5.1 Introduction
In section 4, we examined current service operation in detail. In this section, we analyse the market for the service on the route in order to assess future operational needs.
5.2 Historical View of the Market
The heyday of this market was earlier in this century when Glasgow people made a habit of taking trips " doon the watter", which they did almost exclusively as foot passengers. As late as 1975, CalMac carried 1. 1 million passengers in the year between Gourock and Dunoon. With the growth in foreign holidays, the Upper Clyde's tourism industry shrank away. Places like Dunoon and Rothesay show evidence of past prosperity, but have been forced to find other sources of income. This is made difficult by their geography, but they have three advantages:
5.3 General Demand Factors
Demand on the two routes is influenced by the following general factors:
Total route price elasticities (which cover cars as well as passengers) broadly varied within the same range, although for the Kyle / Kyleakin route it was even lower than on the Western Isles route, at -0.28.
The Gourock/Dunoon route was not examined in the study, but on the evidence submitted to the study with respect to other CalMac routes, we would anticipate that the route elasticity is likely to be low, at -0.5 or less, because, like Kyle/Kyleakin, it is a short crossing. The only feasible alternative for Gourock/Dunoon is a much longer road route. However, the cross-elasticity of demand is likely to be much higher because of competition between the two operators. In other words, if one operator unilaterally raised its tariffs, then one would expect a significant switch in traffic to its competitor, but if they both raised real tariffs by, say, 5%, then total traffic demand on the route would be expected to fall by only 2.5% or less.
A further significant finding of the Henderson / Maddison study was that "no evidence was found of significant seasonal differences in price elasticities",9 suggesting that there may be little difference in the sensitivity of leisure and business travellers to price changes. This leads them to conclude that, "tourist traffic is just as sensitive to price changes as local traffic. Efforts to try and concentrate fare increases on the tourist market run the danger of being counter productive". They conclude that the only economic case for higher tariffs might occur in peak periods when ships are operating near to capacity, when differential peak / off peak tariffs may act as an incentive to travel off-peak and, therefore, be a more cost-effective mechanism for demand management than investing substantial sums in new vessels;
5.4 Demand on the Cowal Peninsula
Argyll and the Islands Enterprise (AIE) is the local enterprise company for both the Cowal Peninsula and the Isle of Bute. It reports that the three major manufacturing companies in the Cowal area make frequent use of the ferry services. Western Ferries is perceived as reacting more flexibly to market needs by, for example, putting on additional services at short notice. CalMac's labour and other restrictions means it cannot do the same.
In terms of tourism, the Cowal peninsula has two large new caravan sites (for around-400 caravans each) which are, according to Dunoon Tourist Board, 90% full with residential caravans all year-round. This traffic travels to the area via the two ferry services and may accordingly be changing the present annual pattern of tourism, shown in Figure 5.1 below.
Figure 5.1 Dunoon tourists 1996197
fig 5.1
Source: Dunoon Tourist Board
Figure 5.1 requires some definition and caveats:
5.5 Tourism Demand on the Isle of Bute
Bute is an island and is, therefore, dependent on its ferry links for all necessities. Bute has 7,000 residents and its principal industries are agriculture, tourism, food and drink and manufacturing, in that order. However, it has benefited from the BT HIE Initiative in having ISDN cabling installed to the island. As a consequence, a large information systems company has relocated to the island. It should be noted that information systems companies are able to transport their products by post, rather than requiring a dedicated commercial vehicle.
In terms of tourism, AIE sees its core market as developing away from fortnight summer holidays to mini-breaks in off-peak seasons. AIE is financing a £1m development of an inner harbour which will attract yachtsmen to the area. It is hoped that this will increase the average rate of expenditure per visitor, as yachting tourists are considered to be high spending visitors.
Figure 5.2 overleaf shows the total number of visitors to Rothesay, and indicates a gradual and probably rather fragile upward trend, with the number of visitors at 80,000 in 1996, slightly down on 1993.
Figure 5.2 Trends in Rothesay tourists
fig 5.2
Source: Rothesay Tourist Information Centre
Figure 5.3 Calculation of tourist demand on the Gourock/Dunoon route, 1996 (monthly totals x 12)
fig 5.3
Source: CalMac weekly data, annualised equivalent
On the assumption that February multiplied by 12 months represents the non-tourist residential market, we calculate that approximately 50% of the traffic on the Gourock/Dunoon route is accounted for by tourists in the summer months, because traffic levels in August are double those in February.
5.6 Estimating Commuter Traffic
The Bums/McPherson Market Research 1993 report was prepared for Argyll & the Islands Enterprise. One of its findings was that it estimated the total pool of commuters from Dunoon to Gourock in the range 350 to 400, and the pool of commuters from Gourock to Dunoon as between 125 and 175 per day.
CalMac has recently made some efforts to estimate the numbers of travellers who use the railway station (who may or may not be commuters). However, it has not been able to take into account the student travellers, or the numbers travelling on multi-journey ticket, or combined rail/ferry tickets, so the numbers collected are not enough to enable conclusions to be drawn. Nevertheless, they are believed by CalMac to be significant.
5.7 Marketing
CalMac markets its service as the quality service. However, this is becoming increasingly difficult without bow and stem loading vessels.
CalMac also markets the "whole experience", not just the particular trip, and its brochures advertise accommodation as well as giving ferry prices.
CalMac offers Hopscotch tickets, which allow the user to travel throughout its network of ferries. In this respect, CalMac has suggested that it may wish to market Gourock as the gateway to the Highlands and to the whole CalMac network. This is because Gourock is at the end of the M8 motorway from Glasgow.
Western Ferries stresses the frequency of its service. It also hires local people and markets itself as a local-grown company. It does not advertise nationally.
In summary, the two operators appear to occupy distinct market niches and to utilise distinct approaches to marketing. Western Ferries focuses mainly on commuter business, while CalMac seeks to market to both leisure and business travellers.
5.8 Trends in Traffic Carried
5.8.1 Overview
The market for the routes across the Inverclyde-Cowal is segmented between foot passengers and vehicular traffic:
5.8.2 Market Size
The total number of passengers carried on the Gourock/Dunoon and Hunter's Quay/McInroy's Point services is shown in Figure 5.4 below.
Figure 5.4 Passengers carried on the Gourock/Dunoon routes, 1992-98
fig 5.4
Source: Westem Ferries and CalMac
1998 figures have been provided by Western Ferries. An assumption of 0% growth for 1998 has been assumed by us for CalMac, as this was the case between 1996-97.
Foot passenger numbers are shown in Figure 5.5 overleaf.
Figure 5.5 Foot passengers carried on the Gourock/Dunoon routes, 1992-96
fig 5.5
Source: Western Ferries and CalMac
CalMac clearly has the bulk of the foot passenger market. However:
Figure 5.6 shows the trend in car passengers over the same period.
Figure 5.6 Car passengers carried on the Gourock/Dunoon routes, 1992-96
fig 5.6
Source: Western Ferries and CalMac
Figure 5.6 shows that the total number of car passengers has increased from approximately 770,000 in 1992 to 910,000 in 1996, or by 18%. As a proportion of total passenger traffic, car passengers have remained steady at 62-63%. Over the period, CalMac's market share has decreased by 9 percentage points. The total number of cars carried on the route is shown in Figure 5.7.
Figure 5.7 Cars carried on the Gourock/Dunoon routes, 1992-98
fig 5.7
Source Western Ferries and CalMac
Overall, Western Ferries has benefited from the fact that it carries a higher proportion of vehicular traffic, while CalMac carries more foot passengers. This may reflect the fact that Western Ferries is more oriented towards the commuter end of the market, which has been the most rapidly growing component, while CalMac draws a higher proportion of its traffic from leisure passengers.
The assumptions used by the two companies vary, and are stated in section 4.3. Western Ferries believes that it carries on average 1.5 passengers per car; CalMac uses a figure of 2.5 throughout its network. It can be seen that if CalMac was to use a ratio of 1.5 passengers per car, the passenger numbers shown in Figure 5.6 would decrease markedly. However, it is possible that the ratios used by both carriers are correct, if, as seems quite likely, Western Ferries carries more single commuters in cars, while CalMac carries more families.
Coaches and commercial vehicle passengers make up the remaining 7% of the total traffic carried and have not been separately analysed.