Deep Discount Group Pass

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A sample of Denver RTD's EcoPass

Introduction

In an era of stagnant or decreasing ridership, transit agencies are looking for new ways to boost revenue. Deep discount group passes (DDGPs) are a way for agencies to tap into large, centralized groups of potential riders. In the DDGP model, a large organization such as an employer or university pays a set sum to a transit provider in exchange for unlimited passes for the organization's members. The total cost per rider to the organization is much lower than it would be to buy individual passes at full price - a discount of anywhere from 40% to 90%+. As long as most of the organization's riders were not previously purchasing individual passes, then the DDGP program will create additional revenue for the transit agency.

In setting fares, agencies are typically focused on the individual existing rider, whereas DDGP shifts the focus to groups of potential riders. Adjusting the base fare for service affects individual choice about how many trips they will make; raising the fare causes price-sensitive riders to make fewer trips while lowering the fare encourages people to ride more frequently. A group pass program encourages a large number of people to make effectively unlimited trips, but is typically extended to groups who might not have used transit at all. If these people were not riders previously, each one represents a revenue gain even though the agency sells the pass at a discount.

Benefits

When structured correctly, DDGP programs benefit both the pass purchaser (employer, university) and the transit agency. The employer can market the program as an additional employee benefit, one that is viewed as progressive and environmentally conscious. For the agency, DDGP programs represent an additional source of revenue. Even though the per-pass price is greatly reduced, a DDGP program will still increase revenue as long as the marginal cost of serving the additional riders is lower than the bulk price of the passes. Assuming that many of the new riders did not individually purchase rides before, then a DDGP program is likely to be profitable as long as extra service is not required to meet the new demand. A secondary benefit of these programs is that they get more people riding, and if these new riders enjoy their experience then they can help raise the profile of the agency and bring on full-price riders.

Common Characteristics

DDGP programs typically define an eligible group, such as all benefit-eligible employees, all currently enrolled students, all city employees, etc. In some cases the employer pays for the cost of the pass and makes them available to eligible participants at no charge. In other cases the organization and transit agency negotiate a discounted pass price, which eligible individuals then pay directly. For example, at UCLA, students pay each quarter for the discounted bus pass; while a significant savings over other options for regular users, it still requires students to pay for the pass individually. Other variations include the unlimited ride benefit at no cost to the user while the group at large pays a fee; this system is in place at the University of New Hampshire, where students and faculty pay a fee to fund the transit system and may simply present their university ID to board the bus at no charge.

Passes often have a photo ID to deter fraudulent use, given the high value of the benefit. DDGP typically confer unlimited use of the system to the pass holder for a year, although universities may divide pass eligibility by academic semester or quarter.

Some programs include a guaranteed ride home component.

Experience

Denver EcoPass

The Denver Regional Transportation District (RTD) was a pioneer in DDGP programming with the EcoPass. Participating employers are required to offer the pass to all full-time employees. The pass cost is determined by the employer location, number of employees, and transit options nearby. This flexibility allows RTD to charge more for employers downtown versus those in free-parking-rich suburbs who may have less incentive to participate. While pass holders receive unlimited use of most RTD services, there is an upcharge for the airport express buses and the pass is not valid on other specialized services at all.

Denver RTD also offers other variations on the EcoPass program to provide as broad coverage as possible. A more flexible version allows employers to choose the level of transit service employees may take advantage of under the pass, for example.

References

Brown, Jeffrey and Daniel Baldwin Hess, and Donald Shoup. “Fare-Free Public Transit at Universities: An Evaluation,” Journal of Planning Education and Research, 23(1), 2003 pp. 69–82.