A Model of Selected Ridership Forecasting Techniques with a Limited Database - a Case Study the Central Coast Diegan W.E

A model of selected ridership forecasting techniques with a limited database - a case study the central coast diegan W.E. Rice

College of Business, California Polytechnic State University, San Luis Obispo, California 93407, USA

Email: wrice@calpoly. edu

Abstract

Central to the authorization of an urban transport project is the development of a credible projection of ridership. Statistical databases are often either lacking or questionable. This paper examines the techniques employed in such an environment by detailing the methodology used to forecast ridership for an extension of passenger train service to San Luis Obispo, California, in the San Diego/Los Angeles urban corridor. Many arguments implied a strong latent demand for this service. Ridership projections were constructed to evaluate the feasibility of different service levels. The statistical analysis was predicated on historical passenger rail traffic patterns, origin/destination surveys and the assumption that ridership is population-driven Data were available with respect to the impact of additional train service, arrival and departure times and the opening of new stations. These relationships were used to modify the projections further. Once the passenger counts were determined, revenue estimates were made Projected revenues were then evaluated against the standard of short-run avoidable costs to determine economic feasibility. This paper provides a detailed analysis of the steps outlined above.

4 Urban Transport and the Environment for the 21st Century

1 Introduction

By 1968, a series of train discontinuances left the abbreviated and downgraded Daylight as the sole passenger train on California's coast line between Los Angeles and San Francisco. Thanks to last minute political maneuvers, the coast line was incorporated, in 1971, into the new federal government rail passenger Amtrak system. Most important, the Coast

Starlight a new San Diego-Seattle service was established. A combination of the convenience of the many cities it served, improved amenities and an expanding population base made the Starlight a solid fiscal and ridership performer. San Luis Obispo, by 1989, was accounting for 45,000 Starlight passengers annually. Serious thought again was being given to the expansion of coastline rail service. For a brief period in the early 1980s, the State of California had provided operating support for an overnight train, the Spirit of California, between Sacramento, San Luis Obispo, and Los Angeles. A combination of politics and the failure of the

Spirit to achieve the statutory fare box recovery ratio of 55% resulted in the last Spirit to run on October 1, 1983. During 1990/91, several events were merging to make increased rail passenger service to San Luis Obispo a real policy option. In 1988, the state had funded a successful extension of a San Diegan north of Los Angeles to

Santa Barbara. With the establishment of a second San Diegan to Santa

Barbara in October of 1990, dedicated San Diegan bus connections between San Luis Obispo and Santa Barbara were established. The San Luis Obispo passenger count was increased by more than 46%. In addition, the added convenience of the additional schedules south of San Luis Obispo was largely responsible for a 17% increase in the Starlight count. It was the statewide passage in June of 1990 of the "Clean Air and

Transportation Improvement Act of 1990" which proved to be the catalyst that triggered the San Luis Obispo governmental review of rail service improvements. Concurrently, the Division of Rail of the California

Department of Transportation (Caltrans) was making its own assessment of expanded coast rail service. Both efforts were coordinated.

The focus now was to establish the "feasible" alternatives and develop an analysis of each with respect to its revenue/ridership potential.

Urban Transport and the Environment for the 21st Century 5

Subsequent discussion produced a "short list" of specific alternatives to be

studied.

Because of a combination of both limited fiscal and operational resources, realistically the viable alternatives were those providing for an

expansion of San Diegan service north of Santa Barbara to San Luis Obispo, a distance of 119 miles.*

Because of population growth, four new intermediate stations were

incorporated into the planning—these were Goleta, the location of the University of California; Surf, to serve both Lompoc and Vandenberg Air

Force base; Guadalupe, to tap the Santa Maria Valley; and Grover Beach, in southern San Luis Obispo county. It was felt, and later verified by the

ridership modeling, that the addition of these new stops would generate

acceptable ridership/revenue levels. To date, only the Grover Beach station has opened.

2 Specific Service Options

The "short list" of specific alternatives studied was based largely on the availability of equipment given the requirements of the already existing San

Diegan corridor service between Santa Barbara and San Diego. Resource constraints made the addition of only one service feasible. The options

considered were: Option 1— This provided for extending to San Luis Obispo the

northbound morning San Diegan from Santa Barbara. The option would

provide an early afternoon arrival with a mid-afternoon return from San Luis Obispo. The train would precede the heavily used Amtrak long distance train, the Los Angeles - Seattle Coast Starlight, It would act partly as a "relief valve" for that train by transporting the many short haul trips between San

Diego and San Luis Obispo. Option 2— This option was similar to the above option. However,

instead of ending in San Luis Obispo, this train would continue northward to

San Francisco. It thai returns southbound, reaching San Luis Obispo at 1:06 p.m., continuing south as described above.

Option J-This option extended to San Luis Obispo the evening train San Diegan from Santa Barbara. This option would provide for nearly 1:00

6 Urban Transport and the Environment for the 21st Century

a.m. arrival in San Luis Obispo with a 5:15 a.m. departure. Option 4 -This option provided for adding a new San Diegan between San Diego and Los Angeles, which would be extended to Santa Barbara and San Luis Obispo. It scheduled an approximate 7:30 a.m. departure from San Luis Obispo, with the returning train arriving around

10:00 p.m. Option 5-This option called for the re-institution of an overnight train between Sacramento and Los Angeles via San Luis Obispo?

3 Patronage Assessments

Each of these options was analyzed. The basis of this analysis rested upon passenger rail-traffic patterns and survey data developed. Although origin and destination data for the Amtrak San Luis Obispo Station was available, it was felt that this data was insufficient to meet all potential patronage scenarios. Specifically, the data did not provide the precise origins or destinations within San Luis Obispo County. For example, patrons, whose origin or destination was in the south county (Grover Beach), would fall under the general category of San Luis Obispo. Therefore, a survey of San Luis

Obispo passengers was conducted from which a detailed profile of the San Luis Obispo county rail passenger was constructed to estimate patronage at all potential stations.

In addition, a stratified random telephone survey designed to determine the potential for rail passenger patronage to and from the City of

San Francisco and its Peninsula was conducted. This was required since there was no direct passenger rail service to these points from San Luis Obispo.

To be effective, the cm site survey was designed to be brief. This was necessary due to the time sensitivity of rail passengers. Two specific procedures were established to insure the reliability of the data. First, surveys were conducted for all Amtrak services. Second, a goal was established of surveying approximately 25% of the total passengers who boarded or alighted during the survey period. A total of 222 surveys were completed. This represented 384 passengers out of a total of 1070 passengers, for a population sample of 35%. The sample size, coupled with quality assurance monitoring, insured that inferences could be drawn from the data with a level of accuracy

Urban Transport and the Environment for the 21st Century 7

within a confidence range of 5%.

The survey data was analyzed by train/feeder bus service, gender of

respondents, origin/destination, reasons for the trip, frequency of Amtrak travel, San Luis Obispo County origins/destinations and prime reason for

using Amtrak. From this database, a series of least-squares regressions were

developed. The purpose of this statistical analysis was to establish whether there existed a statistical pattern between variables. For example, was there

a statistical relationship between the train selected, and the local origin/destination and, if so, what is the level of confidence of such a

relationship?

Based upon this statistical technique, it was found that there was no statistical relationship between the following sets of variables:

(1) The train selected and the local origin/destination. (2) The local origin/destination and the train origin/destination.

(3) The reason for Amtrak travel and the gender or age of the respondent.

(4) Local origin/destination and the frequency of Amtrak use.

The only statistically related predictor, was the size of the party to the origin/destination. Specifically, larger parties tended to be more likely to

originate from outlying areas, as opposed to San Luis Obispo. To fine-tune potential forecasts, seasonal ridership and revenue

patterns were constructed, by month. The purpose of this was to allow

forecasters to adjust either upward, or downward, their estimates of the ridership trend and thus provide a greater level of specificity. Based upon the

above data a matrix of traffic, allocated by San Luis Obispo county origins/destinations, was developed. The relative weights derived from the matrix provided the basis for subsequent ridership forecast allocation between stations.

An assumption was made that ridership is population driven. It was

further assumed that there would be no change from the current levels of service and fare policies. That is, in the latter case, fares increased at a rate that was equal to the average rate of inflation. The inclusion of this forecast showed that demand was increasing at a rate that required an expansion of rail passenger service to avoid significant shortage problems. Demand exceeds seat supply.

8 Urban Transport and the Environment for the 21st Century

In some respects, this forecast was highly conservative since it did not include any expansion. All evidence pointed to a high level of ridership elasticity associated with service expansion. Using the most conservative population growth analysis, a very strong latent demand was apparent. Other things being equal, it showed latent demand between 1989, the last full calendar year with solely Starlight service, and 1995, would rise by 71.5%/

3.1 San Diegan Extension Options

Although many tentative schedules for an extension of a single San Diegan north to San Luis Obispo theoretically were possible, Caltrans established the three most probable scenarios. These were cited above. Analysis of these three service options from the perspective of incremental ridership generated in San Luis Obispo County showed Option #4—7:30 a.m. departure from San Luis

Obispo, with the returning train arriving around 10:00 p.m.—was superior. Option #1- the early afternoon arrival with a mid-afternoon return from San

Luis Obispo was not as viable in terms of potential ridership as option #4 because of its overlap with the Coast Starlight. Option #3—1:00 a.m. arrival in San Luis Obispo with a 5:15 a.m. departure—was clearly the least desirable because of its inconvenient hours of operation for county residents. Caltrans studied and rejected the reestablishment of the overnight

"Sprit of California" (Option #5) between Los Angeles and Sacramento. The agency estimated a fare box recovery ratio of only 46%, well below the legally mandated level of 55%.

The most interesting of all the options was option #2, the proposed extension of a morning San Diegan to San Luis Obispo and then directly to

San Francisco. The northbound train would run ahead of the Starlight. The southbound would follow the Seattle originating Starlight south of San Jose.

This scheduling would allow across platform connection at San Jose. Many arguments implied a strong latent demand for this service.

However, because of a combination of perceived limitations of both fiscal and operational resources this alternative never received serious consideration.

To derive the projected forecasts for the three San Diegan options ending in San Luis Obispo, comparable situations within California were

Urban Transport and the Environment for the 21st Century 9

sought.

Historically, both Oxnard and Santa Barbara stations had the same level of service as San Luis Obispo before the initial extension of the San Diegan to Santa Barbara . Therefore, these stations' patronage patterns were carefully analyzed to establish the incremental impact of the initial San Diegan upon their traffic patterns. It was assumed that, other things being equal, ridership is population driven. Therefore, the proportional increase in ridership concurrent with the service expansion, was related to the population base. Based upon this process, it was determined that the incremental traffic gains to the Oxnard station, when related to the population base, was 12% annually. For Santa Barbara, the comparable figure was 19%.

Accordingly, it was concluded that the Santa Barbara experience would offer the best scenario with respect to Option #4. Further, Option #three, the least desirable option, would be best represented by 50% of the ridership totals of Option #four. This conclusion was reached because Option #3 clearly has the least desirable service times. For Option #1, the best proxy was the mean value of the Oxnard and Santa Barbara experience — namely 15.5%.

Based upon this modeling technique, the estimated ridership for the

Grover Beach station was determined. The estimated population for the service area of the Grover Beach station was 61,964*. In addition, the existence of a Grover Beach station would cause a certain portion of patrons currently using San Luis Obispo to be diverted. Extrapolating from the ridership survey results, it was concluded that if all patrons who are currently using the San Luis Obispo who could avail themselves of new the San Diegan service, this diversion, at maximum, would amount to 4,539 passengers annually. However, because the schedules of Options #3 and #4 are at decidedly different times than the Coast Starlight, it was conservatively estimated that only 50% of the potential diversion would occur if either option were initiated. The maximum diversion of patrons would occur if Option #1 was implemented, since its schedule reasonably approximates that of the

Coast Starlight. A comparable modeling technique was used to develop the San Diegan patronage forecast for the San Luis Obispo Amtrak Station.

Since the San Luis Obispo San Diegan extension would most likely be associated with a third San Diegan to Santa Barbara, estimating the

10 Urban Transport and the Environment for the 21st Century

ridership for this train in totality was necessary. This analysis was divided into two components. Thefirs twa s ridership whose origin/destination was from Los Angeles to Santa Barbara. The second component was the incremental ridership generated north of Santa Barbara, namely stations from Goleta through San Luis Obispo.

To estimate the impact of the third San Diegan on the Los Angeles to Santa Barbara Corridor, two modeling estimates were derived. First, it was assumed that ridership would increase in proportion to the service increase.

The second estimate was based upon the experience that occurred when the California Central Valley "San Joaquin" frequency was increased.

Accordingly the total ridership that would occur for the extension was 180,390 for option 1,135,851 for option 3 and 185,706 for option 4 annually.

4 Revenue Assessments

In deriving the revenue estimates, two assumptions were made. First, any traffic that was exclusively local on the extension would be statistically insignificant, and, therefore, could be eliminated from the calculations. Second, journeys whose origins or destinations are on the San Luis Obispo extension, would have one-way trip mileage of 144 miles or greater. Since most expected patrons would be traveling on some type of discounted fare, it was assumed that the average fare incorporating the proportion of discounted riders would be 14.3 cents. This is consistent with Amtrak's experience. The revenue estimates were based upon the projected ridership from each of the five stations on the extension. This traffic was allocated between other points cm the San Diegan service between San Diego and Santa Barbara based upon the proportion of traffic as determined in the San Luis Obispo

Station Survey. Accordingly, the estimated marginal revenue was $3,031,365 for option 1, $1,570,862 for option 3 and $3,141,726 for option

5 Farebox Return Ratio

Catorans estimated the cost per train mile for to be $24.00 based on short-term avoidable costs. Therefore, the total incremental cost to operate the San

Urban Transport and the Environment for the 21st Century 11

Diegan to San Luis Obispo would be $2,084,880 annually. Accordingly, estimated ferebox recovery ratios would be 145.4% for option 1, 75.35% for

option 3 and 150.7% for option 4. Under the Amtrak law the State of California would guarantee 70%

of losses. Subsequently, Amtrak refined the basis of cost from short-term

avoidable costs to long term marginal cost. The effect was to increase the cost per train mile to in access of $55. Accordingly, the farebox recovery

ratio declined/

6 Central Coast San Diegan Service Record

On October 29, 1995, the extension to San Luis Obispo, known as the

Central Coast San Diegan, started service. This was an implementation of Option 4, a new 9th San Diegan round-trip between San Diego and Los

Angeles, which was extended to Santa Barbara and San Luis Obispo. The

southbound train departs San Luis Obispo at 7:15 a.m.; however, the 3:30 p.m. Los Angeles northbound departure is a schedule that was not studied.

Caltrans had regarded schedules before 4:30 p.m. as too early to maximize ridership. Ridershiponthe southbound trains has been stronger. The schedule

pattern reflects the operational requirements to provide the crew with

mandated "time off." eight hours between trips. Although the study concluded the proposed extension was viable, there was no guarantee that passengers can board a San Diegan at San Luis Obispo. New train services are created because of a blending of economics

and politics. For a new service to be started it must have the solid backing of at least one governmental agency that has the commitment, stubbornness, and

competence to see the project through to operational status. That agency for the Central Coast San Diegan was the San Luis Obispo Council of Governments (SLOCOG).

Rail passenger demand is not solely a function of demographics, but is also directly related to level of service and marketing efforts. Since, the

Central Coast San Diegan began, other than an off-season "Kids Ride Free Promotion," the marketing effort has been minimal.

Once the actual schedule was known, the ridership forecasts were adjusted downward by 10 percent to reflect the early Los Angeles departure

12 Urban Transport and the Environment for the 21st Century

time (which disregards the expanding casual business travel market). This reduction was based upon California experience. Accordingly, the estimated

ridership for Grover Beach would be 12,638 and 37,136 for San Luis Obispo 37,136. Actual 1997 totals were 18,043 for Grover Beach or 42.8%

over estimate and 39,609 for San Luis Obispo for a gain of 6.7% over the forecasted value.

It is too early to evaluate the Central Coast San Diegan adequately.

It is clear for the train to be successful that of the four planned intermediate stations (markets) need to be opened. The issue of the northbound schedule

has to be addressed. Fares can be adjusted upwards to improve the revenue

yield and decrease the size of the operating subsidy. New equipment is needed to improve the service. These steps would help insure the train's continued

operation. Initial results have been encouraging. The forecasting modeling techniques showed themselves to be within

the range of acceptability based upon the actual data.

References

(1) Rice, WE , Dawn of a new train: the Central Coast San Diegan,

Passenger Train Journal, #221, pp. 22- 25, May 1996.

(2) San Luis Obispo Area Coordinating Council, Rail improvement

feasibility study, Chapter 3, Service Improvement Options, R & F Transportation Consultants, pp. 3-1 to 3-13, March 1992.

(3) San Luis Obispo Area Coordinating Council, Rail improvement

feasibility study, Chapter 5, Intercity Rail Passenger Options, Patronage and Revenue Assessments, R & F Transportation Consultants, pp. 5-1 to 5-

37, March 1992.

(4) State of California Demographic Research Unit, Population Estimates for California Cities and Counties, Official State Estimates, p. 48, May 1991.

(5) Amtrak Ridership, October 1995-February 1998 (table), March 1998.