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Error and optimism bias in toll road traffic forecasts

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Abstract

Traffic forecasts are employed in the toll road sector, inter alia, by private sector investors to gauge the bankability of candidate investment projects. Although much is written in the literature about the theory and practice of traffic forecasting, surprisingly little attention has been paid to the predictive accuracy of traffic forecasting models. This paper addresses that shortcoming by reporting the results from the largest study of toll road forecasting performance ever conducted. The author had access to commercial-in-confidence documentation released to project financiers and, over a 4-year period, compiled a database of predicted and actual traffic usage for over 100 international, privately financed toll road projects. The findings suggest that toll road traffic forecasts are characterised by large errors and considerable optimism bias. As a result, financial engineers need to ensure that transaction structuring remains flexible and retains liquidity such that material departures from traffic expectations can be accommodated.

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Notes

  1. The data set was anonymised. Commercial sensitivities prevented the individual roads, bridges and tunnels from being identified.

  2. About 50% of the revenue from the Pennsylvania Turnpike is derived from trucks.

  3. Shadow tolls are payments made by the government—not road users—to the private sector operator of a road based on the number of vehicles using the road.

References

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Acknowledgement

I would like to thank the editor and several anonymous referees for their useful suggestions about and helpful comments on an earlier draft of this paper. I would also like to thank Standard & Poor’s for giving me permission to present material in the paper which was compiled while I worked full-time for the credit rating agency.

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Authors and Affiliations

  1. Institute for Transport Studies, University of Leeds, Leeds, LS2 9JT, UK

    Robert Bain

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  1. Robert Bain
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Correspondence to Robert Bain.

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Bain, R. Error and optimism bias in toll road traffic forecasts. Transportation 36, 469–482 (2009). https://doi.org/10.1007/s11116-009-9199-7

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  • DOI: https://doi.org/10.1007/s11116-009-9199-7

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