M6 Toll - Business Logic

[Captain Colonial]

So the M6 Toll lost £41m last year due to a lack of traffic, which has been steadily going down since it opened.

I'm betting the reason there was a lack of traffic was because the road is overpriced. It was £2.80 when it opened and is now £5.50

So what are the owners going to do to correct the situation?

They're going to raise the prices!

Is it only me who thinks they'd be successful if they increased traffic by reducing prices to something sensible?

[Nic Chase (NICO) - Shropshire & Mid-Wales AO]

No Scott, its not just you!! I could never understand their logic. The answer has always been to increase the prices. Have they never heard of the law of diminishing returns?? I particularly love the signs above the M6, as you approach the M6 toll, advertising that the "M6 TOLL CLEAR" in a desperate attempt to get you to use it. If they brought the prices down more people might actually use it.

[Terry Everall]

Its pricing logic gone wrong!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

[Dave Eastwood (Gadgetman) - Club Chairman]

At the original £2.80 price it was a no-brainer, just nip on for a nice quiet few miles. A few miles that even the Police at the time seemed to turn a little bit of a blind eye to, (as long as you weren't absolutely maxing the car).

Then it got to the £4 mark, and sometimes ou used, it sometimes you didn't, it was a bit dear, but...

Then the. BiB started cracking down, presumably too many took the p*ss to be ignored, and it got used less often.

But at £5 plus, no way, sorry I'd rather sit in traffic than let the consortiums see that it's OK to charge tha much for a short length of road; afterall, let them see it being successful and they'll just repeat the scheme.

[Dave Eastwood (Gadgetman) - Club Chairman]

Its pricing logic gone wrong!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

It's what my old boss, (who worked many years previously in banking) used to call bank-managers logic; whether it's what they were taught, or just their mind set, it's how the typical bank manager used to advise their business customers if times were tight for the customer, put your prices up and make more money that way!

[Vinny's Westie]

Been involved with the issue of road tolling for many years and the M6 always raises its head. As a HGV operator we could never justify using it, its a pretty big white elephant, the MD said that he did not want HGV's to use the road because they would cause damage to it so put the charge up, one way to make the road last longer!

[dombanks]

cant say i ever use it, i have done in the past but recently my journeys have been early morninigs/sundays and there is no point to it, nothing to gain from speed etc. even if they dropped the no toll m6 to 50 id still not use it

[Norman Verona]

it's not only road tolls that use "upside-down" pricing. I've noticed that restaurants and pubs have the same logic. Business drops off so that raise the prices which drives more away. For restaurants I would think the answer would be to completely change the menu and offer "half price days" for a month to get people back in.

Agreed, if the M6 toll was half the price a lot more would use it.

I went on it once when it opened and thought "this isn't going to work" I thought it too expensive at it's opening price. But then again I am an Honorary Yorkshireman - long pockets and short arms.

[Captain Colonial]

I can see an inevitable outcome - operator goes bust, government steps in and buys the road using tax money at an over-valued price, also operates it at a loss due to equally stupid management, ends up selling road a few years later to same operator with same idiots but under a different name for 1p, and the circle of stupid is complete.

Or am I just being a cynic again?

[housebeautician]

Bout sums it up Scott

[Nick Algar - Competition Secretary]

It's like so many white elephants, they need to go bust a few times bringing the capital value down to a level where they can make money.

Happened to Saley Hall Hotel up near us, massive place cost a bomb to build, loads of hype, went bust after a couple of years, taken over, went bust 4 years later, bought out of receivership again for more sensible money. It's now been running for around 10 years as a successful business, because it's capital cost is at the right level.

Sounds a bit like the problem Greece has, and Ireland, Portugal & Spain, soon to be joined by France :suspect:

[BADGERBEATER]

I think I can answer this one.

I was told by the Highways Agency that 'the company' want to limit the amount of traffic using the M6 Toll. They would rather generate the same income by pricing the toll high and have fewer car using it than obtain the same revenue from a low toll price from a higher volume of traffic. The reason is the cost of maintaining the road surface, apparently its eye-wateringly expensive. For the same reason they want to discourage trucks from using it altogether becasue they damage the road very quickly.

As for them making a loss, a loss is a loss and I don't see how it works but I think these projects are accounted for over a longer than traditional time period maybe there's some rocket-scientist-accountant who's figured it all out over 30 years. Dropping their costs would no doubt make them a profit for a few years but perhaps lose them money in the long term as the maintenance costs start to go up. Not sure.

I know the highways agency are very dissapointed with it, since it's not solved anything.

Did you know that there was once a proposed bypass through Kidderminster to move the M6-North traffic off the M5? I think opposition and red-tape squashed that though.

[davidgh]

It's what my old boss, (who worked many years previously in banking) used to call bank-managers logic; whether it's what they were taught, or just their mind set, it's how the typical bank manager used to advise their business customers if times were tight for the customer, put your prices up and make more money that way!

[rant] Bankers are the only people who raise prices "because they can" (getting refinanced by a different bank is pretty much impossible these days, so they definitely "can"). Problem is, they're mostly not possessed of sufficient grey cells to understand that the same rule does not apply in other businesses [/rant]

[SteveD]

you think yourself lucky you dont drive a van £12 what the devil

[Norman Verona]

having thought about it, it may be the best thing since sliced bread.

Maybe the Government will back away from road pricing and other road builders will not build toll roads.

Surely we (well you) pay enough in tax not to have to pay more to use the roads.

It's slightly different in France. Most of the motorways are toll and it costs me about 20€ to drive from home to Calais (about 5 hours fast driving so about 500 kms). However the taxes on motoring in France are a lot less than the UK.