Ancillary revenue: TFL hit by steep decline in advertising board revenues

Here is a good example of ancillary revenues for businesses. Transport for London has experienced a steep decline in the advertising revenues they get from a huge estate of bill-boards, posters and panels inside and outside of their network of stations.

The collapse in advertising sales would have been even steeper had it not been for a surge in pandemic-related government advertising. Nearly 1,448 government, political and social campaigns were used on the network in 2020.

Think about other important sources of ancillary revenues. Airlines sell food and drinks and flog the duty free to passengers. Hotels for years have generated extra revenue from extravagantly priced mini-bars and in-room movies (does anyone bother to pay for their WiFI services anymore). Soccer clubs rely heavily on sales of merchandise and food and drink to supporters in stadia.

Ancillary revenues can make a big difference to the bottom line for a business. Transport for London faces an operating loss of nearly £1 billion in 2021 and has already received several emergency injections of finance from the government during the lengthy pandemic.

TfL’s tube traffic over recent weeks is estimated to be just 45% of pre-pandemic levels during the week and 56% on weekends, while buses are back at 60% to 65%. Even with the planned ending of lockdown restrictions, a permanent drop in traffic is widely expected.