DEMAND FOR TRANSPORT SERVICES. dr Marcin Wolek Sopot,

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1 DEMAND FOR TRANSPORT SERVICES dr Marcin Wolek Sopot,

2 Demand for transport services Transport as a derived demand. Typology of demand for transport services. Forecasting of transport demand.

3 Demand: from general theory to transport: categories of demand Induced demand (i.e. the addition of transport infrastructures results in traffic increases due to higher levels of accessibility, introduction of high speed trains results in higher number of new passengers who have not travelled before by any mode of transport);

4 Transport as a derived demand demand for transport is usually derived from some other function (i.e. production, tourism, leisure, etc ); transport itself is not necessary unless required ; Scale and structure of demand for transport is a result of primary activity (i.e. strong bulk market in Polish rail freight comes from demand for coal by majority of powerplants); It might be applied to passenger and freight transport.

5 Transport as a derived demand Transport is a service which: Cannot be stored; Cannot be produced for stock; There is simultaneity of production and consumption; is bidirectional activity; Direct derived demand: i.e. work related activities commuters it is virtually impossible to move commodities instantly from where they are produced to where they are consumed Indirect derived demand: i.e. warehousing as an element of logistic chain

6 Factors behind freight transport demand Source: Jean-Paul Rodrigue: Challenging the Derived Transport Demand Thesis: Issues in Freight Distribution. Environment and Planning A 2006, Vol. 38, No. 8, pp and next

7 From selection of activity to trip in passenger transport SOURCE: oprac. na podst. Transport Geographies. Mobilities, Flows and Spaces. Ed. By R. Knowles, J. Shaw and I. Docherty. Blackwell Publishing, Oxford 2008, s. 180

8 Characteristic features of transport demand unevenness in demand for transport in time and space; different scale of transport needs; need for complex service. Daily demand for one of bus lines in Warsaw in The blue line means an average level of demand.

9 Factors determining demand Physical characteristics (freight transport); Price (the lower the price the more people are likely to demand the transport service offered); Relative prices charged by different modes of different operators; Customer s income; Speed of service; Quality of service;

10 Elasticity in transport demand ELASTICITY EFFECT EXAMPLE own price cross price income service THIS IS THE RESPONSIVENESS OF CONSUMERS TO CHANGES IN THE TRANSPORT OPERATOR S OWN PRICE A MEASURE OF THE EFFECT OF A CHANGE IN THE FARES OF ONE OPERATOR ON THE DEMAND FOR THE SERVICES OF ANOTHER (INTRA AND INTERMODAL) EFFECT ON DEMAND BY AN INCREASE OR DECREASE IN DISPOSABLE INCOME OF CUSTOMERS REACTION TO CHANGE OF QUALITY FEATURES OF SERVICE OFFERED (FREQUENCY, ADDITIONAL SERVICES) Operator wanting to increase market share by price reduction New operator on the market with lower price level (mainly Low Cost Carriers) Airline business class. Higher salary higher demand Operator defending its market against newcomer with lower price

11 Price elasticity Ep = proportionate change in quantity demanded / proportionate change in price Depends also on: Short run (relatively low -0,1 to -0,4) / long run; Q1/ Q1 E pd P / P Cross (price) elasticity: Percentage change in quantity demanded of our service/ percentage change in price of a competitive service

12 Different values for different types of travellers Tourists: Fare increase: 6 EUR to 8 EUR Passengers fall: 8000 to 4000 per day What is Ep? Is it reasonable to raise the price? Commuters: Fare increase: 6 EUR to 8 EUR Passengers fall: 8000 to 7000 per day What is Ep? Is it reasonable to raise the price?

13 Quality of service and demand Journey time; Interchange (ease of, time needed); Frequency; Access to / from final destinations; Rolling stock quality; Station facilities (special attention paid to personal safety); Reliability; Overcrowding availability of seats; Seat reservation; Cleanliness; Passenger security; Information; Staff attributes.

14 Elasticity of demand practical applications Higher elasticity of demand for leisure or non-commuting travels higher optional nature; Low elasticity of demand large share of obligatory purposes of travel. Category Fare elasticity in InterCity UK Fare elasticity in Regional services UK Non-commuting -0,8-1,0 Commuting -0,3-0,5 Business -0,4 n/a Leisure -1,1-1,1 Source: S. Cole: Applied Transport Economics. 3rd Edition. Kogan Page, London 2005, p. 63

15 GDP and income elasticity V volume g elasticity to GDP t+1 period used for comparison to year t n number of years Źródło: M. Wardman: Demand for Rail Travel and the Effects of External Factors. Transportation Research. Part E: Logistics and Transportation Review 2006 nr 42(3), s

16 Basic measures for demand in transport Number of travels (passengers); Number of tonnes; Number of passengerkilometers; Number of tonnekilometers; Pass-kms / passengers = average lenght of trip

17 Railway freight market in EU main countries by tonne-kilometers in 2008 Others 31,80% Germany 26,1% Sweden 5,20% Italy 5,40% UK 5,40% France 9,20% Poland 11,80%

18 Predicting the demand: the importance of forecasting Demand forecast brings values for the future: crucial for short and long-term planning; Tries to take into account different factors and views; Enables to optimise resources; Improves competitiveness; Almost only advantages apart of exact data for the future.

19 Role of demand forecast in business planning: case study of Canadian Pacific Railway Source: Railway Demand Forecasting and Service Planning Processes. Prepared for Rail Freight Service, March 2010

20 Preparing the model of demand Main assumptions: Mobility; Demographic data; Matrix origin destination; Purpose of travel; Modal split; Elasticities. Graphic result of origin destination matrix for Public transport. An example of one of Polish cities

21

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