Posts Tagged: fare structure



How to Price Your Urban Cable Car

It’s hard to blame officials in some cities for treating the fare structure of new public transport line as an afterthought. It’s not sexy stuff. However, for urban cable cars, the failure to put the time and energy to develop a proper fare model may ultimately hinder the project’s success.

Generally speaking, the price elasticity for a transit bus is fairly limited. Image by Oran Viriyincy.

Whether your envisioned CPT line is built for transit, recreation or some combination of the two, the fare must reflect your overall goals. Take the Maokong Gondola, which recently announced its intention to raise fares. Owned by the Taipei Rapid Transit Corp (TRTC), this recreational gondola transports an incredible 2-3 million riders a year (5 million in its first)!

It’s hard to blame people for thinking these are really great numbers!!

Maokong Gondola. Image by Connie Ma.

And, yes, they are — but the system charges an average roundtrip fare of just US$3.00, among some of the least expensive urban cable cars in the world. Sightseeing cable cars in nearby Hong Kong (Ngong Ping 360) and Korea (Yeosu Cable Car) charge anywhere from US$10-35.

No wonder detractors have lambasted the system for being a perpetual money loser. It bleeds some US$3 million annually. Since fares were scheduled to increase, there were immediate fears that this would cause decreased visitorship and therefore, increase loses. Luckily though, correlation does not mean causation. Let me explain.

During a site visit to the Singapore Cable Car, I learned that they once struggled with a similar situation when management wanted to reorganize priorities. System managers did the math and essentially what happened was this: fares more than doubled in the early 2000s from ~SGD$10 to ~SGD$29 today.

The results were astonishing: ridership decreased considerably — but system profitability actually increased! Why? Simply put, it costs far more to manage millions of low-fare riders than fewer high-fare ones.

They realized their visitors were willing to pay a premium to experience the cable car. Could the same be said of the Maokong Gondola? It’s hard to know without some study but seems to me that a 20-40 minute, 4km US$9.00 cable car ride is still a real bargain. Of course, there will always be that initial challenge to convince the public to pay more for essentially the same service.

Perhaps they should’ve announced the fare raise with a promotion like the Hello Kitty cabins last year, to better justify this cost. Image by travel blogger Jamie (ink+adventure). Click for more photos and original post. 

Moreover, this will likely raise issues of social equity as the Maokong Gondola is owned by TRTC. If your city is considering an urban gondola, this is a story you’d likely want to follow. It may well make you think twice about your fare structure.

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