The cost of motorway services

Motorway service areas are charging up to four times the high street price for basic food and drinks, according to new research.

With few other options available to them, motorists are expected to fork out up to £2.09 for a 500ml bottle of water that would cost 95 pence on a London high street.

Prices of other food products are equally exorbitant: a basic cheese sandwich was found to cost £3.99 at some motorway service stations, as opposed to just £1.00 on a nearby high street, according to the Institute of Advanced Motorists (IAM), a road safety charity.

Yes, obviously. Motorway service stations are local monopolies. They thus price with some measure of monopoly power.

The IAM is calling for a full review of motorway prices. In France, filling stations are forced to advertise their competitor’s fuel prices alongside their own, and the IAM would like to see a similar policy in the UK.

“High petrol prices will put people off filling up. Forcing stations to advertise their competitors’ prices would drive costs down.”

There\’s a much simpler answer. Make sure that each service station has two petrol stations, two cafes, two etc etc and make sure that they are always owned by different people.

They way to beat monopolistic practices is to uproot the monopoly.

54 thoughts on “The cost of motorway services”

  1. Would that really work?

    We know from the mobile industry that prices don’t come down until there are more than 2 players, so why would it be different here?

  2. But wouldn’t that in practice just lead to an unofficial local cartel? And surely (to some extent) service areas are entitled to command a premium for convenience. If you don’t like the prices, don’t pay them, there are plenty of other shops, cafes and petrol stations,.

  3. If it’s a problem, fill and take a water bottle with you. It takes 10 seconds. You can also top up the washer bottle if required.
    (But then that conflicts with the current consensus that it is the role of business to save people having to think for themselves.)

  4. Am I right in thinking that the Major government proposed a major expansion of motorway service stations, with many more allowed and genuine competition between sites? Presumably it got shot down at some point amidst the “Eurobastards” scandal but it would certainly have addressed this

  5. So, if you’re peckish, drive off the motorway into a town and buy something from the local shops there. It’s not hard, is it?

  6. But it’s the landowner who has the monopoly. You can have one, two, or ten cafés; the landlord will just jack up the site rent to extract the maximum rent from passing traffic.

    Coming up next: food & drink is expensive in airport terminals. Shocker.

  7. Hardly a fair comparison. Your local High St sandwich shop doesn’t offer toilets, showers, children’s play area, place to walk your dog and chance to be hassled by a guy trying to sell you AA membership.

  8. there is probably an I phone app’ for indicating alternative petrol stations and cafes not to be used whilst driving of course

  9. Having spent a considerable portion of the past 6 years on French autoroutes the comparison with the UK motorways is overwhelming. Decent, clean service areas with extensive facilities & good quality, reasonably priced food. The best English breakfast, south of London, can be eaten at St Eloi on the A25/E42. And I’m not talking about the péage . The only french toll road I regularly use is the short stretch north of Bordeaux.
    Why so much better? Competition I’d imagine. They’re generally every 25km or so, so not so far to travel to get choice. UK interval’s what? Lot are run by supermarket groups like Carrefour & LeClerk so the use experience is tied in with the overall image the supermarket tries to project & supermarket cafeterias are somewhere you choose to eat out in, in France.
    Here in Spain you tend to get the routier places in service areas. Another pleasure to eat at, sitting at the counter scoffing a great plate of piping hot, freshly cooked calamare for 4€. Don’t know how the Brits would regard the next door whorehouse, though.
    And what’s with your pay to park thing? £8 to stay over 2 hours? Not saying I ever pay it. Like to see them sue me in a French court for the money. French judge’d think they were barking. Aires de service expect people to stop for a sleep. Provide areas for it.

  10. @IanB
    “drive off the motorway into a town and buy something from the local shops there. ”
    And probably have to pay a £3 parking charge to do so.
    You live in a seriously fucked up country. Truly you do.

  11. Shinsei1967 has it. Plus the services it has to offer have to be available 24/7. That’s what up the cost of everything.

    BiS talks about the French service stations being better and I agree from my own personal experiences, but then they don’t need to be open 24/7 providing lots of free facilities.

  12. Not sure it’s quite as simple as that – I had a poke about the subject a while ago:

    “It seems clear from this that that primary function of motorway service areas is not to sell us food and drink – that isn’t in the list above. What we are doing by paying over the odds is allowing the provision of these free facilities required by regulation. Just as with the cinemas in the Stanford study, the service station operator is using the excess profits from high-priced food and drink to cross-subsidise the regulatory requirements – the free stuff the Highways Agency requires of the operators.”

    http://theviewfromcullingworth.blogspot.co.uk/2010/06/motorway-services-stations-are-there-to.html

  13. SBML You tell me the autoroute aire de service that isn’t open 24/7? I could probably sell the story to a French paper for its quirky facts column.

  14. @ Simon Cook
    I don’t think it’s quite as simple as that either. I don’t know but I suspect the root of the problem is what it costs the operator to secure the franchise & the limited number of franchises available. So reducing competition
    The French experience would indicate, service areas should be a profitable business without exorbitant pricing. The Brit model is set up to encourage it.

  15. Having travelled relatively extensively on autoroutes a few years ago, I concur with BIS, they serve proper food, inexpensively. And (the last time I was there, anyway – it may have changed) they don’t have some pissy rule saying that no alcohol can be consumed on the premises (which I recently saw all over services on the way down from the Lakes in the UK, and meant that I, a passenger on that particular journey, couldn’t have a beer with my shite, overpriced meal).

    Having said that, you can just take the first exit to the nearest town for food. Or petrol. But I’d prefer not to have to, ideally. It adds a fuckload of time and inconvenience.

    My current least favourite services is somewhere round Lancaster (southbound) where the petrol station is on the way in with no way back to it. So if you don’t know to get fuel before you go for a piss / grab a coffee/ &c, then you can’t have any and have to limp to the next one on fumes.

  16. Driving around the American west – even in some pretty remote areas – you often find a cluster of the useful businesses at many exits to the Interstate highways. Three, four or more of the well known fast food chains, several different motels (all with signs outside stating the price), several different petrol stations. It’s not necessarily well planned, but there is plenty of competition. Prices are very competitive. Much less in the way of planning laws and labour regulation has this effect. It works for me.

    (One negative may be that there are no free toilets and one has to either sneak into the McDonald’s or not sneak and just buy something. Given that one usually wants to buy something anyway at such a stop (or at least I do), no real problem).

  17. “It adds a fuckload of time and inconvenience.”

    Yes indeed. This complaint, like the one about Tesco Metro charging more than a superstore, or little rural grocery stores being more expensive than Tesco metro, is made only by morons who want to value everything according to what they (wrongly, in any case) consider to be the cost.

    They have no concept of the varying overheads involved in different commercial models/locations, and they have no appreciation of the value added.

    If I’m half way up the M6 and I want a bottle of water then I can either stop at some services, pay my £2, and be back on the road within five minutes… or I can take my chances heading into some town/village that I don’t know. I’ll save a quid.. but it might take half an hour or more. Personally speaking, I’m happy to pay the extra quid. My time is worth more.

    It’s the fear that someone, somewhere, might be making a profit.. overriding any sensible appraisal of whether the individual has actually received something worth paying for.

    (I had a fun argument with a colleague who complained about confectionery in the office vending machine being 15p more than in the nearest shop, 10 minutes walk away. I offered him 15p to go to the shop and buy me a twix. He refused. It turned out that it would cost me a fiver to persuade him to go to the shop and buy me a twix. You might have thought that would be ‘game over’.. but no, he still thinks that the prices in the vending machine are outrageous.)

  18. Yes indeed. This complaint, like the one about Tesco Metro charging more than a superstore, or little rural grocery stores being more expensive than Tesco metro, is made only by morons who want to value everything according to what they (wrongly, in any case) consider to be the cost.

    Yes, thanks for that, TTG; it wasn’t a complaint. It was a reason for stopping at the service station and paying their higher prices. Namely that the extra cost is worth the…oh, never mind.

    I have always rather respected Michael o’Leary for his response when he was challenged as to why sweets on a Ryanair flight cost 500% what they did in Tesco; “Oh. How much do Tesco charge for flights to Barcelona?”*

    *or wherever.

  19. I offered him 15p to go to the shop and buy me a twix. He refused. It turned out that it would cost me a fiver to persuade him to go to the shop and buy me a twix.

    A direct lesson in economic theory that smacks of greatness.

  20. @TTG On re-reading your comment, I’m not sure you were having a go, after all. if not, my apologies for being a chippy c***. Haven’t had enough coffee.

  21. Korean Air and Asiana, the two South Korean airlines, advertise prices to within £3 of each other for flights as far afield as Sydney and Los Angeles. A duopoly can still easily become a cartel.

  22. You would also need to make sure there were two landlords to provide competition for rents, probably the biggest determinant of costs in such places.

    Of course two competitors is not enough to guarantee price competition with more than four required to prevent tacit cooperation.

  23. TTG>

    Your colleague at the vending machine is right, if it’s actually in (exclusively) your office. Charging your own employees what the market will bear isn’t usually a great plan. If the vending machine is in the lobby, owned by the landlord, obviously that’s a bit different, and you’re absolutely right.

    BIS, Sam>

    I’m a little surprised by your comments on French service stations, because my experience has been the exact opposite. The toilets are always filthy beyond belief – and not just in the usual French way, but smeared with excrement, or knee deep in urine, or some such. In English service stations the cleaning can sometimes be cursory, but in France it’s more a case of ‘we clean the toilets once a year, whether they need it or not’. The food is genuinely awful – pretty much the stereotype of seventies/eighties British pub-grub, with your pappy processed-bread sandwich filled with plastic cheese and a tired lettuce leaf, or similar.

    I’ve heard a lot about these mythical French driver-paradises, but I’ve never seen one. I wouldn’t say I’ve been ‘all over France’ on the autoroutes like you chaps, but I must have stopped in a couple of dozen aires de service over the last

  24. Oh damn, why does it now post when I hit ?

    I seem to have truncated the last sentence, but it was supposed to end ‘few years’, in case you couldn’t guess.

  25. Andy Hume>

    Without knowing their profit margins it’s impossible to say whether that’s competition in action driving prices down, or a cartel keeping them high.

  26. Dave,

    I’ve heard a lot about these mythical French driver-paradises, but I’ve never seen one.

    Indeed. Most of the ones that I seem to stop at will serve you biftek et frites or a croque monsieur. I wouldn’t like to choose between one of them and the Motos that I’ve been to. And the shops aren’t as good as the Waitrose/M&S stores at many services now.

    And I’m not at all sure about their petrol argument. I’ve found the difference between stopping at a Total on the autoroute and a Leclerc to be pretty huge.

  27. @ Dave

    “Your colleague at the vending machine is right, if it’s actually in (exclusively) your office. Charging your own employees what the market will bear isn’t usually a great plan.”

    In this instance it’s an exclusive office, but we don’t control the prices. It’s a 3rd party machine. They stock it and maintain it. Our job as a company is to ensure that we keep an eye on them and, if appropriate, change supplier.

    So that 15p extra on a Twix is what they charge to send a man in a van every week to fill up the machine. Some pressure on their pricing will come from staff choosing not to use the machine, but the majority comes from competitors who can maybe offer better machines full of twix’ that are only 10p more than in the shop.

    This being an entirely free market, I bet that all of that 15p melts away and the vending machine company makes a 5% net margin.. just like the shop does.

  28. Dunno about the French ones (except the channel tunnel, which is abysmal in both directions), but the service station/motel at Wels in Austria is a-fuckin-mazing, especially the buffet. It’s almost worth going there just to go there.

  29. TTG>

    I don’t doubt that it’s probably market-value, or fairly close to. The question is whether market-value prices are appropriate in an office. That your colleague is annoyed suggests they aren’t. The cost of subsidising the vending machine down to corner-shop prices can’t be very high. 15p on each item, over, what, a few thousand items a year? At most, we’re talking about maybe a thousand pounds, spread over, say, at least a dozen employees to buy that much from the machine.

    My experience is that employees generally care about the small things much more than is financially justified – perhaps because it is indicative of an employer’s attitude to its employees.

    A while back I was asked to help lower staff turnover at an IT company. None of the employees in that department were terribly highly paid, but a good proportion were at least earning enough to be higher-rate taxpayers. Staff turnover dropped from 25% a year to a relatively reasonable 5-10% after I bought a £25 coffee maker and spent a couple of hundred quid over the next year on free coffee and once-a-week free donuts. Does it make economic sense for the employees to care about where they work based on a perk worth a few pounds a year each? Of course not. So why such a big change? My best guess is that feeling exploited over the little things acts as a trigger to actually make a move elsewhere when an employee is pissed-off for one reason or another.

  30. @ Dave,

    as I said, I was going round the autoroutes (and autobahns, come to that) a few years ago. Around fifteen, in fact. So there are three possibilities for me to be completely wrong

    – they’ve got shite since then
    – I was comparing them to contemporary UK options, which I do remember were pretty fucking woeful
    – my memory is playing tricks on me.

    any of which is possible. But I definitely do remember my first ever experience of a european service station (I think in Belgium, rather than france) being along the lines of “why can’t we have this? This is superb.”

    On the office thingy; my office has free coffee machines. The coffee therein is execrable. There is a subsidised cafe on the ground floor which does better coffee at roughly 2/3 the price of starbucks/nero/costa, but without so many options, syrups, and a bit smaller. Where to people get their coffee? Either the machine or starbucks/&c. Because – I assume – once you’ve committed to the concept of walking & paying at all you think “well I might as well go the whole hog.” Well, that’s what I do.

  31. @ Dave

    Fine, but that’s a whole different discussion. We were talking about the economics behind something that is convenient costing more than something that is less convenient. I think it’s a good thing if our staff understand that. There’s plenty of opportunity to be wuvwwy and fuzzy, whilst still exposing people to the occasional commercial fundamental.

  32. In France, filling stations are forced to advertise their competitor’s fuel prices alongside their own.

    This sounds like shite to me, but its is irrelevant: filling stations on French motorways compete on toilet cleanliness more than fuel price. And in any case, the issue is not fuel prices, it’s the price of stuff in the shops.

  33. Having travelled relatively extensively on autoroutes a few years ago, I concur with BIS, they serve proper food, inexpensively.

    That’s France in general, not just the service stations!

  34. Sam>

    My memories are mostly over the past decade or so, so slightly more recent than yours, but not by that much. I think you’re right that it makes a big difference whether you compare them to our service stations now or ten to fifteen years ago. Now ours tend to be expensive, but at least reasonably clean and with some half-decent food – by which I mean an M&S sandwich or some such.

    TTG>

    I don’t think it is a different discussion. What your workmate was complaining about is not affected by the economics of the situation – at least for the small markups we’re talking about. Well, saying that, it was your conversation, not mine. I should say that it appears to me that what he was talking about was not quite what you think, although he may well have expressed his objection badly, or got drawn into an irrelevant discussion about what the market-value is. His point, I’m pretty sure, given experience with these things, was that market-value is not a good way to price things you sell to your employees – and despite the practicalities of the situation, that’s how the vending machine is perceived.

    I frequently have to point out to struggling companies that selling stuff like drinks and snacks to your employees is almost always a false economy. You don’t have to be paying someone more than two or three times the minimum wage before the time they take to find their change and pay for a Mars bar outweighs the wholesale cost of giving out free Mars bars, quite apart from the other issues we’ve mentioned. It’s remarkable how much employee goodwill you can garner for five or ten quid a week per head, and even at minimum wage that’s a good deal – I think it gives the impression that some thought is given to employees by management, although it won’t work in the face of extensive evidence to the contrary, of course. A half decent company that gives out free lunches and coffee seems to do better than one which doesn’t and pays 10% more, when it comes to staff acquisition and retention, in my experience.

  35. @Dave
    I was specifically talking about aires de service on autoroutes, not french filling stations. Which can be…novel. There’s a simple trick when travelling. Look for all the trucks parked. If the routiers won’t use it, follow their example. They’ll be using the place 25km down the road. The one eastbound out of Toulouse (leClerk) provides a TV lounge in addition to showers, pump outs for autohomes & about 1/2km2 of parking. Don’t stay more than 24 hours or the peage will fine you.
    Yep. Fuel on autoroutes is dearer. Quelle surprise! Use the supermarché at the centre commercial, just off the exit ramp for most towns. But they do sign the cost of fuel at the next service area..

  36. @ Dave

    I’m afraid it really is a different discussion. You can read more into the gripe if you wish, but the example I gave was directly related to the subject of the post. It feels like you’re reading something into it that enables you to bring up a topic on which you have a certain view.

    As you said.. It was my conversation. I know the individual who was griping. I know what our company does and to make it a place where people want to work. I know what our staff retention is. I know how successful we are.

    I agree with the gist of what you’re saying. That perspective should be very useful to a lot of companies. Another useful thing, though, is a sound understanding of your employees as individuals, and the ability to distinguish between a minor complaint that’s a symptom of a major issue.. and someone who’s moaning about something because he’s not bothered to spend five seconds thinking about it.

  37. What’s he problem with private sector monopolies and cartels?
    When I have wondered in my diffident ,courteous way about one supermarket towns or cities with outlying supermarkets at the four corners of the compass, this site has gone apeshit with people wrapping themselves in Tesco bags and vowing undying loyalty.

  38. @DBC Reed
    Re supermarkets & monopoly.
    I’d be happy to wrap myself in a Tesco bag because, despite having the opportunity to abuse a monopoly, the supermarket chains rarely seem to do so.
    If I visit the supermarket in the wealthy stockbroker belt town, near where my father lives, it’ll be offering the goods at the same prices as it’s outlet near my own previous Outer London apartment, The same as the branch in Kensington. The same as the branch in the Kentish coast town which seems to be inhabited almost exclusively by benefit claimants. Probably the same in northern mining towns or Scottish council estates, if I ever visited them.
    Items in the small grocers in my father’s village can be 50% dearer than those sold from a similar shop in a busy town center. The same can be true in the single shop on an impoverished estate. That’s because, not only do they have monopolies but they’re content to use that monopoly to extract the maximum return.

  39. @BiS
    So a massive supermarket is not a monopoly if it charges the same price everywhere in the country?
    Surely it would be more proof against charges of monopoly if it was n’t able to use the freedom to aggressively discount small shops out of business as happened after Resale Price Maintenance was abolished in the UK in 1964? (to comply with EU regulations BTW) Contrast > Leegin vs PSKS in American Supreme Court (which Leegin won).

  40. “Surely it would be more proof against charges of monopoly if it was n’t able to use the freedom to aggressively discount small shops out of business…”
    You state this as a fact. But is it?

    My home in northern France is close to two towns with major supermarkets on their outskirts. When i say major supermarkets, I mean this in the French sense not the Brit , as the pissy little overgrown mom & pop stores the Brits call supermarkets are a very long way from the french notion of a ‘supermarché’. We have cheese sections bigger than some Tescos. Both towns are also packed with thriving small shops & both host weekly markets.
    Maybe you should be looking for another cause?.

  41. BIS or NF
    The cheese section is bigger than Tesco’s and there is a thriving cheese shop in town. Hmnn Who is doing the predatory discounting on cheese?
    Put it this way: if a Brit service area started off with two or three separate cafes, there would be only one after a certain amount of time after the biggest had deliberately undersold the competition. Then, when the competition’s gone its back to monopoly prices in the survivor.Like ptuting two young pike in a pond;soon there’s only one.My local supermarket started off with two shops back to back: Tesco’s took over the other half.
    People in Britain appear to want to drive miles to the supermarket rather than get the same items at the same price in the village. Nobody ever factors in the cost of the compulsory car or the time wandering round the shelves looking for things as they cut staff to the minimum.
    I do have plenty of other causes ,(All lost)

  42. Went shopping at Sainsburys on Wednesday. As usual, the shop was full of offers and two-for-one deals and promotions. It was almost as if they’re frigthtened of losing customers, and trying to prevent that by offering good value.

    Which can’t be true because, y’know, monopoly. And so on.

    “People seem to want to drive to the supermarket” because they do want to. Because they have subjectively decided that for themself, it is the best deal of all factors; products, choice, time.

    People make different choices to the one you think they should make, DBC. That’s all.

  43. People in Britain appear to want to drive miles to the supermarket rather than get the same items at the same price in the village.

    I lived in several villages in the UK. Where would I find a village where I can ‘get the same items at the same price’ as I would in a nearby supermarket?

    I would buy odds and ends in the village stores, but with a limited stock and typical 50+% markup over the supermarket, I bought most things on my weekly trip to Sainsbury’s.

    Nobody ever factors in the cost of the compulsory car

    How do you live in a village and not have a car, unless you’re retired, unemployed, or one of the few who actually found a job there? I could walk to work from the last village I lived in, but it meant trudging for an hour along unlit roads. I could take the train from the village I lived in before that, but it meant two five-minute train rides with half an hour sitting at the station between them and an hour of walking to and from the stations.

    or the time wandering round the shelves looking for things as they cut staff to the minimum.

    Which, I must admit, never happens in village stores. Because they usually only have one row of shelves with a tiny selection of products, so you can’t wander far.

  44. “if a Brit service area started off with two or three separate cafes, there would be only one after a certain amount of time after the biggest had deliberately undersold the competition. ”
    Oh come on Mr Reed. That’s unmitigated crap & you know it.
    One for the full English n’muggatee. One for the latte & croissant crowd. Friendly formica against faux mahogany. They’re not even competing.

  45. BIS “They’re not even competing.” So why mention them? If they were in direct competition they would either tacitly agree to split the trade down the middle or compete on price till one of them folded.

  46. Because you are looking solely at price competition. there’s also service competition. With only one outlet the customer doesn’t get a choice of what level of service is required. You’re also looking at the UK specific situation, where service areas are few & far between. In France, for instance, there are many more service areas with different franchisees. So they compete against each other.
    As I said above, the UK set-up seems to be structured specifically to avoid competition.

  47. Agreed. Places should compete on service and sell different stuff. But in the UK they compete on price because they can sell at whatever price they like ,by ignoring the recommended retail price formerly set by the manufacturers under RPM. This BTW ensured a wider range of manufacturers. The conclusion of Helen Mercer’s LSE paper on the abolition of Resale Price Maintenance (on the Net) was that getting rid of RPM (to enter the EU) put paid to British manufacture which relied on the tied arrangements with retail which ensured security of demand. Manufacturers have no security now because of the intermediation of the supermarkets which dictate manufacturers’ prices for them.
    I also agree that the UK is not a market where competition is encouraged. Your point that there should be more service areas on motorways is well made.

  48. getting rid of RPM (to enter the EU) put paid to British manufacture which relied on the tied arrangements with retail which ensured security of demand.

    Yes. The UK stopped manufacturing things where the value added is a quid, which are now done in Bangladesh, and things where the value added is a fiver, which are now done in China.

    Instead, the UK manufacturing industry, which is far larger than it was before we abolished RPM, focuses on things like (both sorts of) Rolls-Royce, where the value added is enormous. This is an improvement for all concerned.

  49. @JB
    So we can only manufacture high tech stuff and have to rely on importing all the cheap widgets.,Its all going so well is n’t it this arrangement? You’d think we could produce a few volume cars with our mass market..

  50. Mobile Phone Payments :: Bill Payments Online | Check out mysimplemobileshop.com! Need to recharge your SimpleMobile? Do it now with instant Reup Online, Or Call Us at 1877 8522515! Pay your monthly Simple Mobile bill here, Don’t get disconnected and if you are reconnect now.

Leave a Reply

Your email address will not be published. Required fields are marked *