How the UP Express disaster could have been avoided
Partner, SATOV Consultants
For those of you who don’t live in Toronto, you may not have heard about the new train service our transit agency has launched, called the UP Express. It runs from the airport to Union Station with a couple of stops on the way. It is a great hit with its regular users…both of them! Nobody else has used the service, and that is because its price is so disconnected from anybody’s willingness to pay that it begs the question of whether the main asset MetroLinx should invest in is a calculator!
The operator either didn’t do any consumer research beforehand, or read it upside down. In any case, they didn’t hire SATOV. If they had we would have advised a segmented view of potential users, and willingness to pay by segment. We would have done a market simulation to estimate revenue at different price points and then we would have told them to charge 5 bucks for it, fund it with advertising sponsorship and public money or scrap it altogether.
Let’s explore the different potential users of this service, starting with a very basic split between business and leisure users.
Let’s assume (because it is true) that business users are fine to pay a fancy black car 50 or 60 bucks to go to and from the airport just about whenever they travel. If they are important enough to travel for business their time and convenience is worth the 50 bucks, which is a small part of any trip cost. There are times when traffic costs them 15 or 20 minutes and that can be frustrating. Now let’s think about which business users would want to replace this black car with the UP express:
B1: Businesses who have an environmental mandate and want their employees to contribute to putting fewer cars on the road. But the David Suzuki foundation is based in Vancouver (where they have a well- planned and priced service, BTW) and nobody else would put their employees to this much hassle to save a car on the road.
B2: Tiny businesses who can hardly afford the air travel and need a cheap way to get to the airport. For those outside of the core they would have to spend time and money to get to Union, wait for the UP express and then get on. If they travel alone, and get the discount to 19 bucks, they would save 30 bucks or so and spend a lot of extra time. If they think that is a good business decision, they will be tiny businesses who can’t afford travel forever.
B3: Execs from the core who travel at peak times and are worried about traffic. The problem is that they will spend more time walking to Union and waiting for the train than sitting in their black air conditioned private car in traffic. Yapping on their cell phone. So how many would take the UP to save 30 or 40 bucks, assuming they are travelling alone? Doesn’t sound like most investment bankers I know…
B4: Execs from out of town who travel alone, arrive at Peak times, are worried about traffic, and are working or staying in the core. You wouldn’t catch me taking a 27 dollar public transit option in a city when I can take a limo for 50 and arrive in style. But I concede that the world is filled with irrational people.
Now let’s look at leisure travelers:
L1 (families): They tend to be more price sensitive and have a bit more time on their hands, given that they travel pretty infrequently and are sometimes have to save up for big trips. But, importantly they don’t travel alone – so the fare on UP is something way north of 19 bucks, depending on how many adults and kids are in the mix. And more importantly, they don’t live in or near the core…so how are they going to get to Union to take the UP? Subway, another cab….to save somewhere between 0 and 30 bucks? Me think not..
L2: There is a segment of leisure travelers who may be interested in taking the UP – millennials who live downtown are travelling alone, care about the environment, and are generally public transit minded. They would have to travel pretty frequently to fill more than a couple of trains per week. They do travel frequently as well, so let’s throw in a few of them for good measure.
In Toronto, we have a congestion problem of the highest order that we need to solve. As an environmentally minded person (I swear) I would love to see more public and green options for our commuters. But consumers don’t do anything for the public good unless it really works for them or they are paid to do so. The UP express is neither and thus has been a colossal waste of time and precious transit investment dollars.