West Somerset Railway General Discussion

I agree. But that investment is part of the cost base of the railway, and should be accounted for as such.


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Where's @Bean-counter when we need him? Oh well ..... next best it'll have to be ....

IS THERE A CHARTERED ACCOUNTANT IN THE HOUSE PLEASE?

..... and I never thought I'd find myself asking that!

 

I wouldn’t use the word “profit” but instead use the word “surplus”.
There are three types of “surplus” on a heritage railway-

1. firstly the direct costs of the particular operating day eg ticket sales over the costs of coal and loco hire etc.

2. Secondly the surplus from 1 is carried forward and then applied against the fixed annual costs of the railway eg insurance, staff salaries, and other general costs ; and

3. if a surplus results from 2 then this is often used for repairs and renewals and sometime improvements.

Most typically railways can make a surplus/profit from 1 and 2 so the direct costs of running and fixed annual costs are covered. The big issue is 3, being funding repairs and renewals from operating surpluses, particularly where there is a “backlog” where the residual life in equipment is coming to the end. There are alternative ways such as donations but being brutally honest there is a never ending cycle of repairs and renewals for railways of more than a certain size. Hence the key figure on the profit and loss accounts is how much is invested in repairs and renewals. Better to have a break even with high investment in repairs than instead to claim a “profit” from 1 and 2 above and be lagging behind on 3.

regards

Matt

 

Which is why, in context, I said “profit”. Where said profit is surplus after allowing for 1, 2 & 3.


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Whilst nothing wrong with what the market will bear, it still needs to cover your costs. A 20 mile line will have more infrastructure costs than a 10 mile line even if the locos end up running more trips on the 10 mile line each day. A line with limited competition of other attractions may end up not having much to "compete with".
There is no "one model"

 

Question, then.
If our notional family is staying a week or two in a place on holiday, there will be some "big ticket" days, some medium ticket days, and some cheap days out. The proportion of each will depend on their income. Currently, I would say that the steam train day is one of the "big ticket" days- it is for my family. £70-£90 basic outlay, plus a few cups of tea and ice creams, and we are around the £100 mark- rivalling the cost of a day at one of the local theme parks, the zoo or similar.
If fares were set so that the railway was in the medium ticket range, £50-£60, could there be sufficient increase in customer numbers that the overall basic income was the same, but with a lot more people to sell tea and ice cream to?
Or are trains already running at capacity and there isn't scope for more bums on seats without more seats and hence more operating cost? Is the customer demographic one which tends to shun crowds and prefers to have more space, and might be put off if trains were too busy?
From what I've seen*, standard gauge lines are more expensive to visit, and appear to have surplus capacity. Narrow gauge lines tend to be shorter, cost less, and operating at or near capacity.
A couple of years back, when the 'new' Baldwin was first out on the BMR I visited on the weekend. The train was full-all seats taken, and people of every age, shape and colour seemed to enjoy every minute. All tipped out at Pontsticill on the way down and bought lots of ice cream. Terrific jolly atmosphere. I went back a couple of weeks later on a weekday, with just my son. Train was about 1/6 loaded, and everyone seemed to be grumbling- Cost of tickets, lack of heritage, having to stop at Pontsticill with nothing to do, and being forced to buy tea to pass the time- Grumble grumble. The second trip they may well have been steam enthusiasts, but the hoi polloi seemed to enjoy themselves more.
* I haven't been everywhere, I probably didn't go on the gala day

 

"What the market will bear" is the absolute maximum income you can get. Anything different in the way of a pricing structure will generate less for the same costs. If "what the market will bear" doesn't cover costs, nothing will.

 

True, but sometimes setting prices on “what the market will bear” leads to an underestimation of what prices should be charged. Working from costs up is sometimes a useful challenge to assumptions about what the market will bear.


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In the specific case of charitable entities (i.e. no share will ever pay over a dividend to the shareholder) I appreciate that, but there remain statutory accounting requirements which do have financial implications. Of course, none of the terminological niceties ultimately count for anything much if income from the sources enumerated by @Jamessquared fail to cover the costs of operating.

 

Whilst I know what you mean, I think that should be "if income from all sources fails to meet the costs of operating, maintaining and renewing the railway".

 

Indeed ..... I'd merely thought, income wise, Tom's list had pretty much nailed the lot. For the sake of completeness, the UK's Gift Aid facility really deserves a specific mention too.

 

As someone who processes Gift Aid, I'd say it's vitally important - but not a separate income stream. It needs to be seen as maximising the existing charitable streams, not a separate strand.

 

It was the ops, maintenance and renewals bit I meant to emphasise, not just operations

 

Perhaps the finances of railways needs a thread all of its own, its not just the WSR that faces this issue?

 

Oh ... them!

Agreed, though perhaps widened to all pw related? Coo-eee .... How about it mods?

 

Well there are a few that buy a small quantity of new rail each year, paid for from revenue. Alas, there are others who don't but resort to public appeals.

 

But....passengers get off at places like Ropley to visit the loco shed etc. Would they get off at WD just for a playground and/or miniature railway in sufficient numbers to warrant providing such facilities there?

 

If it does, then you have got it wrong somewhere. "What the market will bear" is just the same as "the maximum the market will bear", i.e. the maximum you can charge for a given cost of production. Working from costs up will possibly give you the same figure, but is most likely to bring in less, either because you are charging less than most people are prepared to pay for what you are offering or because most people are not prepared to pay what you are charging.