The farebox recovery ratio (also called fare recovery ratio, fare recovery rate or other terms) of a passenger transportation system is the fraction of operating expenses which are met by the fares paid by passengers. It is computed by dividing the system's total fare revenue by its total operating expenses.
Video Farebox recovery ratio
Fare structures
There are two schools of thought in fare collections: a simple, flat rate fare structure (pay a fixed fare regardless of time of day and/or travel distance) or a complex, variable rate fare structure (pay a variable fare depending on time of day and/or travel distance).
In North America, South America, Africa, and Oceania, the majority of the cities use simple, flat rate fare structures due to budgetary constraints. With the majority of North America, most of South America, almost all of Africa, and most of Oceania being heavily reliant on the automobile for both short and long distance travel, majority of the transit budgets are allocated toward construction and maintenance of freeways and roads, with very little funding making way to investments in new mass transit technologies. Inadvertently however, the reliance on simpler fare structures due to their cheaper costs ends up increasing the tax burden on the agencies as flat rate fare structures have lower farebox recovery ratios, placing more pressure to the transit agencies to increase taxes, pursue higher fare hikes, or to cut services to maintain the transit system.
In sharp contrast, majority of the cities in Europe and Asia are heavily dependent on mass transit. Therefore, the majority of their transit budgets are used extensively on mass transit technologies, which enables these countries to install and maintain self-supporting and profitable variable pricing structures. Transit agencies that have instituted a more variable fare structure depending on distances or zones traveled have higher farebox ratios over those that rely on a flat-rate model. In addition, recent urban transit scholars agree that variable pricing methods on public transit would actually be a profitable business which can alleviate many municipal agencies' budget problems. For example, transit riders will be discouraged to travel longer distance due to increasing price as one travels further, reducing human congestion of mass transit riders who ride lengthier trips. On the other hand, an increased number of riders will opt to frequently use the transit system for multiple short and quick hop-on and hop-off trips as prices would be cheaper for shorter trips, which mass transit is better suited for. The downside however is that institution of variable-rate fares requires a high value initial investment in fare ticketing technologies such as the use of contactless smart cards, turnstiles or fare gates, automated ticket machines, as well as the IT infrastructure in which the return on investment may take years depending on the expected transit ridership volumes.
Maps Farebox recovery ratio
Farebox ratios around the world
The farebox recovery ratio is the ratio of fare revenue to total transport expenses for a given system. These two figures can be found in the financial statements of the operators. Oftentimes the operator runs multiple modes of transport (e.g. subway and bus), and there is no data for individual modes (segment analysis). In this case the operator is considered as one system, or a group of modes are collectively considered one system.
Fare revenue is not the same as "transport" or "operational" revenue, as there are often secondary sources of revenue such as lockers and paid restrooms. Fare revenue is a subset of transport revenue, which is in turn part of total revenue along with "non-transport" or "non-operational" revenue.
Total "transport" or "operational" expenses are a part of total expenses along with "non-transport" or "non-operational" expenses. Total transport expenses may include expansion projects if they are paid for by the operator.
References
Source of the article : Wikipedia
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