Effects of the ‘Verano Joven’ discounts on Spanish High-Speed Rail

On June 15, 2023, the government launched a 50% subsidy on the price of high-speed tickets (up to a maximum of €30 bonus), aimed at young people. The measure was aimed at young people between 18 and 30 years of age and was explicitly intended to improve their access to this type of travel. The measure was in force until September 15 and has been reissued in 2024 and extended. In fact, it is expected to remain in force, which motivates the need to evaluate to what extent it has produced the desired effects and where it could be improved.

Two dimensions deserve special attention: on the one hand, measuring whether or not the policy has effectively increased the use of high-speed rail. On the other, to estimate whether the aid has been converted in its entirety into a price discount, something that cannot be taken for granted in light of the available academic evidence on what is known as pass-through or passing part of the bonus on to the price.

To evaluate the effects of the bonus on occupancy and prices of high-speed trains, we worked with a database containing values of prices and available seats for each train (with date-time of departure and arrival, origin-destination, travel time and type of vehicle) for one of the high-speed operators in Spain. The database includes all the main routes and collects information on prices and seats available each day up to the time the train departs.

An econometric method that takes advantage of the quasi-experimental discontinuity was applied: the temporal discontinuity implied by the entry into force of the measure in 2023 was used to define a group of trains affected by the policy (those that departed in the days immediately after June 15) and others, similar in all other characteristics, but not affected (those that departed in the days before).

The results of the regressions indicate that the basic-type seat occupancy rate was nearly 4.9% higher on policy-treated trains compared to control trains, a statistically significant and robust result. At the same time in 2022 (when there was no discount), an increase of 1.2% was observed. With this, the total effect attributable to the rebate could remain at around 3.7%.

The models also indicate that prices for treated trains increased by between 5.6% (premium tickets) and 10% (basic tickets). This price increase was further concentrated on basic tickets for trains departing in the afternoon hours (after 12 pm), an effect that is not observed in 2022.

To maximize the original objective of the measure (facilitating access to high speed for young people) while minimizing the impact on prices, we suggest a possible reform in the design of the aid based on the evidence collected for other transport promotion policies. This reform would consist of converting the subsidy into a fixed value of X€ instead of a percentage of the total ticket. This value could change between routes to reflect price differences, keeping public spending on this policy the same.

In addition, it is noted that increased competition on routes could mean that any bonus could be passed on more to the end consumer, including young people.