Bigger fares and fees hurt economy - just look at BC Ferries

VICTORIA - We Islanders have just escaped an eight-per-cent ferry rate increase, the kind of thing that makes any consumer crabby.
Just like, I imagine, someone who lives in Merritt feels when they roll up to the toll booth on the Coquihalla, or we all feel when we contemplate the tax component of $1 gas.
But we tend to forget that the economic impact goes far beyond our individual problems.
Take the BC Ferries' proposed rate increase, which the corporation wanted to offset rising fuel costs. (The BC Ferry Commissioner, the independent watchdog over fare increases, ultimately reduced the levy to four per cent.)
The proposed eight-per-cent fare increase, based on BC Ferries' models, would have reduced ferry passengers between Vancouver Island and the Mainland by 2.5 per cent. That's more than 70,000 cancelled trips.
Some of those cancellations would come from Islanders, giving up on a plans for a Vancouver weekend.
But a lot of the lost travelers would be tourists who decided that it was too expensive to zip over to the Island to see Butchart Gardens.
It's a simple economic law. As price rises, demand falls. If you're a tourist in Vancouver, trying to decide whether to head to the Okanagan or the Island, the ferry costs are a factor. Figure $135, with reservation charges, for the round trip. That's enough to take the family out for a day at the water park, or to splurge on a flashy dinner. The Interior starts to look like a better destination.
BC Stats looked at the impact of ferry rate increases last year. It found that fares had consistently risen faster than inflation over the last 30 years. The average inflation rate was 4.5 per cent; ferry fare increases averaged 6.5 per cent.
Those excess increases are costing Vancouver Island's tourist industry more than $25 million a year in room revenues alone, BC Stats projected. Include food and other spending, you're looking at an annual $40 million loss to the economy.
BC Ferries rates may be a good deal by global standards. But that's not the issue.
Back in 1975 a car and driver could make the crossing for $5. If price increases had kept pace with inflation, today's fare would be about $18. Instead, it's more than $30.
That's enough to discourage some travellers, the evidence suggests. B.C.'s population has increased more than 55 per cent since 1980. Ferry traffic has risen only 33 per cent., and the Island is capturing a smaller share of overall provincial room revenues.
"The trend in Vancouver Island's share of room revenues has closely followed changes in ferry prices," BC Stats reported. "This suggests that BC Ferries has been, to a degree, pricing Vancouver Island out of the tourism market."
It's not just an Island issue. Vancouver Island is a destination for visitors from outside the province, and BC Ferries rate increases discourage visitors who could range through other parts of B.C.
And the issue goes far beyond BC Ferries.
Prices have to go up as costs rise. But all price increases, and taxes, and fees, have their consequences for the overall economy.
The Liberal government's appointment of a BC Ferry Commissioner to rule on rate increases is a good step. (Although the government has refused to act on Commissioner Martin Crilly's warning that he can't do his job properly because he has no power to review reservation fee increases. This creates "potential for misuse of monopoly power" by BC Ferries, says Crilly. BC Ferries raised reservation charges 17 per cent last year; they are effectively required on many sailings.)
But it's often up to the public to be vigilant when governments or councils decide they need extra revenue.
Services need to be paid for. But the wrong decisions - like excessive ferry rate increases - can cause unintended damage to the economy, and communities.
Footnote: It's not just a question of rates. The discussion of tougher ferry travel security measures in the wake of the London bombings should also scare the tourism communities. Travellers have come to hate the hassles of airport security. Bringing metal detectors and line-ups into ferry travel will give people another reason to stay away, for what seems a very dubious threat.