Deep Discount Group Pass Programs: Innovative Transit Finance

For public transit operators in the U.S., neither fare increases nor fare reductions have been successful in boosting revenues. A different kind of strategy is needed, one that can produce more revenue for transit operators than it costs. This article argues that deep discount group pass (DDGP) programs can accomplish this goal. DDGP programs provide groups of people with unlimited-ride transit passes in exchange for a contractual payment by a group’s employer or other organizing body. While previous research on DDGP programs has ignored their impact on operator revenues, this article addresses that gap by focusing on their revenue-increasing potential. The study estimated and compared before and after revenues earned by three transit operators to draw conclusions about the revenue-increasing potential of group pass programs. The universal DDGP programs analyzed consistently yielded either higher revenues per boarding than the system-wide average or higher total revenues from target markets with the program than without it, proving their potential as innovative instruments for increasing transit operating revenues. Employment-based DDGP programs yielded the highest net revenues to operators. When appropriately priced and carefully deployed, DDGP programs can increase transit revenues, make transit operators less reliant on external subsidy, and become powerful instruments of efficient fare policy in public transit.