Singapore-KL High-Speed Rail Project Looks for Funds
Singapore and Malaysia are proposing to build a high-speed rail (HSR) line that will reduce the travel time between the two capital cities to as little as 90 minutes.
The HSR will stretch 350km between termini in Jurong and Bandar, Kuala Lumpur.
To Fund this project, there are a number of different public-private partnership (PPP) options that the governments can pursue. These include a PPP for the whole project where the government contracts with one consortium comprising specialist companies that contribute expertise and resources in specific areas such as construction, rolling stock or operations. This was the approach taken for the Taiwan HSR. An alternative PPP model is one where the project is divided into smaller packages for the civil work, track, systems, rolling stock and operations and maintenance separately. The governments will then contract with and manage the various separate contractors on each aspect of the project. This is how the Singapore government develops the MRT now.
Beyond procurement, Malaysia and Singapore will have to tackle another key issue — how to fund the project.
The HSR project is estimated to cost up to S$15 billion, and the governments should maximise passenger and non-passenger revenue streams to minimise the funding requirement. Here are some possible ways and practices to maximise revenue streams that can be adopted or adapted from worldwide HSR projects.
The largest revenues will be from passenger ticket sales. To maximise passenger revenue, the operator should adopt yield management strategies used by airlines and hotels. These include segmenting the market and offering different products to different customers such as classes of travel, reserved or unreserved seating, ticket flexibility, timing, monthly passes and other value-added services. The proposition provides pricing power to the operator given a high quality service, relatively short and reliable travel time and a convenience not yet offered by competing modes of travel.
Loyalty programmes are critical to retaining customers and retaining revenue. Cross linking loyalty programmes across a host of other complementary services including hotels and airlines will reinforce loyalty.
Like all transport systems, there will be off-peak periods, and the operator will need to be more creative to generate off-peak revenue.
For example, it can promote off-peak package tours like how the Shinkansen ties up with tourist spots such as Tokyo Skytree and Tokyo Disney Resort.
In Singapore, this could be done in partnership with the Integrated Resort operators here. Governments can also work with the HSR operator to provide services to support key tourism events in each country, such as the Grand Prix races.
The operator should seek to generate revenue by providing additional ancillary services. These can include charging for Wi-Fi or access to films and other entertainment provided through an onboard communication system.
This is done to great effect by the Heathrow Express, which benefits from its high proportion of business travellers. Further revenue can be generated through providing catering services to passengers at stations — the Taiwan HSR “bento box” has generated a cult following — and catering can also be offered on the train.
Operators can further generate revenue through targeting the travellers’ entire end-to-end journey. Partnerships with car rental companies, taxi services, hotels and holiday destinations not only generate additional journeys, but also allow the high-speed rail operator the opportunity to capture a greater percentage of tourist and businesses’ travel spending.
Other commercial partnerships should be explored; for example, Transport for London receives revenue and benefits of up to US$10 million (S$13.8 million) per year through its contract to distribute the Metro paper on its bus and rail network.