mio. 55 Mio. 50% TC TC 2 10 Mio. 70 Mio. 80 Mio. 110 Mio. 110 Mio. 73% Delta Delta (rel.) (rel.) +100% +40% Delta Delta (absl.) (absl.) +5 Mio. +20 Mio. Effect Effect on on cost cost coverage coverage +4,5% +18,2% 24

25 Thank you for your interest! 25

26 Arne Beck Project Manager BSL Management Consultants Berlin GmbH Viktoria-Luise-Platz 7 D Berlin T +49 (0) F +49 (0) berlin@bsl-consulting.de 26

27 BSL Management Consultants is an international consultancy specialising in the public transport and rail sector Established 1991 in Hamburg, Germany Around 60 employees; consultants are qualified in business & economics, engineering, science, transport & urban planning and IT Offices in Hamburg, Berlin, London and Sydney Experience from more than 600 successfully completed projects around the world Management Consultancy of the Lloyd's Register Group Transport suppliers, manufacturers & financial institutions Public transport (Heavy) Railways Utilities/Logistics Local authorities and governmental institutions 27

28 BSL's portfolio is well geared towards our clients challenges Strategic consultancy Organisational and financial strategies Strategic Asset Management Infrastructure management Workshop optimisation and fleet policy Strategic Risk Management/ Enterprise Risk Management Marketing and sales strategies Revenue management Quality management Mergers & acquisitions Market research Market entry strategies Benchmarking and business analysis Cost reduction strategies/ improving competitiveness Optimisation of all operational functions Overhead analysis and optimisation Sustainability management Organisational development Human Resource management Management systems and tools Change management 28

29 BSL has carried out projects all around the world, with strong delivery record in Germany and continental Europe Public Transport Hamburg Berlin Stuttgart Frankfurt Munich Düsseldorf Leipzig Dresden Saarbrücken Cologne Hanover... Rail Deutsche Bahn AG HLB AKN nordbahn metronom... Industry Siemens Daimler HSBC RailOne Vossloh... Public Transport Vienna, Austria Barcelona, Spain Brussels, Belgium Graz, Austria Athens, Greece Bratislava, Slovakia Budapest, Hungary Geneva, Switzerland Linz, Austria Luxembourg Lyon, France London, UK... Rail SNCF, France RENFE, Spain Network Rail, UK SNCB, Belgium FS, Italy JBV, Norway NS Reizigers, NL BDK, Denmark SBB, Switzerland ProRail, NL ÖBB, Austria... Public Transport Bangkok, Thailand Beijing, PR China Hong Kong Jakarta, Indonesia Ahmedabad, India Ankara, Turkey Bursa, Turkey Jerusalem, Israel Shanghai, PR China Tehran, Iran New York, USA Sydney, Australia Toronto, Canada... Rail Amtrak, USA JR, Japan RailCorp, Australia PT Kereta API, Indonesia Jinan Railway Administration, PR China MERVAL, Chile CP, Canada... 29

30 In the field of revenue management we offer our clients a broad range of services Competence center revenue management: Key aspects of activity Strategy Revenue audit for the riskand capability-orientated evaluation of revenues Development of marketing strategies Marketing mix Management information system Advancement and design of fare systems Design of customer relationship management (CRM) Evaluation of traffic supply and strategic planning Determination of the mix of communication channels Design and implementation of management information systems Revenue and demand modelling for franchise bids Reorganisation of the distribution system (mix of sales channels) Development of action plans for increasing the sales channels productivity Elaboration of concepts for ticket inspection Development and implementation of a market- and demandoriented quality management system 30

31 The competence center public transport authorities and financing offers consulting services at several levels Competence center public transport authorities: Key aspects of activity Political level Regie Operators 4 City 2 Transport associations 3 2 TC Transport companies Reorganisation Service scoping Elaboration of contractual relations and design of cash flows Development and implementation of funding instruments Conception, coordination, audit, controlling of transport performance Monitoring of commercial performance Sizing/rating organisations Cross-comparison Marketing Contract strategies 31