The UK’s Office of Rail and Road (ORR) has uncovered significant inefficiencies in the railway station catering market, according to its recent report. The regulator argues that greater competition in this sector is crucial to drive better value for passengers and taxpayers alike.
The investigation by ORR highlights key issues within the market, emphasizing that the current lack of competition leads to missed opportunities for improved services and increased investment in the railway infrastructure. The report reveals that outlets at railway stations often remain under the same management for extended periods due to protected leases. This lack of turnover means that station operators are not adequately incentivized to invite competition for catering outlets.
Even when unprotected leases are up for renewal, the common practice is to roll over or extend the lease without engaging in open competition. Shockingly, nearly half of all stations (47 percent) with retail space have only one outlet, indicating a lack of diversity and choice for passengers.
The ORR report underlines that these market weaknesses not only limit options for passengers but also impact station operators’ income. With less income available, operators face challenges in improving stations and services, thereby increasing the reliance on taxpayer support. The report suggests that these inefficiencies contribute to an average 10% price premium at railway stations compared to the high street.
Will Godfrey, Director of Economics, Finance, and Markets at ORR, expressed concerns about the current state of the railway station catering market. He stated, “The railway station catering market isn’t working as effectively as it should be. More competition between companies to operate at stations would bring real benefits to passengers and taxpayers.”
The ongoing investigation by ORR will now focus on formulating recommendations for the government, station operators, funders, and other stakeholders to enhance the functioning of the market. The aim is to encourage healthy competition, ultimately leading to better services, increased investment, and reduced reliance on taxpayer support.
Source: News Rail Business Daily