The national rail industry is facing a daunting task to stabilise its position in the transport market and its relevance to stakeholders
How long will it be before stations like Kings Cross see passenger numbers reach pre-pandemic levels?
The last 12 months have been a time of unparalleled change and disruption for the national rail industry in the UK, and generally globally. The industry was already coming to the end of its previous structure as evidenced by the Williams Review, political and public fatigue with the outcomes of the 1990s privatisation, as well as the eventual arrival of a redefined UK industry with HS2. Change was well underway.
We now have to reassess the basic economic assumptions of the railway and its ability to support its operating costs with passenger revenue; how long it may take for demand to return to pre-pandemic levels – if it ever does; how basic drivers of demand such as commuting to central cities, shopping and large events may or may not return; as well as an increased operating cost base.
Some other global markets have seen a strong rebound in rail travel. However, particularly in East Asia, the effects of the pandemic have been contained to a more restricted period of time. It does remain unclear, particularly in the UK, when “normal” will return and what this will look like. Much of the UK national rail industry is influenced by the key radial routes to and from the main London terminals. Travel to these hubs represented 60% of trip arrivals in 2019.
As a positive note, in the UK, as well as in Europe and the wider world, we have still seen much of the pre-planned investment in heavy rail continue during this crisis
As a positive note, in the UK, as well as in Europe and the wider world, we have still seen much of the pre-planned investment in heavy rail continue during this crisis. This includes high speed schemes in Spain and Italy, new rolling stock, and of course HS2. Investment has also continued in terms of crucial maintenance and renewals.
Furthermore, the long term case for heavy rail remains strong. This is particularly regarding the needs of sustainability in terms of mobility and particularly climate change. The industry is continuing to actively survey its customer base and plan for the reopening of the economy over the spring of 2021 and to understand, within the confines of government regulations, how it can stimulate its market and bring back many of its customers. It is assumed though, that some elements of social distancing and wearing of masks will continue for some period of time and into 2022, at least.
However, the previous business model of operating the industry is now defunct. Previous franchise agreements with the DfT are wholly unsustainable and based on now wildly invalid assumptions about typical demand growth, cost control, running more services and investment supported by revenue projections from ticket sales. In addition, costs have now significantly increased due to the operational needs to meet sanitation and crowd limitation measures at stations.
So, what does a post pandemic UK national rail system look like?
The UK rail industry had been built – and certainly investment focussed for the last 20 years – on ever more capacity and reduced crowding for the key peak movements into major centres. This had led to longer trains, higher frequencies, redesigned interiors to offer more capacity and redesigned stations to move ever more crowds. Now, post pandemic, what is the peak?
Demand will be quite different than before. All indications such as office space lettings, central area retail and leisure permanent closures, the need to rebuild much of the entertainment and events industries, limitations in the visitor industry and particularly international visitors as well as changes in how people intend to socialise with friends, families and colleagues all indicate a new demand paradigm for rail travel.
Almost every aspect of the demand picture has been altered. Consider any of your personal journey purposes that used the rail system and consider the impact of the previous 13 months. 2019 will not return!
Work has changed, shopping has changed, education has changed, being social with friends has changed, entertainment has changed, and going on holiday has changed. Almost every aspect of the demand picture has been altered. Consider any of your personal journey purposes that used the rail system and consider the impact of the previous 13 months. 2019 will not return!
So, as a previously frequent user of trains and an industry commentator what is the future?
Demand will certainly be lower, but more consistent throughout the day and for many more varied purposes. The off-peak traveller is a much more complex person than the peak commuter and has more subtle needs and issues as well as temporal, modal and now technological options.
Hygiene will be an overwhelming concern. Many previous regular rail users have now developed a deep concern about the hygiene of using this mode. This will be unfair to the operators as no one can see the Covid virus with their own eyes. But, the apparent cleanliness of trains, stations, and the overall rail experience will be paramount and perpetually examined by customers, stakeholders and the media. This will also be impacted by the perception of the cleanliness of other passengers! The late evening train that hasn’t been litter-picked and is put into service after a busy run will be a troubling experience for many passengers and may end the use of any train service or any travel at all into city centres by many.
Ticket revenue will be more varied and people will demand more flexible travel options. Who would buy a long term season ticket now when some form of lockdown could still return at any time?
The industry will remain in a fragile financial state for years to come and certainly unable to financially plan based on growing and predictable revenues
The industry will remain in a fragile financial state for years to come and certainly unable to financially plan based on growing and predictable revenues. The pandemic has shown how the industry’s financial models can be upended by the unpredicted. It has also exposed the basic need for endlessly increasing travel as false. This is also the case for many other industries including retail and entertainment.
It will be hard to attract businesses that are willing to take a long term view of the finances of rail and bid for the traditional contacts. The pool of potential operators will also likely shrink. That said, by reducing the risk in the contracting process, the DfT may be able to attract new businesses to operate the system under new forms of contacts.
Along with the reduction in air travel, which airlines and airports are now facing, train demand to airports will have been impacted, reducing this lucrative and key income source for railways.
Increased government financial support will be required in the long term to maintain anything like traditional service levels, let alone the enhanced service levels that we know can attract substantial numbers of customers from private car travel and stimulate discretionary demand.
How will the operators deal with the passenger reaction to inevitable train crowding? Even with the best planning, incidents and disruptions will occur and trains will become potentially very crowded at times. Will this cause panic in many passengers?
Will they board these crowded trains and will they even attempt to use the rail system again after such an experience? What will and should be the operator response?
However, the reduced demand in the short term should allow the ability to offer a more stable and reliable service and form a basis for operators to begin to re-engage with their previous customers in a more controlled operational environment. This is an opportunity!
The national rail industry is facing a daunting challenge in stabilising its position in the transport market, its relevance to stakeholders and the funding that they provide, and assisting in the delivery of a sustainable mobility transport system for all of us. There are lots of challenges, but not all is bleak. The government in the UK and across Europe seem to be maintaining their faith in heavy rail, so far, in the recovery from the pandemic.
The next few years will be extremely challenging. As could be said of retail in general, 2020 has seen a decade of transition to new business models occur in 12 months!
ABOUT THE AUTHOR: Giles K Bailey is a Director at Stratageeb, a London based consultancy assisting businesses think about their strategic vision and innovation. Previously, he had spent nine years as Head of Marketing Strategy at Transport for London.
This article appears alongside further coverage in the latest issue of Passenger Transport.
One year has seen a decade of transition
by Passenger Transport on May 13, 2021 • 12:27 pm No CommentsThe national rail industry is facing a daunting task to stabilise its position in the transport market and its relevance to stakeholders
How long will it be before stations like Kings Cross see passenger numbers reach pre-pandemic levels?
The last 12 months have been a time of unparalleled change and disruption for the national rail industry in the UK, and generally globally. The industry was already coming to the end of its previous structure as evidenced by the Williams Review, political and public fatigue with the outcomes of the 1990s privatisation, as well as the eventual arrival of a redefined UK industry with HS2. Change was well underway.
We now have to reassess the basic economic assumptions of the railway and its ability to support its operating costs with passenger revenue; how long it may take for demand to return to pre-pandemic levels – if it ever does; how basic drivers of demand such as commuting to central cities, shopping and large events may or may not return; as well as an increased operating cost base.
Some other global markets have seen a strong rebound in rail travel. However, particularly in East Asia, the effects of the pandemic have been contained to a more restricted period of time. It does remain unclear, particularly in the UK, when “normal” will return and what this will look like. Much of the UK national rail industry is influenced by the key radial routes to and from the main London terminals. Travel to these hubs represented 60% of trip arrivals in 2019.
As a positive note, in the UK, as well as in Europe and the wider world, we have still seen much of the pre-planned investment in heavy rail continue during this crisis. This includes high speed schemes in Spain and Italy, new rolling stock, and of course HS2. Investment has also continued in terms of crucial maintenance and renewals.
Furthermore, the long term case for heavy rail remains strong. This is particularly regarding the needs of sustainability in terms of mobility and particularly climate change. The industry is continuing to actively survey its customer base and plan for the reopening of the economy over the spring of 2021 and to understand, within the confines of government regulations, how it can stimulate its market and bring back many of its customers. It is assumed though, that some elements of social distancing and wearing of masks will continue for some period of time and into 2022, at least.
However, the previous business model of operating the industry is now defunct. Previous franchise agreements with the DfT are wholly unsustainable and based on now wildly invalid assumptions about typical demand growth, cost control, running more services and investment supported by revenue projections from ticket sales. In addition, costs have now significantly increased due to the operational needs to meet sanitation and crowd limitation measures at stations.
So, what does a post pandemic UK national rail system look like?
The UK rail industry had been built – and certainly investment focussed for the last 20 years – on ever more capacity and reduced crowding for the key peak movements into major centres. This had led to longer trains, higher frequencies, redesigned interiors to offer more capacity and redesigned stations to move ever more crowds. Now, post pandemic, what is the peak?
Demand will be quite different than before. All indications such as office space lettings, central area retail and leisure permanent closures, the need to rebuild much of the entertainment and events industries, limitations in the visitor industry and particularly international visitors as well as changes in how people intend to socialise with friends, families and colleagues all indicate a new demand paradigm for rail travel.
Work has changed, shopping has changed, education has changed, being social with friends has changed, entertainment has changed, and going on holiday has changed. Almost every aspect of the demand picture has been altered. Consider any of your personal journey purposes that used the rail system and consider the impact of the previous 13 months. 2019 will not return!
So, as a previously frequent user of trains and an industry commentator what is the future?
Demand will certainly be lower, but more consistent throughout the day and for many more varied purposes. The off-peak traveller is a much more complex person than the peak commuter and has more subtle needs and issues as well as temporal, modal and now technological options.
Hygiene will be an overwhelming concern. Many previous regular rail users have now developed a deep concern about the hygiene of using this mode. This will be unfair to the operators as no one can see the Covid virus with their own eyes. But, the apparent cleanliness of trains, stations, and the overall rail experience will be paramount and perpetually examined by customers, stakeholders and the media. This will also be impacted by the perception of the cleanliness of other passengers! The late evening train that hasn’t been litter-picked and is put into service after a busy run will be a troubling experience for many passengers and may end the use of any train service or any travel at all into city centres by many.
Ticket revenue will be more varied and people will demand more flexible travel options. Who would buy a long term season ticket now when some form of lockdown could still return at any time?
The industry will remain in a fragile financial state for years to come and certainly unable to financially plan based on growing and predictable revenues. The pandemic has shown how the industry’s financial models can be upended by the unpredicted. It has also exposed the basic need for endlessly increasing travel as false. This is also the case for many other industries including retail and entertainment.
It will be hard to attract businesses that are willing to take a long term view of the finances of rail and bid for the traditional contacts. The pool of potential operators will also likely shrink. That said, by reducing the risk in the contracting process, the DfT may be able to attract new businesses to operate the system under new forms of contacts.
Along with the reduction in air travel, which airlines and airports are now facing, train demand to airports will have been impacted, reducing this lucrative and key income source for railways.
Increased government financial support will be required in the long term to maintain anything like traditional service levels, let alone the enhanced service levels that we know can attract substantial numbers of customers from private car travel and stimulate discretionary demand.
How will the operators deal with the passenger reaction to inevitable train crowding? Even with the best planning, incidents and disruptions will occur and trains will become potentially very crowded at times. Will this cause panic in many passengers?
Will they board these crowded trains and will they even attempt to use the rail system again after such an experience? What will and should be the operator response?
However, the reduced demand in the short term should allow the ability to offer a more stable and reliable service and form a basis for operators to begin to re-engage with their previous customers in a more controlled operational environment. This is an opportunity!
The national rail industry is facing a daunting challenge in stabilising its position in the transport market, its relevance to stakeholders and the funding that they provide, and assisting in the delivery of a sustainable mobility transport system for all of us. There are lots of challenges, but not all is bleak. The government in the UK and across Europe seem to be maintaining their faith in heavy rail, so far, in the recovery from the pandemic.
The next few years will be extremely challenging. As could be said of retail in general, 2020 has seen a decade of transition to new business models occur in 12 months!
ABOUT THE AUTHOR: Giles K Bailey is a Director at Stratageeb, a London based consultancy assisting businesses think about their strategic vision and innovation. Previously, he had spent nine years as Head of Marketing Strategy at Transport for London.
This article appears alongside further coverage in the latest issue of Passenger Transport.
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