The Economic Characteristics of Passenger Ferry between England and France - Case Study Example

Maritime Economics 　　　　　　　　　　　Introduction This report investigates the economic characteristics of passenger ferry between England and France, which crosses the Straits of Dover, making distinct comparisons between the activities in this market during the 1997 and today. Statistics that display the differences between these two periods are highlighted, and the applicable maritime economic theories are explored. Part 1 Comparisons between the market in 1997 and today In 1997, according to Cole (1997, pp.213), the two main ferry operators along Dover-Calais route were P & O European Ferries, which controlled about 40% of the Cross-Channel ferry market; and Stena, which had about 30% of the market. Other small ferry operators like Hoverspeed, Sea France (15-20% of the market) and Le Shuttle and EuroStar shared the rest percentage of the ferry markets. For simplicity purpose, it is helpful to minimize the comparison and contrast to only two of these ferry operators across the Straits of Dover, namely P & O European Ferries and Sea France. In 1997, P & O European Ferries offered 20 sailings a day in a crossing time of about 75 minutes (Cole, 1997). But today, the number of crossings per day has increased to 22 crossings per day done in about 1 hour 30 minutes (Direct Ferries, 2009). It is possible to infer from the figures just stated that the proportion of the Cross-Channel ferry operation covered by O & P European Ferries has shot up a bit over 40 % of the entire market. But what could have been responsible for the slower time needed to cross the Straits of Dover might be due to the fact that the ferries are getting older now or the weight of the passengers/cars do not support making such a crossing as swiftly as it was done in 1997. This is an inference based on the statistics given, though O & P European Ferries doesn’t offer any official reason for running slower than it used to do in 1997. Cole (213) explains that Sea France operated just a mere 5 return trips in 1997, which gave it 15-20% of the total market then. Surprisingly, Sea France currently offers 15 crossings per day in 1 hour and 15 minutes across the Straits of Dover (Direct Ferries, 2009). Mathematically, there seems to be some improvement on the performance of Sea France on the Cross-Channel ferrying: this could account for about 38% of the entire market now. There are several reasons that may have been responsible for this sudden great performance by Sea France: some of these reasons include offering reasonable fares, better customer services and crossing the Strait of Dover in about 15 minutes faster than the main rival, O & P European Ferries. Considering pricing structure, this area of maritime economy has changed as well: both O & P European Ferries and Sea France have drastically reduced their fares to attract more passengers in order to keep operating the ever busy Dover- Calais route. Generally, the ferry market now faces serious challenges from other forms of transportation: for example, the Eurotunnel that connects Britain to France has made it possible for motorists to go from one of the countries to the other, having been repaired after a suddenly fire outbreak in 1996. On a similar note, cheaper and faster rail and air transportation offers have dramatically cut the number of passengers that may be willing to use the ferries to cross the Channel. This is the dire situation ferry operators face today, and the sudden appearance of discount ferry operators is also another headache the major ferry companies have to deal with it. Part 2 2 (a) Supply and demand for cross-Channel passenger services: Adil (2006, pp. 4) reckons that demand is an economic process for which people need and willing to purchase or pay for certain goods and services; while supply is the act of providing them. In the case of cross-Channel ferry services, the cheapness of crossing the Strait of Dover has been the main magnet that have attracted more people to using ferries to get to France from Britain. Even though low at this moment, the cost of flying or travelling by train or bus is still far more expensive than using the ferries. As this market grows uniquely, more and more ferry operators have entered into the market to provide ferry passenger/car services to the increasing number of customers. This sees some formidable new entrants into the market that offer strict competition to the operation of the main ferry companies like O & P European Ferries and Sea France. These new ferry operators are smart at offering discounted crossings and improved customer’s services they expert would lure the passengers to them. Another reason why many people decide to use the ferries is because trains, which happen to major competitors with the ferries, have poor on-board customer services. And the trips by trains are usually boring and the fear of another unexpected fire outbreak in the Eurotunnel scares most passengers that would have opted for the trains. And uncertainty about the reliability of train sometimes does make people turn away from using them. (Cole, 215). 2 (b) How operators differentiate their services? Whether in 1997 or today, similar strategies are carried out by the ferry operators to make their services more superior to their rivals. Referring to Cole’s explanations, (1997, pp. 214-215) some of the steps that were taken include: Making check-in procedures easier for the people: what the ferry operators are doing are to let the passengers have enough time to check in their luggage, car, bags and other materials they are travelling with. This system would work against ferry operators that hurry passengers aboard and refuse to give enough time for pre-sailing preparations (Cole, 1997). Many passengers may have lost their valuable possessions in the course of hurriedly getting on to the vessels. Offering many benefits, which include duty-free shopping aboard the ferries and well-organized restaurants and eating arrangement aboard the ferries (Cole, 1997). These benefits are either unavailable or not as such improved on the trains commuting between Britain and France. Therefore, customers that are looking for a fulfilling trip across the Channel would definitely opt for the ferries. But since different tour operators offer different kinds of benefits, passengers would normally patronize the operators that offer the best comfort that their money could buy. Social relationship between the passengers and the ferry workers is vibrant, as passengers are usually treated with some respect and the on-board entertainment is great! Also, there is club membership which gives some passengers more discounts and exclusive treatment while sailing on the ferries, depending on their membership status. Some ferry operators could offer reduction in the fares or serve delicious meal aboard for their passengers based on their membership. It is clear that ferry operators that offer least benefits would lose their customers to their rivals who offer better deals. And since most of the ferry operators offer car-carrying services, but it is natural that passengers would go with the ferry operators that could guarantee bigger capacity but at a moderate fee. When comparing the trains with the ferries, the ability to carry cars en route to the destinations makes ferries to have an edge over trains, which can’t carry cars. 2 (c ) The pricing options that are available to ferry operations: Cole (1997, pp.214) describes what could be referred to as “price war” immediately after fire damaged Eurotunnel. And several ferry operators have to compete intensely with one another to attract the passengers turning to them to make their trips to France. However, there were some pricing options adopted then, which are still much in practice today: these include; Price-cutting: Many ferry operators cut their prices with the hope of getting more passengers. This price-cutting process involves offering discounts on a trip per day or depending on the number of trips someone is willing to make within a week. Cruising packages: there are cruising packages which offer cruise with food, drinks and entertainment. What makes these packages stand out is that they are affordable: so, passengers would always be happy to treat themselves to a nice cruising experience, as they move from Britain to France. Seasonal or special offers: The ferry operators utilize their knowledge of seasonal cruising demand from the customers to establish seasonal offers. During the winter, fewer passengers would like to be on the seas, because the weather would be cold producing mild feelings. During this period, the ferry operators would give cheap cruising fares. But summer always lures people into travelling because of the long summer holidays. So, ferry operators always witness a surge in the number of passengers ready to use their ferry services; therefore, they usually hike their fares during this period to offset the discounts given during low-season periods. Special offers are given during the weekends, bank holidays, school holidays and special occasions, in order to encourage more passengers to use the ferry services. Class/membership pricing: this system of pricing is gaining more recognition among the ferry operators. The passengers are divided into different classes based on their kind of membership. There are Premium, Platinum and Economy classes; and their treatments or benefits vary considerably. For example, a premium class could enjoy a cruising and dinner or lunch, while a platinum class could have a comfortable bed and good entertainment in the course of the trip. This is another way to cater for the different classes of people in the society: since there is always middle class, working class and upper class people in every society. But the ferry operators that charge cheaper fares with all the above-mentioned benefits would definitely be able to have more passengers. 2 (d) Competitive behavior between the operators: Steuernagel (1998, pp.129) agrees that competitors do exhibit certain competitive behavior that may be similar fighting a war as they struggle to take control of the market under consideration. In this way, certain attributes are necessary to maintain a competitive behavior characteristic: this is called “competitive differentiation” (steuernagel, 1998). Competitive differentiation involves the following processes listed below: Product definition: This emphasizes the importance of defining each ferry operator’s product so as to identify it as a unique product of that particular ferry operator. This explains why it is easy for passengers to know which packages belong to O & P European Ferries and which ones are Sea France’s packages (Steuernagel, 1998) Pricing: The most important aspect of competitive behavioral pattern is to determine how each ferry operator carries out its pricing system: when is the time for cheaper cruising and why? And how could the pricing regime remains unique so that passengers could quickly identify with it and keep patronizing that ferry operator? (Steuernagel, 1998) Promotion: It is not enough to put in place nice product identification and great pricing option, but it is as well important to promote the ferry operator’s services and packages (steuernagel, 1998). The three steps discussed above are necessary to represent a ferry operator’s competitive behavior. How often it carries out these options would indicate its fierceness to be the leader in the ferry service market. As it has been reported by Cole (1997, 213), the competition among the ferry operators that ply Dover to Calais has become like a war, as each operator does it best to outsmart the other. Bibliography/References 1. Cole, Gerald P., 1997. Strategic Management. London: Letts Educational 2. Adil, Janeen R.,2006. Supply and Demand. Mankato, Minnesota: Capstone Press. 3. Steuernagel, R., 1998. Cellular Marketing. London: John Wiley and Sons. 4. Direct Ferries. 2009. (online) (updated 10 March 2009). Available at Accessed on 27 April 2009. Read More