Tuesday, October 26, 2010

The rise of inter- and intra-city luxury buses threatens rail

The eminent Bob Poole over at Reason has another insightful analysis in his Surface Transportation Innovations newsletter which I wanted to excerpt, but has so many good points I just highlighted my favorites in bold:

Bus Continues to Challenge High-Speed Rail

I've written previously about the remarkable come-back of the inter-city bus ("coach") industry this decade, as typified by the highly competitive New York to Washington, DC market, kicked off by new-entrants BoltBus and MegaBus. These services offer reserved seats, power outlets, free wi-fi, and other amenities. That plus their low fares makes them highly competitive with both the airline shuttles and Amtrak's Acela service in this corridor. But this concept has begun spreading to the Midwest and the Southeast, and is also invading some of the short-haul and commuter markets on which some high-speed rail (HSR) plans are depending for part of their fare revenue.

To begin with, Joseph Schwieterman of DePaul University recently explained to the readers of Practical Traveler (July 16, 2010) the service features that have enabled these bus services to attract a growing market share, beyond the typical inter-city bus clientele of relatively low-income people and students. These features include:
  • Online ticketing-which ensures that most passengers are internet-savvy;
  • Guaranteed seats-which ensures a comfortable travel experience, with no pre-trip anxiety over seating vs. standing;
  • Curbside departures-which avoids the typically downscale bus stations many prefer to avoid;
  • Onboard technology-again, appealing to business and professional travelers.
Competition in the northeast corridor has led Greyhound itself to introduce upgraded buses on its routes linking Montreal, Boston, New York, and Washington, offering wi-fi and power outlets, three-point safety belts, and increased leg-room.

Schwieterman's researchers found that most of the new services of under four hours are operated as express, with no stops along the way. They also found similar services in the Midwest (e.g., Chicago to Madison, Milwaukee to Madison); in fact, about 40 cities in the Northeast and Midwest, as well as nearby Canadian locations, now have new-generation  bus service.

The South appears to be the next frontier. RedCoach, owned by one of the largest transport companies in South America, is now offering daily express bus service in Florida and Georgia. The new buses seat 27 instead of 56, offering far more leg-room and including a foot rest, lap desk, and power outlet, in addition to wi-fi. Service between Miami and Orlando is scheduled at just four hours, and this month is being offered at an introductory price of just $40 round-trip. RedCoach serves six Florida cities thus far, plus Atlanta. Its expansion plans include Tampa, meaning that it will offer express service between Orlando and Tampa-an alternative to the planned $3 billion (of taxpayer money) high-speed rail line for that corridor, as well as the much more costly Miami-Orlando HSR line that proponents hope will follow. Yet like all the other express bus operators, RedCoach receives no tax money, and pays highway user taxes like all other motor vehicles do. Plus, if a particular route turns out to be a loser, it's easy for the company to shift the vehicles to other routes. You can't do that with HSR.

Luxury bus service is also entering commuter and other short-haul markets. In Silicon Valley, Bauer's Limousine Service is well-known for operating the corporate buses that transport numerous Google and Facebook employees to and from work. Recently, the company has begun offering premium commuter bus service to others in the Bay Area. Under the brand name Wi-Drive, Bauer has introduced four $500K luxury buses. For $5 to $9 per ride, the service offers leather seats, power outlets, free wi-fi, restrooms, and even coffee and pre-ordered breakfasts. In its first year, Wi-Drive buses are running at 60-70% occupancy, with routes serving destinations both north and south of San Francisco.

Another completely unsubsidized short-haul service is Disney's Magical Express, which links Orlando International Airport with the various Disney resorts. It provides door-to-door service for both people and baggage, sparing families of the hassles of lugging bags and renting cars. Magical Express averages about 6,000 passengers per day, about 7% of the airport's total. It is so popular that low-fare carrier Allegiant Air, which typically serves secondary airports, is shifting about a dozen of its flights from Orlando-Sanford Airport to Orlando International, so that its passengers can make use of Magical Express. Orlando International to Disney is one of the planned markets for the $3 billion Orlando-Tampa HSR service.

I continue to view HSR, as currently planned in the United States, as largely a solution in search of a problem to solve. Why this nation should commit tens (and potentially hundreds) of billions in taxpayer dollars to create this new mode of inter-city passenger travel, when the entirely unsubsidized luxury bus industry can do the job, is beyond me.

Hear, hear!

First, can somebody please explain to me why nobody has created this service yet for the Texas Triangle? (Maybe it's the cheap, frequent Southwest service?)  It seems like a great opportunity.

Second, we really need more of these services on a commuter basis (like The Woodlands Express) connecting all parts of Houston to all of the major job centers, and that includes you, Metro.  The fastest and best way to make it happen would be for Metro to offer a straight per-passenger-mile subsidy and let free-market contractors compete on routes, schedules, frequency, punctuality, and amenities.

More on the economics and pictures of luxury bus service here.

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At 10:10 PM, October 26, 2010, Blogger Jardinero1 said...

If you eliminated Metro's legal monopoly you would see more and varied private services fill the gap. You would have everything from 10 passenger vans to luxury coaches working regular routes to destinations determined by market forces not politicians.

At 11:06 PM, October 26, 2010, Anonymous Anonymous said...

The promotion and advocacy of high-speed rail in the United States is not based on logic. Any logical-thinking person is going to be baffled, as you are, Tory. And all taxpayers should be not only baffled but also concerned.

Of course, HSR is all about the money. Construction money. Steady streams of future taxpayer money to subsidize operations. Employees who in most places will be unionized, hence more revenue to unions who contribute heavily to the democrats.

And there also is a contingent of people who have seen HSR in Europe and think it would be great to have it here. Unfortunately, these people don't consider the fundamentals, such as population density, high fuel cost in Europe, and fewer/more crowded airports in Europe.

At 12:20 AM, October 27, 2010, Blogger Alon Levy said...

All of the advantages you mention for express buses are also true for high-speed rail. Seats are reserved, ticketing can be done online, boarding is at train stations designed for good passenger throughput rather than at Greyhound mazes, wi-fi is offered on board.

Express buses are great for city pairs with crappy rail options, like New York-Washington. But it's telling that they don't exist where rail is good. There's no Megabus between Paris and Lyon and never will be.

At 8:53 AM, October 27, 2010, Blogger Jardinero1 said...


You are right there probably won't be megabuses between Paris and Lyon because of the TGV. But this is a case of the perfect(TGV) being the enemy of the good.

I doubt the TGV between Paris and Lyon is cost effective. Will fares ever recoup the capital outlay? Do fares cover operating expenses? I imagine the answer is no and the citizens of France will be stuck with this albatross forever.

At 9:26 AM, October 27, 2010, Blogger Tory Gattis said...

Yes, once you have a Ferrari, you don't feel much like driving your Toyota. So, logically, we all need to splurge on Ferraris?

At 9:51 AM, October 27, 2010, Anonymous Martin said...

It is about building an effective network that is comprehensive. That means express or "luxury bus" where it works. That means having a core backbone of high speed rail lines to link major population centers. And finally, that also means having another network of air travel where bus travel and rail travel is not effective given the distance. But the point is that you have it all. It is not an either or question.

What we need are rational, problem solvers to address the pathetic transportation infrastructure we have in this country. Every other post-industrialized country seems to have them. Instead, here, it seems that what we get is the constant drumbeat from the likes of Randal O'Toole and the other ideologues at Reason (and their followers that populate this blog). They are not interested in solving problems. They are interesting in trying to prove a libertarian utopia, make-believe world that was the subject of their PHD dissertation. And then people wonder why our infrastructure ranks with the likes of Romania.

At 10:05 AM, October 27, 2010, Blogger Michael said...

>>Curbside departures-which avoids the typically downscale bus stations many prefer to avoid;

Sorry - this is not an advantage over high-speed rail and a nice train station. Especially in Houston for about 5 months, or this year 7 months, where it is over 90 degrees every day. This is if anything an extreme disadvantage to adopting something like Bolt Bus in Houston.

>>And there also is a contingent of people who have seen HSR in Europe and think it would be great to have it here. Unfortunately, these people don't consider the fundamentals, such as population density...

To take just this example - arguments I have seen about density are very weak - comparing the density of the entire continent of Europe with that of North America. You have to look at population centers - nobody cares that the Great Plains and Mountain West is not very dense, for instance. That is a lot of land that has very few people, and maybe only 1-2 cities in that area would be covered by HSR. This is like saying that "Canada is not dense enough for HSR" when the proposal might be to build a useful HSR trunk from Toronto to Montreal.

There is no reason why our major population centers should not have HSR, bus, plane, roads, freight, ports (where applicable), highways, etc. They are all part of a modern transportation infrastructure.

Some of these items are more expensive to build than others but I see no inherent reason why building high-speed rail is so wildly expensive versus building a port or an airport, etc. If costs are high then they should come down as technology improves, as we spend more on research, mass-produce lines across the country, and buy equipment and stock in bulk. This is not like buying everyone a Ferrari - far from it.

At 12:59 PM, October 27, 2010, Blogger Tory Gattis said...

"Other countries do it" and "variety" are not arguments. The question is the value proposition: what will HSR offer that other modes can't do right now, and is it worth the cost? Are airports along the proposed route at capacity? Are there major, logical intermediate stops between two major metros? (like the urbanized east coast from DC to Boston, Japan, China, and parts of Europe) Are the needed distances too short for flights but too far to drive or take a luxury bus? (a pretty narrow range)

It is very hard to find places in the US that meet those criteria. The DC-Boston corridor - but it's hard to argue that upgrading from Acela will add enough value. Maybe CA eventually, but, to be honest, they really could have plenty of air capacity if they just better utilized the runways they have at alternate airports - enough for decades of growth.

At 1:04 PM, October 27, 2010, Blogger Tory Gattis said...

> Some of these items are more expensive to build than others but I see no inherent reason why building high-speed rail is so wildly expensive versus building a port or an airport, etc.

A port is the *only* way to bring in or send out seaborne cargo - no other options. An airport is the *only* way to travel rapidly to any other city on the planet - not optional. Freight rail is the only way to move mega-bulk cargo (like coal and grain) at affordable cost. Each of these has a very clear value proposition and purpose. HSR usually does not except in special circumstances.

At 1:16 PM, October 27, 2010, Anonymous Martin said...

Well...off the top of my head... it provides better reliability. It is also faster. It also provides access to an additional transport mode which can relieve congestion off our airways and our roads thus providing greater flexibility. Do we need it everwhere (which is what you suggested with your Ferrari comment)? No. But it should be part of a larger system.

Your article does not touch on any of these questions but instead it simply cheer-leads for a system of bus travel that you (and the author) automatically assume is a substitute for HSR. I am all for better bus travel and I like the fact that "premium" bus travel is finally catching on here in the US. But that is not an argument for somehow stopping plans for HSR. They complement each other and are all part of the larger infrastructure system.

And finally, the argument that HSR won't work here because we aren't dense enough (presumably because you arrive at the destination without a personal automobile), interestingly in your line of argument doesn't apply to air travel or this new intra-city "luxury bus" that is going to suddenly end the need for HSR. Funny because when I have taken intra-city couches, I don't seem to remember suddenly having a car with me at the destination.

At 1:46 PM, October 27, 2010, Blogger Michael said...

>>HSR usually does not except in special circumstances.

I would argue that connecting the mega-regions of the world that are closely connected - ie the Texas Triangle, is not really a "special circumstance".

>>The question is the value proposition: what will HSR offer that other modes can't do right now, and is it worth the cost?

Transport hundreds / thousands of people in the most efficient, highest-speed, most comfortable way possible at ranges of 100-800 miles.

"Is it worth the cost?" is a very subjective question. To me, I would be fine for instance raising the marginal tax rates to 70% and put the money to use to do things like this. That might not be a popular view but to me we'd get more societal benefit versus letting the money sit in rich people's bank coffers accruing .2% interest. We'd create jobs, build something of value that would last for generations, etc. So yes, to me HSR is obviously worth the cost. But then to me subsidies and government are not bad words - just a part of life.

At 2:43 PM, October 27, 2010, Blogger Tory Gattis said...

Obviously, buses don't solve the last mile(s) problem, although they can certainly stop wherever there is the most demand (like the very center of downtown). Neither do planes or HSR. But they also don't require an entirely new multi-billion dollar infrastructure, and they can offer lower fares than HSR - unsubsidized.

As far as the Texas Triangle, I simply can't see enough value vs. driving, luxury buses, and SWA flights on the hour or even half-hour.

As a side point, that "money sitting in rich people's bank coffers accruing .2% interest" is actually doing no such thing, but is invested in the economy in the form of loans to people and businesses that do productive things with it (inc. creating jobs). The question is can govt do better things with it than the market. Subjectively debatable, but I think most economists would say not, at least on a cost-benefit or ROI basis.

At 11:18 PM, October 27, 2010, Blogger Michael said...

>>As a side point, that "money sitting in rich people's bank coffers accruing .2% interest" is actually doing no such thing, but is invested in the economy in the form of loans to people and businesses that do productive things with it (inc. creating jobs).

Do you have statistics to back this up - I understand that no money ever really just "sits" in a bank vault, but from anecdotal evidence and numerous stories I've read and heard, there is a vast amount of capital that is literally just sitting on the sidelines these days - in extremely conservative plays - people are scared to invest it, scared to hire, scared to make loans to people. Government is one of the few actors that can come in during such a situation and say "we are going to hire 1 million people", for instance. And such direct spending seems to be far more efficient in creating jobs, at least versus other government alternatives like tax cuts.

And regardless - as Dean writes, 2 private companies want in on building the Texas Triangle HSR. As we've noted on this blog before. Would they be getting some public money and perhaps some subsidies? Probably. I think highway and airport contracts generally are pretty sweet as well, if you can get them.

At 11:39 PM, October 27, 2010, Blogger Alon Levy said...

Jardinero, the LGV between Paris and Lyon is highly profitable, even after depreciation. Its profit margin is 25%, leading to recurrent protests that SNCF is profiteering. The construction bonds for it have been paid in full, and the line's success has led the regions to demand their own services, even when cost-ineffective.

Tory, "acceptable" and "necessary" mean different things to different people. If you're used to something, then you'll think the alternatives are a nice to have. I know surprisingly many New Yorkers who think paying $1,200 for a studio is acceptable; I doubt Houstonians think the same.

What you say about the Acela depends on price. It's stupid to take any position on it that's price-blind. At some costs, it's a great investment; at others, it's a boondoggle.

At 2:10 PM, October 28, 2010, Blogger Tory Gattis said...

Michael: Well, the bank does one of two things with deposits, and both are productive in their own way: they either loan it out for private initiatives (personal or corporate), or they park it in Treasuries, which means they're loaning it to the government to do what they want to do. If the government is making wise investments (a big 'if'), then the long-term returns to growth - and therefore tax revenues - should be more than enough to pay off the Treasury bonds.

What you are describing is Keynesian economics, as most championed today by Paul Krugman (Princeton/NYT). It is very controversial. But govts try to avoid raising taxes to cover the spending, because that just dampens economic growth more and scares people into saving instead of spending. They just borrow - or print - the money they need instead.

Alonn/Acela: from what I've heard, it's many billions to raise Acela speeds relatively small amounts (and save a handful of minutes on popular routes). I don't have the hard numbers, but they always struck me as not-so-great on a cost-benefit basis. I think that's part of the reason they received so little money from the Obama administration in the first HSR round.

At 10:37 PM, October 28, 2010, Blogger Alon Levy said...

The Amtrak plan calls for spending $11 billion to cut half an hour from the full route. The real-world cost of such a cut, for the record, is zero: all it requires is a change in FRA cant deficiency regulations, which are too conservative because of institutional dysfunction. For a little less than $11 billion, it should be possible to cut the Acela runtime to about 3 hours, Boston-Washington, given best rail operating practices, which are not found in the US.

At 9:50 AM, November 01, 2010, Anonymous Anonymous said...

there is a vast amount of capital that is literally just sitting on the sidelines these days - in extremely conservative plays - people are scared to invest it, scared to hire, scared to make loans to people. Government is one of the few actors that can come in during such a situation and say "we are going to hire 1 million people", for instance"
I think many companies now are afraid to invest now is because of uncertainty caused by the government.
They don't know how health care will play out. Even if it is left intact in its current state, what will actually happen when it starts?
What will tax rates be? On the rich? On business? On dividends? Capital gains?
Will Quantitative Easing be enacted? If so, what will happen to the economy and value of the dollar? And to exports?
These are huge uncertainties which can affect nearly every business - even ones that were well-leveraged against the real estate bubble bursting.

At 10:16 AM, November 05, 2010, Blogger Peter said...

We can easily decide all of these questions if we plot the alternatives on scatter plot.

Total cost of the service on one axis (what passenger pays at farebox + what rest of us pay in taxes).

Total worst-case door-to-door transit time for the passenger on the other. Maybe you could plot safety on a third axis.

There is no one size fits all. It's very situational.

I think HSR, buses, cars, airplanes, bikes, walking, can all work together as a network to provide optimum levels of service & safety at lowest system cost.

I think the real argument is how much of each, and where and when to apply each component.

I don't have much time for idealogues who are wedded to or antithetic to one TECHNOLOGY or another.

Technology doesn't matter. It never has.



At 10:45 AM, November 05, 2010, Blogger Peter said...

A couple weeks ago I took Greyhound from Colorado Springs to Denver for $15. It took an hour, and I was Downtown, where my convention was. Had a great time. Nice town.

Yes, the fellow clientele was mostly low income. And the bus was worn.

But, for double the ticket price, you could fund a better bus, and have free juice and coffee on board, etc.

I saved my company hundreds of dollars on this trip by not renting a car. This dropped straight down to the bottom line as profit. And buses are safer than solo drivers driving in areas they don't know (me).

The right kind of transit can really add value to businesses and the public at large.

Too bad people don't demand these services more. I think it's all cultural... "white (American) people don't take the bus". White Europeans have so such problems. Asians have no such problem.

At 10:46 AM, November 05, 2010, Blogger Peter said...

Typo: "White Europeans have no such problems"

At 10:15 PM, February 19, 2011, Anonymous Anonymous said...

Anyone who thinks that (private) inter-city buses are not subsidized needs to re-think that one. So called "road use taxes" do not come close to paying their way.

At 10:23 PM, February 19, 2011, Blogger Tory Gattis said...

Actually, highways are pretty much covered by gas taxes. The local street grid, not being optional (try owning or developing land without being connected to it), is part of property taxes.


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