News: BC Ferries Banking on New Technology

Les Leyne – Times Colonist – Feb 26

Most of those who signed the petition presented this week demanding B.C. Ferries be moved under direct government control did so thinking a major change is what’s needed.

But there’s already a major change underway that will have far more impact than redrawing the lines of authority between the ferry system and the government, regardless of whether it succeeds or fails.

It’s the multimillion-dollar computer upgrade that will pave the way for an entirely new fare system on the major routes. Under the fare flexibility and digital experience initiative, reservations will be the preferred option, with the extra charge dropped. The show-and-go model under which the system has operated its entire life will become an option that passengers will have to pay more to use.

The independent ferry commission recently gave the initial approval for the project and released its full reasons for the decision this week.

It’s the start of a long, expensive conversion of the kind that have turned into nightmares for other public-sector bodies that have attempted them. And B.C. Ferries is attempting two at the same time. A parallel “automated customer experience” program, which also involves upgrades and changing other aspects of the business model, is also underway.

As described by the commission, it will replace the ferries website with a new interdependent IT system that will sell passengers all kinds of services and handle online transactions. It will also involve a new revenue-management system to forecast traffic and generate pricing recommendations.

“Leveraging this capability, B.C. Ferries intends to influence customer behaviour and further achieve goals such as capacity optimization and/or revenue generation,” says the commission.

The commission said the objective is to improve affordability by reducing pressure for future fare hikes. It said the company knows its current pricing and outdated IT systems are significant barriers. The business model has been fixed for decades; customers buy tickets on departure and pay one set price. The only innovations in the last 20 years were the reservation system, at a premium price, and assured loading, also at a premium.

The company told the commissioner the rigid old technology limits its ability to design attractive and relevant pricing. It wants to appeal to different groups with different fare options and make discounted fares available, but it needs a new computer system to do so.

When advance-purchase pricing options are available, more customers are expected to use them, but some capacity will always be held open for the traditional “show and go” passengers.

The commission said additional sailings are now ordered during busy times at the discretion of operations managers, according to traffic buildup. But it requires ships and crews to be on standby, with associated costs.

It’s considered inefficient and “only works to reduce the duration of sailing waits, rather than to prevent them.” If passengers are persuaded to book and buy ahead, capacity and demand will be matched more accurately, and the number of discretionary sailings can be reduced.

The big risks to the conversion are lower-than-expected traffic growth, and cost overruns.

The commission concluded traffic-growth projections in the three to five per cent range are reasonable, but even if it’s half that, the project is viable.

As for cost overruns, commission approval would be required for the company to spend anything over the amount approved. (It’s currently confidential, since costs are being negotiated. But it’s believed to be in the $30-million range.)

The application was open for public input over Christmas and got 102 responses, a high rate.

The commission found there is overall support for the change, but there are major concerns. Some think it won’t work on minor routes, so the commission said there should be comprehensive consultation before the reservation system is extended beyond the bigger routes.

There is also a worry that cancelling the current reservation fee would lead to more fare hikes, but the commission said the complicated price cap it sets on fare hikes should ease that concern.

Another fare hike of four per cent is coming in April. The schedule of hikes for the next several years depends on the next price cap, which is expected to be announced in mid-March.

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