Dubai Metro has won favour with its ticket prices. But will cheap fares be enough to offset the cost to other transport providers and keep this gravy train on track?
Following months of speculation, the Roads and Transport Authority (RTA) unveiled prices for the $4.2bn Dubai Metro last week as the system’s September 9 launch date draws near. With less than three months until the first trains start shuttling passengers from Jebel Ali to Rashidiya, the authority revealed that standard tickets will cost between AED2.50 ($0.68) and AED6.50 ($1.80).
The fares for travelling on the metro’s 52km Red Line, which the RTA claims will take 60 minutes to travel and carry up to 32,000 passengers an hour, appear to have appeased Dubai residents. ArabianBusiness.com readers flocked to praise the authority’s reasonable prices.
Most have welcomed the news that passengers carrying electronic top-up or ‘Nol’ cards will spend AED2.30 ($0.63) when travelling through one of the system’s five zones, and AED5.80 ($1.60) for longer distances.
Charges for gold card holders, who can ride in the most comfy cabins, are AED4.60 ($1.30)and AED11.60 ($3.20) respectively, while senior citizens and students will be charged 90 fils (0.25) and AED2.90 ($0.80) for 3km or triple zone trips.
In comparison, passengers travelling on the London Underground have to pay around £4 ($6.60) for an adult single zone fare, with a single ticket costing around 1.60 ($2.30) on the Paris Metro.
The Dubai Metro fares are three times cheaper than New York, Tokyo and Hong Kong and similar to those in Singapore and Cairo, according to RTA chairman Matter Al Tayer.
“The price will make it attractive to use buses and the metro, and it is also a very luxurious and comfortable way to travel,” he says.
Still, while the ticket pricing has won favour with Dubai’s masses, cost alone will not ensure Dubai Metro’s success, says Robert Ziegler, partner and vice president of global consulting firm AT Kearney Middle East. Convenience will be crucial to the metro’s popularity.
“If you need to take a taxi to get to the metro and then drive somewhere and then take another taxi to get to your final destination you may as well take a taxi straight away, unless it is prohibitively expensive,” he says.
“How many people are within the vicinity of these stations and can they use them in a practical way? If it’s faster and the connectivity is good then people will use it, even if the price is too high.
“There will be a segment of customers that will use it because it is cheap, and then you will have to look at taxis and how they compare and compete,” he adds.
For taxi drivers, the downside to a popular metro system will be a likely drop in demand for their services. Taxi fares from Dubai Marina to Garhoud average between AED60-70 ($16-19), more than 10 times the AED4.10 ($1) fare that passengers will pay when riding through two zones on the metro.
An AED14 ($4) day pass also represents good value compared to taxi charges.
But with both the new transport system and Dubai cabs falling under the RTA’s remit, Ziegler says this is unlikely to be a concern for the authority, adding it will sacrifice revenue from taxi fares if it means reducing traffic on Dubai roads and attracting more metro users.
“They [the RTA] know the metro, as a large infrastructure investment, is not going to be something they will make a huge profit with,” Ziegler says. “This is not a profit-generating enterprise and I think someone from the RTA said that a couple months ago at a conference. He said this was an investment in the infrastructure of Dubai, therefore there is no short-term business case.
“There is a long-term business case in trying to get traffic into public transport and making Dubai a more liveable place.”
Suggestions that the metro could affect Dubai’s car rental companies are also misplaced, according to Ziegler. He argues that holidaymakers or businesspeople staying in the emirate are still likely to find hiring a vehicle much more convenient than riding the metro.
“You could be a tourist or someone on business here for a while and want to get to places that are not so easily accessible,” he says.
Sam Eltibi from car rental company Dollar Thrifty makes a similar point, claiming residents will still require car transport when the metro goes live on September 9. The executive director for the MENA and Asia Pacific region said: “People want to go to distant destinations where the metro won’t take them. The metro is a good addition to the transportation mix, but it is not going to touch our business in any way.
“A few years ago, I was asked a question about Salik [road tolls] and I said the same thing then – it will have zero effect.”
If anything, analysts such as Ziegler and Gautam Bellur, an associate partner in Oliver Wyman’s Dubai-based transportation practice, are confident the metro will mean more business for local companies.
Bellur says: “The metro is developed with anticipated demand in mind. It is not a toy for Dubai. It is built with the idea of encouraging mass transit for a fast-growing city, so it is not just a good thing, it’s absolutely required for a growing city. It is paramount to have a well-oiled metro system.”
When fully operational, the metro should help cut road traffic, making the city more attractive to outside investors, according to Bellur.
“Each transportation mode has a role to play in the overall transport system,” he adds. “The RTA would never have conceived of a major development like this if traffic wasn’t one of the key areas that they were trying to impact. Particularly in areas that face significant traffic in peak hours, the metro will likely be a huge hit.”
As for the people using the metro, Bellur insists it is too early to assess which portion of Dubai’s population will provide the most passengers. He does, however, argue that people’s reliance on the metro will depend on where they live.
“I would imagine the RTA has researched the demographics and what is right for 20 to 40-year-olds is not necessarily the same for people who are 40-plus,” Bellur says. “There is also income and where people live to consider.
“If you live in Dubai Marina you are more or less a suburbanite who may think differently to someone in Bur Dubai or Deira for whom [the metro] is almost a critical lifeline, so as not to get clogged in traffic on a daily basis.
“Demand is going to be highest in those places where people have fewer alternatives. It may take a longer time for people or communities [to show interest] where there are alternatives.”
www.arabianbusiness.com by Rob Morris