Florida East Coast Industries, Inc. (FECI) commissioned The Louis Berger Group, Inc. (LBG) to develop an investment grade ridership and revenue forecast for the re-introduction of passenger rail service on its existing right of way. The proposed new passenger rail service, named All Aboard Florida (AAF), will be a privately owned and operated, intercity service that is intended to initially connect key cities in Southeast Florida (Miami, Fort Lauderdale, and West Palm Beach) with Orlando in Central Florida.
Each year, travelers make hundreds of millions of trips between the communities in Southeast and Central Florida that will be served by AAF, making the region one of the most actively traveled areas in the United States. The proposed AAF service will operate on a corridor running directly through some of the most densely populated communities in the State of Florida with stations located proximate to major sites and connected to local transit hubs (bus, commuter rail, etc.).
All Aboard Florida System
The introduction of a new passenger rail system to serve the Miami-Orlando corridor has been carefully studied in the past by a number of public agencies and has long been recognized as a viable and needed service given the scale and demographics of the region, level of travel activity and the existing and growing congestion on Florida’s highways. Southeast Florida is the fourth most populous urbanized region in the U.S. The City of Orlando is the most visited city in the nation while Miami is home to the world’s largest cruise port and the travel gateway to Latin America. However, no intercity rail alternative comparable to the proposed AAF service exists currently. These factors, together with several of the key findings by LBG in conducting this study, support the potential for substantial ridership for the proposed AAF service.
Summary of Key Findings and Estimated Ridership
With frequent service between city centers within the corridor, AAF offers the prospect of substantial time savings to current users of auto, bus, traditional rail and even air. To determine how these time savings would alter travel behavior and generate ridership and revenue for AAF, LBG undertook a detailed examination of current travel activity and behavior, and conducted surveys that determined traveler preferences and willingness to pay. Best practices in discrete choice analysis and travel network modeling were employed and findings were tested and referenced to previous studies. The investment grade forecasts prepared for this feasibility study were intended to be conservative in nature. The analysis revealed that introduction of AAF service would complement existing modes of travel and draw a substantial number of business and non-business travelers.
The thorough study effort resulted in the following key findings:
- Substantial “Addressable Market” – Hundreds of millions of trips are taken annually between the four cities that will be served by AAF. LBG’s study included a determination of the portion of these total trips that both originate and terminate within a defined distance of a proposed AAF station (a station “catchment area”). The AAF addressable market is assumed to include only those trips beginning and ending within station catchment areas. Based upon detailed analysis, LBG concluded that the addressable market for AAF intercity service amounts to over 110 million trips made by individuals annually1.
- Challenging Intercity Trip – At a distance of approximately 230 miles, the journey from Orlando to Miami is relatively short for air travel (with total air travel time disproportionately long for the distance given airport security and delays); and relatively long for an auto trip, where traffic congestion can make the four to five hour trip unpleasant and unreliable. Travel volumes on key highways connecting Central and Southeast Florida are expected to exceed capacity by 2030, resulting in further delays and reduction in reliability.
- Demonstrated Market Travel Growth – Intercity travel on the Florida Turnpike between Orlando and Miami has grown by an average of 3.5 percent per year since 2000 and air travel between these cities has seen annual growth of 3.2 percent during the same period. LBG long-term growth rates for the AAF system are conservative and are below these historical travel levels.
- Demonstrated Market Demographic Growth – In the past 30 years, population in the market area has grown by an annual average of 2.5 percent and employment has grown by an annual average of 3 percent. Within one mile of proposed AAF stations, annual population growth has ranged from 2 percent to 5 percent since 1990 indicating strong growth in the urban core at the heart of the AAF alignment.
- No Comparable Service – AAF can provide travel time savings of 25% to 50% when compared to existing surface modes (auto, bus and rail) and with a journey time of around three hours from
- Established Willingness to Pay – The optimized fares estimated in this study are highly competitive with existing modes of travel when time, tolls, and travel costs are considered and are comparable to other successful rail services in the U.S.
- Long-Standing Interest – Given the profile of the travel market and the central location of the rail line, there has been interest among stakeholders and the public in developing passenger service on the Florida East Coast corridor for decades.
In connection with the investment grade evaluation, LBG prepared estimates for annual ridership and farebox revenue. This forecast accounts for all elements important to future ridership potential including targeted market segments and induced ridership. LBG identified critical assumptions subject to varying levels of uncertainty and developed a series of sensitivity tests in order to test the impact of uncertainty on the ridership and revenue forecasts. These sensitivity tests are summarized in Section ES-5. The ridership and revenue is summarized in the table below for 2020, the first year after stabilized ridership is achieved. This forecast comprises of service between each of the three stations in south Florida (Short Distance trips) and trips from the stations in south Florida to Orlando (Long Distance trips).
AAF Ridership and Revenue Forecast, 2020 (2012 $)
Short Distance (1) 2,813,200 $64,143,400
Long Distance (2) 2,534,100 $229,436,300
Total 5,347,300 $293,579,700
Ridership: Fare Revenue:
(1) Short distance trips = Miami - Ft. Lauderdale, Miami-West Palm Beach, Ft. Lauderdale - West Palm Beach
(2) Long distance trips = Southeast Florida – Orlando
AAF Annual Ridership Forecast, 2017-2030
(see PDF download for complete document)
As shown in the forecast charts presented above, we expect ridership and revenue for the initial years of AAF to start at relatively low levels and grow to a stabilized volume after three years. This reflects a conservative assumption for “ramp-up,” a period of time during which ridership is building up to long- term forecast levels as travelers become acquainted with the new rail service and adjust their trip-making habits. To ensure a conservative approach to estimation of initial year ridership and revenue, LBG assumed a three year ramp-up period: the first year at 30 percent of forecasted volumes, second year at 60 percent, and third year at 80 percent of the forecast. This assumption is consistent with previous rail service forecasts in Florida. The forecasts include the assumption that Short Distance rail service will not be fully operational until the second quarter of 2017, and Long Distance revenue service will begin in fourth quarter 2017.
The forecasts include induced ridership demand. Introduction of a new mode of travel, particularly premium rail service which is more convenient and improves travel time, can often encourage travelers to make trips they may not have made in the absence of the new service. This is called induced ridership. Previous studies have found that the introduction of intercity rail service can result in levels of induced travel ranging from 5 percent to 30 percent. The highest levels of induced travel have been observed on high speed rail services serving multiple markets over distances of 200 to 500 miles. LBG’s evaluation of induced ridership in the forecast for AAF estimates the potential for a 20 percent increase in AAF ridership that has been included in our estimate for 2020.
Estimated Market Share
The forecast shows that the addition of the AAF service will complement the existing modes of travel between core locations in Florida. Station locations offered by AAF in Miami, Ft. Lauderdale, West Palm Beach, and Orlando will provide an alternative source of transportation for travelers with origins or destinations at or near these urban cores.
The forecast indicates that after the initial ramp up period, AAF will serve approximately 10 percent of the overall market for travel between Southeast Florida and Central Florida—the Long Distance market, which is expected to comprise the largest portion of AAF revenues. In the Short Distance market, AAF will serve approximately 1.2 percent of the overall market.
ES-1 Overview of the Investment Grade Study Process
An investment grade ridership study is one of the most rigorous and thorough forecasting processes. Investment grade studies are common in the finance and project development industries. Below is a summary of the key characteristics of LBG’s investment grade process:
- New Primary Source Research – Over 1,800 stated-preference surveys and 10,800 origin and destination surveys were conducted to confirm travel behavior, preferences, and willingness to pay.
- Independent approach – The forecasting model was constructed from the bottom up using data gathered from regional planning agencies, stakeholder organizations, and recognized commercial sources.
- Accepted methods – Best practices in discrete choice analysis and network travel demand modeling were employed.
- Critical evaluation of economic growth assumptions – Outlook for growth in travel market was carefully evaluated and conservative assumptions were adopted.
- Thorough documentation – The study details the data collection, evaluation, and forecasting procedures.
- Benchmarking and validation – Forecast assumptions and findings were validated against previous reports. Alternative mode choice models were developed and evaluated against known travel patterns.
- Sensitivity Testing – LBG recognizes that forecast assumptions are subject to varying levels of uncertainty. Sensitivity tests were conducted on the ridership and revenue forecast in order to evaluate the extent to which the uncertainty could impact the forecasts.
ES-2 Study Purpose and Objective
Planning for implementation of AAF service in Southeast and Central Florida is well advanced. Environmental permitting is complete and construction has begun in the southern portion of the rail corridor. Operations planning have been conducted, station program development and design are underway and environmental review is in process on the remaining portion of the corridor. At this phase in the project development process, a thorough understanding of demand potential can contribute to the finalization of business planning activities that are underway. The objective of this study is to provide FECI with an independent overview of ridership and revenue that will inform and advance the project planning efforts and decisions of potential investors and funding partners.
The study follows the objectives of an investment grade evaluation appropriate for project planning and development. It includes new primary source research for the understanding of travel patterns and travel behavior; a critical evaluation of input assumptions; and demonstration of the sensitivity of the forecast to those assumptions. A summary description of the study design and how it meets the objectives of an investment grade evaluation is presented in this executive summary.
ES-3 Study Process
To determine the extent and magnitude of the demand for a new mode of travel between Central Florida and Southeast Florida, LBG undertook a thorough assessment of the existing and potential future intercity travel market, the attributes of the current modes of travel in the corridor, and prospects for future growth. The study included the following key activities.
- Research to Establish Market Size and Catchment Area – Residents and visitors to cities in the corridor make millions of trips per year, but only a select portion of these trips involve travel between the central business districts and surrounding activity centers that would be served by AAF stations. To identify the addressable market, LBG gathered extensive data on current levels of travel by auto, rail, air, and bus; and several sources of information on traveler origin and destination patterns. The research established a market of over 110 million intercity trips per year in areas reasonably served by the stations2. These findings on the size and characteristics of the market are consistent with previous studies undertaken for rail projects in Florida, and provide a conservative base for the demand forecast.
- Identification of Travel Network and Competing Modes of Travel – The demand forecasting process also requires a thorough understanding of the travel network and the schedule, journey time, and cost attributes of all modes of travel using the network. This report outlines the assumptions and data sources LBG used to establish the highway, rail, and air travel network. The report also documents the attributes of each mode of travel used as inputs to the demand forecast.
- Assessment of the Prospect for Growth in Travel – An investment grade forecast requires thorough examination of the prospect for growth in the overall travel market. By gathering data from regional transportation planning agencies and other accepted public and commercial sources, LBG established conservative and reasonable growth rates for the overall market based on observed trends in each segment. Based on observed trends in each of the metropolitan regions within the corridor, LBG expects the overall number of intercity trips to grow by 1.7 percent per year.
- When travelers choose to make a journey by auto or by rail they weigh the time and money cost of travel and make a choice based in part on their travel budget and willingness to pay. Travel behavior is also influenced by trip purpose (e.g., business, leisure, commute, airport access) and other factors such as party size and need for a vehicle at the destination. The AAF system is an entirely new type of service for the region whose unique features can only be tested in hypothetical scenarios that pit AAF against other competing modes. The current state-of-the-practice uses mode choice Stated Preference surveys (SP) as the basis for understanding how individuals (or groups of individuals) value individual attributes, such as access time, in-vehicle travel time, headways, and cost - of a transportation choice.
- Demand Forecasting – The LBG study team employed best practices in discrete choice analysis and network travel demand forecasting to determine diversions from existing modes of travel to AAF and ridership volumes on the AAF system by city-pair segment. SP survey data was used to develop estimates of the AAF market share and is the basis of the AAF ridership forecast.
- Sensitivity Testing – The report provides the findings of sensitivity tests demonstrating the effect of changes in key forecast assumptions (e.g., AAF fare prices) on ridership and revenue. These sensitivity tests are used to establish the stability of the forecast model and inform project planning.
ES-4 Key Assumptions
To develop a conservative approach for forecasting AAF ridership that is appropriate for evaluation by lenders and investors during the planning stage of project development, the study team made several key assumptions for the Base Case. As planning for the project advances, these assumptions are likely to be altered or enhanced resulting in further refinement of the ridership and revenue forecast. To reflect the full potential for enhancements to ridership, LBG has been commissioned to provide FECI with a separate Business Plan Case forecast reflecting all aspects of the AAF team’s business planning. The conservative assumptions used in the Base Case presented in this report, include the following:
- The forecast study area is limited to the extent of the metropolitan areas in Central and Southeast Florida. Transfer connections to existing transit and bus services are assumed but future connections such as Sun Rail in Central Florida may enhance AAF ridership.
- The forecast team utilized a base year and future year auto travel trip table prepared on behalf of a third party for general application in the study of interregional projects in the I-95 corridor including Florida. The study team has evaluated the base year trip table by comparing it to traffic counts on intercity roadways, and to the findings of a survey implemented for this study. These comparisons were undertaken to ensure that the trip data used in this study is consistent with the origin and destination patterns as they currently exist in the corridor. The information was compared further to data maintained by regional planning agencies to ensure consistency in assumptions for current conditions and the potential for trip growth anticipated for the corridor. Trips tables for other modes of travel were based on information obtained from relevant planning agencies and operators.
- Station market catchment areas and trip filters were developed to establish reasonable boundaries for the addressable market and to eliminate illogical station access patterns. As described in Section 3, this is the basis for establishing the size of the candidate market at over 15 million trips per year for the long-distance journey between Orlando and the three cities in Southeast Florida. When trips between the three cities in Southeast Florida are considered along with trips between Southeast Florida and Orlando, the number grows to over 110 million.
- A fare optimization analysis was conducted to determine the appropriate fare level for the revenue analysis. All fares and competing mode costs were fixed in real terms. For purposes of estimating the future cost of auto travel, gas prices were set at $4 (based on U.S. Energy Information Administration (EIA) reference case forecast).
- Growth in the future auto travel market was assumed to keep pace with the regional outlook on population and household growth. LBG took the conservative assumption that any growth in income would not be considered in trip making. LBG utilized the official forecasts of Amtrak, Tri- Rail and the Federal Aviation Administration for rail and air modes of travel. These are conservative assumptions for growth outlook that are based on current fundamentals of the travel market. Future growth in income that outpaces the demographic rate of change, would most likely result in increased intercity travel overall and increased ridership for AAF in particular.
- The estimation of the future travel market, does not include any changes in the location of households or employment related to transit-oriented development in the areas surrounding the stations.
- Congested auto travel times were accounted for in estimating station access and long-distance auto travel times. Given the history of growth in highway congestion and challenges in expanding the highway network, regional planners consider it likely that congestion within and between the regions will increase, making non-highway modes of travel more competitive.
- AAF presents users with a premium service unlike any other service in the State of Florida. It is often the case that Stated Preference surveys which underlie the mode choice model and forecast do not fully capture the value that users attribute to the premium nature of services such as AAF. Our survey research and fare price benchmarking was designed to compensate for this providing the basis for a comprehensive view on traveler willingness to pay.
- AAF management has a detailed and robust business development and marketing initiatives underway to establish cooperative arrangements with travel providers, travel arrangers, and key tourist and convention markets. LBG independently evaluated these initiatives and accounted for ridership and revenue based on expected fares for the key market segments targeted in order to reflect the full potential for expansion of the travel market with the introduction of a new mode of travel.
- Induced demand potential was based on a method of evaluating the improvement in the generalized cost of travel that has been accepted in other studies for high speed transportation in the U.S. As a novel form of transportation in Florida, AAF is likely to experience ridership demand for tourism and leisure travel based on its convenience and amenities.
LBG conducted a variety of sensitivity tests to identify sources of forecast risk and evaluate the Base Case Forecast. Key findings include the following.
- Overall, a decrease in AAF running time of 10 percent (i.e., a reduction of 20 minutes in the running time from Miami to Orlando) could be expected to result in an increase of just over 7 percent in ridership. In the SEF market a similar decrease of 10 percent in run time (7 minutes) would result in a 5 percent increase in ridership. Should the running time need to be increased from the levels assumed in this study, a similar magnitude of decrease in ridership could be expected.
- An increase in the frequency of service by 20 percent (over the one departure per hour base assumption) would be expected to result in a 5.4 percent increase in ridership in the Miami to West Palm Beach short distance market, and a 1.4 percent increase for the longer distance city pairs.
- An increase in the amount of time to access an AAF station by 20 percent for long distance travel (due, for example, to congestion on local roadways) would be expected to result in an 8 percent decrease in ridership. For travelers making trips on AAF within Southeast Florida the impact would be greater: a 13 percent decrease in ridership.
- For long distance intercity travel, an increase in the cost of accessing an AAF station by 20 percent (attributable to an increase in gas prices or feeder transit fares) would be expected to result in a 2.5 percent decrease in ridership. Access cost is more important for short distance travelers and a similar increase in access cost would result in a 7 percent decrease in ridership.
- For long distance travel, an increase in auto travel time of 20 percent (attributable to an increase in intercity and intracity roadway congestion in the region) would be expected to result in an 8 percent increase in AAF ridership. For the short distance market where journey times are lower, the increase in AAF ridership would be 4 percent. If the increase in travel time were only to apply to intercity auto travel (in a scenario with heavy congestion on freeways but with little change in access times to stations via local roadways, for example), the increase in AAF ridership would be 16 percent in the long distance market and 12 percent for short distance riders.
- An increase in fuel prices of 20 percent would be expected to result in a 1.4 percent increase in AAF ridership for both long and short distance markets. Should AAF fares also increase to pass on the cost of higher AAF fuel related operating costs, there would likely be no net increase in ridership.
- An increase in air fares of 20 percent would be expected to result in a 1.7 percent increase in AAF ridership. Should air fares decrease by a similar magnitude, a decrease in AAF ridership of 2.6 percent would be expected.