Institute of Transport and Logistics Studies

Business travel value of time savings - So what did Hensher do for Europe?

Professor Mark Wardman, Visiting Professor, ITLS-Sydney; Institute of Transport Studies, University of Leeds, UK

9th Apr 2013  11:00 am - Lecture Theatre 2 (Room 112), Level 1, St James Campus, The University of Sydney, 173-175 Phillip Street, Sydney, NSW 2000

Abstract: The value of travel time savings is one of the most important parameters of transport planning and has preoccupied the profession for over forty years. It is commonly claimed that up to 80% of the benefits of transport investment schemes accrue from time savings. Even though business travel tends to form a small proportion of overall travel, because of the premium valuation of business travel time savings they form around a half of the time saving benefits.

The conventional approach is to value business travel time savings at the wage rate plus the additional costs of employing labour. The potential shortcomings of the cost savings approach have long been recognised and are well rehearsed, yet it is only in Sweden, the Netherlands and previously Norway where there have been any departures from it in official appraisal practice relating to so-called briefcase travellers.

With a pedigree almost as long is the so-called Hensher equation. This has considerable intuitive appeal, allowing as it does for the productive use of time while travelling, the relative productivity of time in the normal workplace and while travelling and the use to which the time savings will be put which permits inclusion of benefits to the employee.

Another approach is to use a company's expressed willingness to pay for time savings as a direct estimate of the benefits to them of time savings for their employees while travelling. Such valuations might be obtained from Revealed Preference evidence or else from Stated Preferences.

We are aware of only one study, reported by Fowkes in 1987, that has compared the various approaches in a single study. This seminar is based on a recent study for the UK Department for Transport where we have reviewed the existing evidence in this area to enable the Department to make decisions as to how it will develop policy. After briefly summarising appraisal practice in the main developed countries, the worldwide evidence (principally European) relating to the Hensher parameters is reviewed. The implications of this approach for official values is demonstrated. We then review a large amount of European willingness to pay evidence on business travel valuations and contrast this evidence with the cost savings and Hensher approaches. Finally, some specific studies providing important insights into business travel are briefly summarised.

Our conclusions are that the empirical evidence is not telling a consistent story, with some notable differences between the values derived from willingness to pay and the Hensher equation, and there is clearly a need for further investigation of this important area.

Bio: Mark Wardman is Professor of Transport Demand Analysis at the Institute for Transport Studies (ITS), University of Leeds. He was Director of ITS between 2006 and 2011 and prior to that Director of Research. He has been involved in travel behaviour research for over 30 years, since being involved in the UK Department for Transport's pioneering national value of time study. His main research interests have been the use of Stated Preference methods to value travel attributes and environmental factors and the analysis of rail demand data. In recent years, he has conducted extensive reviews of values of time, price elasticities, time elasticities and time multipliers. He is interested in the reliability of SP data and means of improving it, and the consistency of demand paramaters obtained from different types of data (RP, SP) using different methods (demand modelling, choice modelling) and how they conform to or indeed challenge economic theory. He has published over 50 papers in international journals.