Helping Transit Agencies Calculate the Return on Investment of Mobile Ticketing
The transit industry is facing what has been cited as a ridership crisis. In markets across North America, ridership is declining (APTA) as choice riders are turning to alternative forms of mobility to get from point A to B. Amidst the rapid pace of change in the mobility space and new entrants, how can transit remain relevant?
One of the first pragmatic steps is to leverage mobile technology to improve the rider experience. By giving riders the mobile tools they expect to make taking public transit more seamless, ridership can stabilize and/or increase. Due to the cyclical nature of ridership, fare revenue and service, increasing ridership allows for stronger cost justifications for service level operational improvements.
“Ridership declines, and then fare revenue declines, and then you have to cut service which means ridership declines more. So folks get nervous about the cyclical nature of the decline because of lost fare revenue. But ridership declines also undermine the public will to invest additional subsidy dollars and service as well. It’s very hard to go to your government and say ‘My ridership is down 10 percent, and I need more money to subsidize 10 percent less riders.”
Steven Polzin, Program Director for Mobility Policy Research
University of South Florida’s Center for Urban Transportation Research
Every taxpayer dollar that is spent to improve the rider experience is scrutinized, and must be cost justified, making innovation challenging. Building a model to effectively calculate a positive return can also be challenging.
However, with the existence of public data such as unlinked passenger trips, total revenue hours, and fare revenues earned; we’ve worked to develop a tool to comprehensively analyze the return on investment for solutions in the public transportation space whether that’s focused on time or cost savings.
Mobile Ticketing as the Baseline for Advancing Transit Operations
The most immediate impact of mobile ticketing — from an expense standpoint — is the decrease in cash handling burden. But, upon further investigation, decreased cash handling burden is not the only savings an agency would experience with mobile ticketing.
The benefit of mobile ticketing can be felt through improved customer experience, decreased reporting time, reduced dwell time, and increased data collection. Of these other measures, dwell time is the most readily available and objective metric to analyze. Combining the dwell time savings and cash handling burden savings would allow transit agencies to have a solid idea of the positive impact of a solution like mobile ticketing.
However, if reducing dwell time is a key factor, one question still remains: how much dwell time does a transit agency actually save using a mobile ticketing solution? We took it upon ourselves to figure this out by conducting our own research of various formats of fares for boarding transit.
Time Savings Research
A recent article by Metro Magazine, emphasizes the negative impact of poor on-time performance (“OTP”), “otherwise known as schedule adherence”. Consequences of poor OTP manifest in a variety of ways, including: negative customer perception of transit, decreased revenue miles per hour, and unpredictability of service. However, one way to improve OTP is through decreasing dwell time.
According to Jordan Elpern-Waxman, founder of Olive Branch Ventures and mentor at URBAN-X, dwell time “is the amount of time that a vehicle spends at stops or stations, as opposed to en route between them”. As such, dwell time directly affects on-time performance of transit and therefore the rider perception and predictability of service.
Through research, we concluded that visual validation is the quickest way to reduce dwell time,substantially faster than cash collection. In addition, we identified the dollar value of time for a transit agency, allowing us to understand the financial impact of decreased dwell time for a transit agency.
Pulling it all Together
Once we were able to determine the dollar value of dwell time savings, we were then able to create a more comprehensive calculation of ROI of mobile ticketing.
It is important to note that this measure isn’t perfect. There are limitations to the true meaning of savings. While projected savings are the theoretical savings, given agencies operating expenses and processing savings, this is not a perfect measure of what exactly is saved. This is due to the need to leverage new capacity from additional time savings and redistribution of labor for decreased cash handling that is offset by mobile ticketing.
Rather, this measure will give leadership in transit agencies the tool to compare apples to apples of various proposed investments. Should your transit agency open a new bus line? Should your agency explore mobile ticketing? All of these have a dollar value associated with them, but that is sometimes hard to measure.
Try it for yourself
Often with these concepts, it is difficult to visualize and understand the concept. We’ve made it easy for you to see for yourself. Visit our ROI calculator here. All you will need to do is provide your transit agency, the average cost for processing cash, and your anticipated adoption of mobile ticketing. The calculator uses the above methodology to find your return on investment and break even point for mobile ticketing.
Works Cited:
“Americans Took 10.1 Billion Trips on Public Transportation in 2017.” American Public Transportation Association, 4 Feb. 2019, www.apta.com/news-publications/press-releases/releases/americans-took-101-billion-trips-on-public-transportation-in-2017/.
Elpern-Waxman, Jordan. “Transportation Terms: Dwell Time.” Jordan Writes about Cities, Medium.com, 29 Jan. 2017, http://bit.ly/2O2Dd70
Gaudet, Arthur N. “Improving Transit on-Time Performance.” Management & Operations, Metro Magazine, 19 Nov. 2019, http://bit.ly/337EON0
