Abstract
Since high-speed train operation in 2004 in Korea, the revenue of conventional trains has been rapidly declining. To overcome the circumstance even a little, sightseeing trains have been introduced along ten competitive routes since 2013, which helped to reduce the loss rate from 3.0 to 2.5 compared to the existing conventional trains. Such accomplishment was based on the existing fare system fitted to conventional trains, not reflecting the value of the unique service that only the sightseeing train provides. The understanding of the Willingness To Pay (WTP) has largely remained unexplored in the railway transportation literature, and further no contributions in the sightseeing train industry. The paper aims to estimate the economic value of various types of service for sightseeing trains in the contexture of the WTP postulates using open-ended question survey data and a Tobit censored regression with four different statistical structures. The normal distribution model replicates the WTPs best fitted over entire service types, and the WTPs vary by different type of train services such as recreational activities, slow-moving operation, seating type, tourist commentary and locally connected tour service. The highest value 13.3~24.2% in room typed seats compared to observable seats has been observed. Applying the demand elasticities to price, the revenue maximizing is observed at a 6% hike for a standard seat and a 22% hike for a designated seat, and the revenue rises by 0.33% to 3.54%. This study expects that the result can be used as an appropriate guideline in determining a new fare fitted to sightseeing trains.
Highlights
The Korea Railroad Corporation (Korail), which operates the national rail network, is a public corporation that pursues both public interests and their own profits
Korail operates three types of railways: an urban train linking Seoul and the surrounding satellite cities, two nationwide trains
The boarding purposes of sightseeing trains are different from those of the conventional passenger trains, the fare for sightseeing trains is the same as the priority seat of conventional trains
Summary
The Korea Railroad Corporation (Korail), which operates the national rail network, is a public corporation that pursues both public interests and their own profits. Korail operates three types of railways: an urban train linking Seoul and the surrounding satellite cities, two nationwide trains (conventional trains and high-speed trains running over 300 km/h). In the case of urban and high-speed trains, the earnings reach a certain level of expenditure. The high-speed trains had recorded operating profit of 441 billion won (1,120 won = 1 USD in Aug 2017), while the conventional trains recorded 594 billion won lost in 2017. The loss is higher when the conventional train route is adjacent to the high-speed train route. For this reason, the Korean government subsidized Korail for 296.2 billion won in 2017 as a part of public service
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