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Institute for Transport Studies
FACULTY OF ENVIRONMENT
Theory and practice of valuing
travel time savings
The Forge Summer School
University of York, September 2012
Richard Batley & James laird
R.P.Batley@its.leeds.ac.uk

Some questions that we will
consider…
• What are travel time savings
• Are travel time savings important to a scheme appraisal
• Why would people pay to save travel time
• How do we measure the value of travel time savings
• How do values vary

Structure
• Part 1: Introduction
• Part 2: Defining travel time savings
• Part 3: Business and freight travel time savings
• Part 4: Non-work travel time savings
• Part 5: Time savings in a forecasting and appraisal
• Part 6: Contentious issues
• Part 7: Conclusions

Part 1: Introduction

Context
In practical scheme appraisal, the proposition is that...
Overall
Economic
Impact
= Change in
transport user
benefits
+ Change in system
operating costs
and revenues
+ Change in
costs of
externalities
- Investment costs
(including
mitigation
measures)
Reliability
Time
Scheduling
Comfort
Frequency
Quality

Are travel time savings important
100.0%
Contribution to PVB for 101 rural schemes on the
NSR, Ireland by impact (showing 15th centile,
median and 85th centile)
80.0%
60.0%
40.0%
20.0%
15th centile
85th centile
median
0.0%
-20.0%
Air and climate
change
Noise Accidents Transport
Efficiency &
Effectiveness
Wider Economic
Impacts
Source: National Secondary Roads Needs Study, Ireland (RPS et al. 2011)

Part 2: Defining travel time
savings

What are travel time savings
• Can we save time
– If only....
• However, we can transfer time from one activity to another.
– Work
– Housework
Leisure
– Travel
Work
More travel

What are travel time savings
The value of transferring time from
travel to something else
....and that something else can include more travel!

Why pay to save travel time
Business
– Employees will spend more time
working not travelling (increased
productivity)
Freight
– Increased productivity of vehicle
and driver
Non-work
– More leisure time
– More time to do jobs (e.g. paint
the lounge)
– Ability to travel more may open up
access to new activities/locations
Eurostar

Part 3: Business and freight
travel time savings

Theory of VTTS:
Business and Freight
• Cost saving approach:
VTTS = wage rate + labour related overhead
• Rationale:
Firms hire workers until the value of their output = their wage rate
– With a time saving (increased productivity of labour force):
• Firms increase output with given labour force; OR
• Firms keep output constant and use less labour releasing labour
into the market
– In each case, firms gain an amount equal to the value of the wage
rate of the labour x the no. of hours/labour units saved

Part 4: Non-work travel
time savings
COMMUTING
SHOPPING
LEISURE
VISITING FRIENDS AND FAMILY
PERSONAL BUSINESS
ESCORT (e.g. PICKING KIDS UP)

Theory of non-work VTTS
VTTS = Marginal utility of transferring time from travel to leisure
Marginal utility of income
• Theory cannot be used to support any particular value, as VTTS will be
influenced by:
– Relative (dis)utilities of travel and leisure
– How much time is spare, the manner in which the time constraint binds,
and the consequences of being late
– Whether travel time constrains access to activities/locations
– The marginal utility of income
• Therefore require empirical evidence, usually a mixture of:
– Revealed Preference (RP); and
– Stated Preference (SP)

Non-work VTTS
How it varies - empirics
• Non-work VTTS found to vary by/over (all other things being
equal):
– Journeys
• Journey purpose
• Mode
• Conditions (overcrowded, free-flow)
• Group size
• Journey length
– People
• Income
• How tightly time constraints bind (gender, culture)

Part 5a: Time savings in
forecasting

Time savings in forecasting
• Essential to use perceived (i.e. behavioural) values to
ensure accurate demand forecasting
• Values of time savings need to vary by:
– Travel cost/distance and income
– Size and sign of time saving may also be important
• Most important for transport pricing:
– Toll roads, public transport, road pricing, etc
• BUT, pragmatism may be necessary:
– Cannot collect data on all variables and scenarios

Non-work VTTS: Formula
used for forecasting in UK
• ITS Leeds & Bates (2003) proposed an identity relating
VTTS to travel cost and income:
where:
VTTS
cost
time cost1 income1
cost cost0 income0
income
subscripts 0 and 1 refer to ‘base’ and ‘forecast' scenarios
β time , β cost, ε cost and ε income are parameters estimated from SP
data

Part 5b: Time savings in an
appraisal

The effect of income
• In practice, value of time savings varies with wages
(business) and income (non-work)
– Result: benefits are higher in richer areas ceteris paribus
• Is this the right thing for appraisal from a policy perspective
– Yes if you can:
• Collect data on the incomes of travellers
• Conduct a distributional analysis, and thereby compare schemes
effectively between one region and another
– No if you can’t

The effect of income – national
appraisal
• UK
– Standard values for UK
– Non-work: average income assumed (equity value)
– Business: wage varies by mode and driver/passenger
– Freight: wage of driver constant across vehicles
• EU (Odgaard, Kelly and Laird, 2005)
– Standard values dominate but some variation in VTTS
– Income (Netherlands and Switzerland)
– Others:
• Drivers and passengers (Netherlands and UK)
• Urban/interurban (France)
• Journey length (France, Switzerland and Sweden)
• Delays (Denmark and Sweden)
• Days of the week (Hungary)

Non-work VTTS: Values used
for appraisal in UK
• WebTAG unit 3.5.6
Table 2: Values of non-work time per person
(£ per hour, 2002 prices and values)
Purpose Resource Cost Perceived Cost Market Price
Commuting 4.17 5.04 5.04
Other 3.68 4.46 4.46
• Applies to all modes except:
– Walk/cycling valued at 2 times values above
– Wait time valued at 2.5 times values above
• Year on year REAL growth in value of time of 0.8*growth in REAL GDP/capita
• Variation by income for tolling/road pricing studies only (WebTAG unit 3.12)

Time savings and economic
impact
• Historically have always been viewed as an economic
impact.
• But are all time savings related to the economy
– Yes directly: business and freight time savings
– Yes indirectly: commuting, shopping/retail, tourism
– Not really: visits to friends, pure leisure, etc.
• Really, time savings are a mixture of:
– Economy
– Accessibility

Part 6: Contentious issues
SMALL TIME SAVINGS
INCREASED TRAVEL
PRODUCTIVE USE OF TIME

Small time savings
• < 3 mins or < 5 mins
• Can comprise 25% to 50% of time savings (Welsh and
Williams, 1997)
• But 3 arguments against small time savings
– Perception
– Usability
– Error

Increased travel
• Transferring time to increased travel
– Valid economic response
– To access new more attractive/useful destinations, to move house, to
move job
• Travel time budget concept (see e.g. Metz, 2004) is
therefore broadly consistent with concept of VTTS
• Might not be desirable from a policy perspective, BUT:
– DON’T SHOOT THE MESSENGER; instead
– Take into account elsewhere in the appraisal

Business travel:
The productive use of time
• Cost saving approach implicitly assumes all business travel
time is unproductive
– What about train travel
• If train travel is productive:
– Time saving benefits are diminished for existing travellers
– Need to factor in crowding effects, distance effects, etc. on
productivity of work whilst travelling
– Need to separate walking and waiting in the modelling of train
journey times
– Need to factor in scheduling constraints for business meetings etc.
• Problem is not straightforward

Part 7: Summary

Summary
• Can’t save time only transfer it to something else
• Value of travel time saving is a function of the difference in
how productive time is whilst travelling and how productive it
is in the activity it is transferred to
• Business and freight VTTS is a function of the wage
– Varies by any aspect of travel that affects productivity
• Non-work can only be surveyed; and:
– Varies by inconvenience/discomfort, income, consequences of travel
• Remains contentious as it dominates appraisal and appears
to work against more sustainable policies, but:
– Don’t shoot the messenger

References
• Abrantes and Wardman (2011) Meta-analysis of UK values of travel time: an update. Transportation
Research Part A, 45, pp1-17.
• Axhausen, Konig, Bates, Bierlaire (2004) Swiss Value of Travel Time Savings. European Transport
Conference 2004.
• De Jong, G., Bakker, S., Pieters, M. and Wortelboer-van-Donselaar, P. (2004), ‘New Values of Time and
Reliability in Freight Transport in the Netherlands’, Proceedings of the European Transport Conference,
2004.
• Department for Transport (2011) Values of time and vehicle operating costs. TAG Unit 3.5.6.
www.webtag.org.uk
• Fowkes, A.S. (1999) Issues in Evaluation. A justification for awarding all time savings, both small and
large, equal unit value in scheme evaluation. In AHCG (1999) The Value of Travel Time on UK Roads,
The Hague Consulting Group, The Hague, Netherlands., pp341-359.
• Fowkes, A.S. (2001) Principles of Valuing Business Travel Time Saving. ITS Working Paper 562,
Institute for Transport Studies, University of Leeds, UK.
• Hensher, D.A. (1977) Hensher, D.A. (1977) Valuation of Business Travel Time. Oxford:Pergamon Press.
• Mackie, P.J., Jara-Diaz, S.R. and Fowkes, A. (2001) The value of travel time savings in evaluation.
Transportation Research Part E, 37(2), pp91-106.
• Metz, D.A. (2004) Travel time – variable or constant Journal of Transport Economics and Policy, 38(3),
pp333-344
• Odgaard, Kelly and Laird (2005) Current practice in project appraisal in Europe. European Transport
Conference 2005.
• Shires and De Jong (2009) An international meta-analysis of value of time studies. Evaluation and
Program Planning, 32, pp315-325.
• Welch, M. and Williams, H. (1997) ‘The Sensitivity of Transport Investment Benefits to the Evaluation of
Small Travel-Time Saving’ Journal of Transport Economics and Policy 31 pp231-254