Deep Discount Group Pass

Denver RTD was one of the first agencies to experiment with a DDGP program. Source: Greg Goebel

Introduction

In an era of stagnant or decreasing ridership, transit agencies are looking for new ways to boost revenue. Deep discount group passes (DDGPs) allow 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%+ in studied cases. 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.

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 customers.

Common Characteristics

DDGP programs typically define an eligible group, such as all benefit-eligible employees, all currently enrolled students (see College and University Student Transit Programs), all city employees, etc. In some cases the employer pays for the cost of the passes 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. In other cases the group at large pays a fee and everything receives passes at no additional cost; 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.

Because of the high value of unlimited transit passes, they often include photo ID to deter fraudulent use. DDGP typically confer unlimited use of the system to the pass holder for a year, although universities may divide pass eligibility by academic period.

Some programs include a guaranteed ride home component.

Case Studies

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 suburb oness who may have less incentive to participate. While pass holders receive unlimited use of most RTD services, it excludes some specialized services.

Denver RTD offers other variations on the EcoPass program to provide as broad of coverage as possible. Passes can be paid for by employers, employees (using pre-tax dollars), or some combination. If an organization does not want to provide unlimited EcoPasses, it can provide transit vouchers or use the FlexPass program, which allows for more specificity in the services covered.

The EcoPass program has been successful for Denver RTD. The program yields significantly higher revenue-per-boarding than the system-wide average. EcoPass and the agency's other DDPG programs account for more than half of all fare revenue.

UCLA BruinGo

UCLA offers transit passes to its students under the BruinGO! program. The program initially offered all UCLA students, faculty, and staff free rides on Santa Monica's Big Blue Bus. After the program launched, people in the service area began riding the bus to campus in increased numbers. Unlike a conventional DDGP program, UCLA paid Big Blue Bus per ride. However, the university paid a significantly lower amount than a standard fare. The program was funded by campus parking revenues. Aside from revenue from new riders, the BruinGO! program benefited the transit agency because existing riders who joined the program began paying their fare with a card rather than coins, which increased boarding speed vehicle productivity.

While the program was popular, UCLA eventually stopped giving free transit passes to students and faculty. Today, the university instead subsidizes public transportation, offering commuters discounted fares to ride the six operators that serve the campus: Big Blue Bus, Culver CityBus, LA Metro, LADOT Commuter Express, Santa Clarita Transit, and Antelope Valley Transit Authority. As a customer acquisition activity, the University seeks to convert existing or prospective parking permit holders to transit by offering free passes for one quarter.

Additional Reading

Nuworsoo, C. (2005). "Deep Discount Group Pass Programs: Innovative Transit Finance." Berkeley Planning Journal

This paper provides a detailed look into the economics of the DDGP system, including a general overview and breakdown of potential increases in revenue.