Industry perspectives

2015 Passenger Transportation Trends

Facing the economic consequence of urban congestion and traffic jams, governments must make intelligent choices about infrastructure and land use.

As the world becomes increasingly urban, densely populated areas will face dramatic and seemingly intractable transportation issues. Fifty percent of the global population already lives in cities and, according to the United Nations, that number will approach 70 percent in the next 40 years.

If current trends continue, people’s reliance on cars will only increase, particularly in emerging markets. As the growing population becomes more affluent, the number of vehicles on the road worldwide is projected to triple, to as much as 3 billion by 2035, according to economic forecasters Global Insight. A good deal of this increase will be due to magnified urban sprawl; many already overcrowded cities won’t be able to simply build up to accommodate new residents, so they will have to stretch their borders and build out.

And as the traffic jams worsen, much more than time will be lost. Vehicle congestion typically erodes a country’s GDP by 1 to 3 percent. And the pollution, noise, accidents, and altering of the landscape attributable to cars and roads may leave long-term health and psychological scars on local communities.

Vehicle congestion typically erodes a country’s GDP by 1 to 3 percent.

For most governments facing these consequences, the choices are limited. Designing more infrastructure in significant volume is generally not an answer, particularly in developed countries, where real or imagined fiscal constraints determine priorities. But perhaps more important, the best solution isn’t in fact to build another road, bridge, or tunnel. Over the past several decades, brute construction to meet the needs of drivers has been the default approach for many cities and emerging nations. Yet this strategy has merely generated more traffic, and instead of one congested route, it has created two.

With these factors to weigh, passenger transportation must become foremost on the agenda for municipal and even national governments. Indeed, we believe that how well this issue is addressed will shape the productivity and competitiveness of cities and countries for the foreseeable future.

Viewed from a macro perspective, the challenge can best be described as a supply and demand dilemma that will be greatly exacerbated by demographics. In our view, the only efficacious response for governments is to widen supply efficiently without worsening congestion, while altering the passenger behavior that drives demand.

The case for mass transit

On the supply side, mass transit must be upgraded substantially in order to ensure that governments are getting the greatest possible benefit from their transportation investments and that the systems are an attractive alternative for commuters. In many cases, mass transit systems are failing. Shortfalls in municipal labor productivity and shoddy maintenance records too often compromise them, while passengers are treated to overcrowding and delays on suboptimal routes, which often reflect historical demand patterns that are no longer relevant. Assessing these issues in a new light, with the mind-set of a business determined to root out wasteful practices and to better appeal to consumers — and not with the attitude of a less-accountable public utility — would enable governments to “sweat the existing assets” better and immediately augment supply where it is most required.

On the supply side, mass transit must be upgraded substantially.

Such an approach might, for example, lead to increasing the passenger capacity on routes that have become more populated by adding articulated or double-decker buses and eliminating or downsizing lesser-used itineraries. Additionally, improvements in signaling technology on rail systems might be called for, which can increase the number of trains per hour on a line, creating more capacity. And it is also possible to enhance the efficiency and cost-effectiveness of existing roadways by giving priority to higher-occupancy vehicles, through dedicated bus lanes or high-occupancy/toll lanes (HOT lanes), which give motorists in single-occupant vehicles access to high-occupancy lanes for a fee that can, in turn, support improvements in mass transit.

In order to reduce people’s reliance on cars and meet the growing mobility challenges, new mass transit systems will also be necessary. However, these require a tremendous amount of political will, funding for capital expenditures, and rigorous planning to ensure that programs (1) are approved, (2) meet construction schedules, and (3) are completed within budget. It’s not an easy task for governments to underwrite transit system expansion. To do so, they must be willing to invest substantial time and management focus up front in developing clear and farsighted transport plans, in rigorously assessing these projects, and in committing to their implementation (rather than letting them die uncompleted).

To facilitate their transportation efforts, governments should weigh new types of private-sector partnerships, particularly because some of the recent initiatives have failed to meet expectations, including roads where toll revenue has lagged forecasts, or larger capital improvements that have stalled owing to changing political conditions. Governments may need to more aggressively attract private-sector investors by assuming more of the early-stage risks. For example, in developing new toll highways, governments can fund construction and operate the roads until there is an established baseline of revenue, and then hand off future operations to private companies. And in mass transit, governments can structure contracts to significantly reduce the revenue risk and improve the upside for private-sector operators by offering financial incentives to companies that are able to increase ridership and improve customer service.

Changing the commuter’s mind

On the demand side, altering travel behavior to spread out commuting hours and ease demands on the transportation system in peak periods is essential. At its simplest, this involves convincing employers to stagger work days, shifting the hours earlier or later so that not all of their employees are traveling to work at the same time — either by cars or by mass transit. Other measures include staggering school days, encouraging more flexible work hours for individual employees, and extending shopping hours for retail locations. But equally important, municipalities need to better manage traffic flow, especially during heavy usage of roadways, with the latest technologies, such as real-time monitoring of driving conditions, intelligent traffic patterns that employ data analytics to predict backups in advance and redirect drivers to alternative routes, dynamic tolls that go up during peak periods (or differentiate between lanes), and similar measures. In some cases, however, more basic technology is enough; for example, simple electronic signs on major arteries can warn drivers of traffic jams ahead and suggest different, less congested roads.

To operate at their best, these traffic-management systems should be integrated throughout a region and take advantage of an abundance of information coming from multiple sources. For example, as part of its broader “smart cities” initiative, Hong Kong controls traffic through a network of closed-circuit cameras and advanced sensors linked together among most of the city’s highways, tunnels, and bridges and connected to a series of signs, signals, and lane control equipment. This adaptive control system adjusts traffic signals in real time based on the current driving conditions, demand, and overall capacity. The system used in Hong Kong was initially developed in Sydney, where it has achieved a 37 percent decrease in travel time; a 21 percent decrease in congestion stops; and a 6 percent decrease in CO2 emissions, according to a recent study described in a report on In Sydney, the system is also being used to provide signal priority to buses that are running late, improving mass transit reliability.

Besides smoothing out demand on roadways, behavioral changes can reduce it outright. For example, some cities are actively encouraging people to commute to work by bike or ride sharing. Others are trying to coax employers to adopt telecommuting, which removes commuters from the roads entirely. And more coherently structured land and community development policies can trim road use through strategic planning for population and employment density in different parts of urban areas. All of these programs require government agencies to spur adoption among local companies and developers.

Finally, appropriate pricing remains a key demand management tool; too many cities significantly underprice transport (both public transport and roads) relative to their cost of delivery. Setting prices based on real costs will go a long way toward aligning future demand with supply and creating a sustainable transport network.

Passenger transport presents sizable challenges, but governments have little choice regarding whether to address the problem. Rather, the main consideration is whether they respond with the same measures they have in the past — reactive and largely ineffective solutions — or through intelligent planning that makes their cities more productive and more attractive to residents and tourists alike, particularly as urban density increases. For the regions that get this right, the reward will be more livable environments that function better, become more accessible for everyone, and attract the new talent needed to compete in the 21st century.


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