Skip to main content

Tourists Are Major Capital Bikeshare Funders

The Washington DC economy benefits heavily from tourism. Some businesses benefit directly while others take advantage of tourism spillovers. Is Capital Bikeshare in the same boat? I took a look at membership and trip data for one year from April 1, 2011 through March 31, 2012 to get to the answer.

Capital Bikeshare offers a variety of products, from one-day memberships up to annual memberships. Annual and monthly members (registered users) have plastic red keys that allow them to access the system. Everyone else (casual users) use their credit card to access the system for short-term periods. Though not perfect, this makes a nice proxy for locals (registered users) and tourists (casual users).

More short-term memberships were sold during the 12 month study period than for full-memberships. But since full-memberships cost more they ultimately generated more estimated revenue*.

Click to Enlarge

*This is a good time to mention that these are not actual revenue figures. These are estimates that I'm calculating based on membership, trip and price data. The actual numbers are probably slightly different. For example, the revenue statistic for registered users is likely inflated because I'm not taking into account the Living Social deal that Capital Bikeshare ran last year; but for the sake of this post I'll assume a "best case scenario". A more detailed methodology and caveats is posted here.

The real difference comes when you look at how registered and casual users are utilizing the system. Prior work has shown that casual users have a much higher propensity to take rides that incur fees. In fact 97% of registered user trips were less than 30 minutes and therefore generated no revenue. Only 59% of casual member trips were under 30 minutes.


The histogram below breaks down the distribution of trips for registered and casual users by time intervals (which correspond with price breaks).

Click to Enlarge

This is not a negligible difference. Even though registered users made four times more trips than casual users, it's the casual users who generated five times more revenue from those trips than registered users.

Click to Enlarge

Another way to think about it is this: the average trip for a casual user generated $3.45 compared to a measly 16-cents for registered-users.

Click to Enlarge

What's the implication of this? During the study period, taking into account both membership costs and usage fees, casual users proved to be bigger funders of the Capital Bikeshare system than did registered users.

Click to Enlarge

I'd argue that tourists are clearly key to the success of Capital Bikeshare, at least from a financial standpoint. They tend to use the bikes less but they generate significantly more revenue. Prior research has shown that casual users tend to use the bikes in the middle of the day while registered users hit the system hardest during the morning and afternoon rush hour.

Capital Bikeshare was likely smart in creating a separate pricing schedule for casual and registered users that went into effect last November. Given that registered users appear to be much more price sensitive than casual users, the higher prices for casual users will probably generate even more revenue from this group. In any case, a more detailed look at the elasticity of demand is required to fully answer this question.

Lastly, this raises questions about station balance. Previously I've written that the Reverse Riders experiment last summer didn't do an especially effective job at rebalancing the system. Given the apparent price sensitivity of registered users, it's worth exploring whether a "rush hour surcharge" would better accomplish this goal. It's probably a political non-starter, but it's worth considering, at least in the theoretical world.

Comments

Popular posts from this blog

In Praise of Southwest's 'C' Boarding Group

A few weeks ago I saw a tweet from someone complaining that their Southwest Airlines boarding pass had been assigned A20 (meaning they would be at least one of the first twenty passengers to board the plane). Apparently this person though they should have been assigned a higher number, less their flight experience be considerably spoiled.

Despite the complaints, Southwest has resisted demands to assign seats on its flights, a decision which I personally applaud. I'll admit that I was skeptical when they rolled out the newest boarding procedure, assigning both boarding groups and a line number; but in hindsight it seems like one of the best operational decisions they've ever made. If nothing else, it effectively eliminated the infamous "cattle call" whereby fliers were getting to airports hours in advance and sitting in line on the floor as if they were waiting for the midnight showing of the new Star Wars movie.

When I was an intern at Southwest Airlines last winter, I…

So You Want to be a Southwest Airlines Intern?

My personal website must have pretty decent SEO - because in the past year, I've received about two dozen emails from aspiring Southwest Airlines interns looking to draw on my experience in search of their own dream internship. In the past two weeks alone a few new emails have already started rolling in...

(from flickr user San Diego Shooter)

If you've found your way here, you might be hoping for the silver bullet; a secret tip that will propel you above the competition. Unfortunately, I do not know any inside secrets. I can only share my experience as an internship candidate about two years ago and, rather than responding individually to future emails I anticipate to receive, I hope that potential interns will find the information posted here valuable.

Understand: Southwest Airlines is a very unique company. The corporate culture at Southwest is truly unlike that of nearly every other company. But you probably already knew that, since it now seems mandatory for every management,…

Mixing Sports and Business

In the last two days I've devoured every article in the Washington Post about the Nationals painful and epic defeat on Friday night in the NLDS. It was a tough way to see the season end, there's no doubt about that.

(from wallyg on Flickr)
These articles make it clear that there are a lot of people emotionally invested in professional sports. I think they sometimes they forget that, ultimately, Major League Baseball is big business. Each team is a major corporation and the league itself is an organization governed by a bunch of executives. The television networks that show the games are under contract with the team owners and the games aren't usually available to those without cable.

This is why it can be so hard to be a fan in this game. It's the multi-millionaire and billionaire owners that call most of the shots. They get to decide how much they're willing to spend on players. They get to decide who to hire as the CEO of the company. They get to decide how much t…