Standard and Poors: Traffic Forecasting Risk: Study Update 2004

Publication Date
19 October 2004

This article presents the findings of ongoing research by Standard & Poor's Rating Services on the traffic forecasting risk.

Traffic forecasts are central to the assessment of credit risk in most toll facility findings. However, a consistent feature of toll road traffic forecasting is that figures prepared for host jurisdictions worldwide are optimistic.

This update uses 87 case studies to compare toll road forecasting performance with the predictive record of traffic forecasts made for toll-free facilities. It finds that systematic optimism bias appears to be a distinguishing feature of toll road forecasts. It also points out that another key component is general error.

The report recommends that, before conducting sensitivity tests, base case forecasts should be adjusted to take account of any suspected optimism bias. Sensitivity tests should then be used to assess the robustness of key credit metrics to alternative input assumptions so that the true credit quality of a toll road’s business proposition can be ascertained.