Price elasticity of demand in high-speed rail lines of Spain: impact of new pricing scheme

Abstract

Reduced travel time, regional cohesion, economic development and environmental benefits were some of the reasons given to develop the High Speed network in Spain, the largest in Europe. Ever since the opening of the first High Speed line in 1992, High Speed Rail (HSR) have become a new travelling experience despite the fact that in the recent years several voices have raised concerns over a lack of demand and low occupancy rates for HS trains compared to other countries. In February 2013, RENFE implemented a new pricing scheme which reduced ticket prices by at least 11%, and introduced flexibility in their purchase in order to boost the usage of HSR. In this research, the effects of the new scheme are analyzed and the impact on the shift in the modes of transport is underpinned by considering a discrete choice model. As a consequence of this policy, occupancy rates have been hugely increased but several other findings arise from the research. Although apparently ticket price is not regarded by users as the main factor to travel by HS trains, the price elasticity of demand turns out to be high. Depending on the transport modes competing with HS the effects are quite different. For short routes connecting small and medium-size cities with big metropolitan areas the growth of demand is achieved at the expense of car and bus, whereas for long routes connecting large cities where air transport is available the growth is made mainly at the expense of air transportation, and induced demand is also triggered. Finally, when the owner of the infrastructure and the Train Operating Companies (TOC’s) are both managed by the government, the rail infrastructure fee policy set may prompt unfair competition with other modes such as the bus or the plane.

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Identifiers

ORCID for Alejandro Ortega: orcid.org/0000-0002-5224-5363

ORCID for John Preston: orcid.org/0000-0002-6866-049X

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