Four factors transit agencies should consider for new revenue generation opportunities

There’s a common misconception about transit agencies that they should be able to operate solely on farebox revenue. The assumption is that boosting revenue is as simple as increasing ridership and that these agencies should be run like businesses aiming to maximize profit. 

However, the reality is that public transit has never been a profit-driven enterprise. Commuter rail, buses and subways are public services designed to provide safe, reliable transportation and keep cities and communities connected. Transit operators excel at moving people efficiently, not at generating profit. 

While farebox revenues rarely cover all operating costs, transit agencies have untapped opportunities to diversify their revenue streams and strengthen their financial stability. By thinking outside the box, they can leverage several strategies to generate additional income. 

Here are four key factors transit agencies should consider when exploring new revenue generation opportunities: 

1. Uncover the hidden value of your audience 

Every day thousands of passengers spend significant time in transit stations and vehicles, providing transit agencies with a valuable, yet often underutilized opportunity to diversify revenue streams beyond ticket sales. The data generated onboard trains offers rich insights into passenger demands, usage patterns, network performance and even system health. With this wealth of information, transit agencies can explore new ways to engage passengers and generate revenue. 

One avenue is targeted advertising. By strategically placing digital displays, posters and interactive ads, agencies can capture passengers’ attention and increase ad revenue. Beyond physical advertising, transit vehicles, particularly rail cars, often come equipped with mobile access routers for passenger Wi-Fi. This existing infrastructure can be leveraged to deliver unique advertising and sponsored content through a captive portal. 

For example, onboard entertainment portals offer movies, TV shows, eBooks, audiobooks, newspapers, magazines and games. Not only does this enhance the passenger experience, but it also opens up new revenue streams by incorporating banner ads and pre-roll content. This custom-branded interface creates opportunities for transit agencies to partner with advertisers, generating revenue while collecting valuable data on passenger preferences. This data can then be used to improve ad targeting, making it more effective and attractive to brands and ultimately increasing revenue potential. 

2. Make your real estate serve another purpose 

While passengers offer one revenue opportunity, a transit agency’s most valuable asset might be its real estate. Transit stations, neighboring rights-of-way and adjacent land can all be monetized in various ways—whether through expanding advertising space in high-traffic areas or leasing land for cell towers along railway lines. Mobile operators are often willing to pay significant sums to rent space for cell towers in urban areas, providing a stable, long-term source of income that is independent of daily operations. 

However, agencies should approach this carefully. Following the onset of the COVID-19 pandemic, one agency aimed to create a self-sustaining model where revenue from cell tower rentals would offset the costs of providing reliable passenger Wi-Fi. The agency soon discovered  this approach was flawed. It’s essential to separate these goals. Agencies should maximize revenue by renting cell towers to the highest bidder while issuing a separate request for proposals (RFP)  for the vendor that can best deliver a superior passenger Wi-Fi experience. Combining these initiatives into one could dilute both revenue potential and service quality. 

3. Build in-house expertise to protect an agency’s assets  

In today’s crowded urban environments, with property values skyrocketing, a transit agency’s real estate can be a significant financial asset. Managing and protecting these valuable properties, however, requires specialized expertise. This is where having an in-house real estate expert becomes crucial. 

For an agency to achieve its financial goals while keeping operations on track, close coordination between revenue, strategic planning, asset management and marketing is essential. A dedicated in-house real estate expert ensures that someone is always focused on the agency’s best interests. Given the high stakes involved, agencies should aim to keep control of real estate management in-house rather than outsourcing it to parties that may not prioritize the long-term objectives. 

4. Keep control and never compromise performance  

Transit agencies have many opportunities to monetize onboard passenger Wi-Fi or generate advertising and sponsorship revenue from their digital assets. However, it can be tempting to combine services or trade one offering for another. The danger with this approach is that agencies can risk losing control of both revenue generation and service quality, which ultimately impacts passengers. 

Before issuing an RFP, agencies should start by evaluating customer satisfaction (CSAT) metrics to guide procurement decisions. Bundling services with differing performance expectations can result in one service suffering at the expense of the other, negatively affecting the passenger experience. 

To avoid this, transit agencies should maintain oversight and prioritize performance metrics. By keeping CSAT at the forefront of technology investments, agencies can ensure that the passenger experience remains uncompromised while still pursuing new revenue opportunities. 

The future of public transit extends beyond moving people. It involves transforming stations and vehicles into dynamic, multi-functional spaces that cater to the evolving needs of modern commuters. Around the world, forward-thinking agencies have diversified their revenue streams while strengthening their financial position—without sacrificing control over their assets and data. 

By carefully considering these factors and embracing innovative approaches, transit agencies can unlock new revenue opportunities while staying true to their mission of providing essential public services. With the right strategy, the balance between service quality and financial sustainability can not only be achieved but exceeded.