Megabus undermines high-speed rail
Business Week recently had a feature article on "The Megabus Effect
" and how these new cheap luxury intercity bus services are not only extremely popular and growing like crazy, but also deeply undermine the case for spending tens of billions of dollars developing high-speed rail for this country:
He immediately begins detailing the company's merits: how 90 percent of customers book online, many simply showing tickets texted to their phones to board; how the buses all offer free Wi-Fi and power outlets at every seat; how every trip includes at least one $1 fare, with prices going up as the departure date nears and as the bus fills; how there are no terminals or storefronts, just a bare-bones back-office staff; how the bus fleet is in constant use. "You cut all that overhead out of your business, you find you can pass that savings on to customers, thus driving volume.
There's a battle going on to control the in-between routes, the 200- to 300-milers. Air travel, despite its enormous carbon footprint (and meager profitability), is unlikely to be displaced anytime soon as the transportation of choice for long-haul travel. For short distances, the car is still king. But of the most traveled American routes, many fall into this middle category: New York to D.C. (or Boston), Los Angeles to Las Vegas, Chicago to Detroit (or St. Louis), Dallas to Houston (or Austin or San Antonio), Miami to Orlando, Nashville to Atlanta (or Memphis). These routes are too far for a leisurely drive and too near for most Americans to justify the expense, or increasing hassle, of a plane. In 1990 a third of Americans flying domestic traveled these medium-haul distances. By 2009, though, that portion had shrunk to a quarter of all fliers.
In Europe, these are the routes owned by rail, and transit policy experts in the U.S. hope that in coming decades high-speed rail will serve that market. But it's the intercity bus, the tortoise of the transport world, that is taking over much of the medium-haul market. On most city-to-city trips under 300 miles, the curbside bus offers tickets that cost a tenth of those of Amtrak and far less even than the price of the gas to get there by car. The bus is also at least four times more fuel-efficient than a car. Researchers at DePaul University's Chaddick Institute for Metropolitan Development estimate that curbside carriers, at their current capacity, already reduce fuel consumption by 11 million gallons annually, the equivalent of taking 24,000 cars off the road.
Much of the recent success of the curbside business derives from its nimbleness. In February the Obama Administration unveiled some specifics of its long-term plan for high-speed rail, requesting $53 billion over the next six years to build and upgrade intercity service—a proposal that has already met opposition. By contrast, the bus simply uses existing roads, requiring no policy debates, government funding, or land management studies. It needs only a curb and a sign. Bus companies are also able to gauge demand quickly, gather rider input online, then alter pickup locations or routes just by posting changes to their websites. While we're having coffee, Moser explains that since he's seen numerous requests on transit blogs for new service from Chicago to Memphis, he figures he might as well give the route a try. A couple of weeks later he has the buses up and running.
The curbside bus can also easily add and subtract departures. During Thanksgiving and Christmas in 2010, Megabus continued to sell as many tickets as were requested on its website, adding buses as needed. In Chicago, the buses were lined up all the way around the corner at the pickup location. "It's astounding how few constraints there are to its development and expansion," says Joseph Schwieterman, the director of DePaul's Chaddick Institute. "That's why it's an exciting product to watch. Adding two big hubs in six months—we just don't see that anymore in transportation."
The comparison with rail is revealing. Consider that even after the Obama Administration budgeted $10.4 billion in federal stimulus money to jump-start high-speed rail projects around the country, the states had to submit proposals, federal transportation officials had to select the most viable ones, and state and federal governments had to negotiate these plans with the freight companies that own most of the nation's track. After all that, politicians, citing budget shortfalls, ended up scuttling many of the plans.American Thinker adds their own commentary
, and New Geography adds additional depth in their analysis
, including this insight:
The growing prevalence of portable electronic technology, such as laptops and cellphones, gives intercity bus a new competitive advantage over air service and driving. At randomly selected points, we estimate in our analysis of traveler use of technology that more than 40% of passengers on curbside buses are equipped with portable devices, a percentage higher than on Amtrak (perhaps due to the free Wi Fi) and much higher than on commercial airplanes. Customers who place a premium on their ability to access electronic devices apparently find curbside bus service a particularly attractive option.
Both BW and NG predict Texas service in the near future, although I have not heard of any specific plans. The Houston-DFW-Austin-SA triangle is an obviously huge candidate right in the optimal range for this sort of service. Still a chance for a new operator to slip in and grab the market before the big guys get here. How would they compete? My suggestion: Give it strong Texas branding (like HEB does) and partner up with Buc-ee's
for rest stops. In fact, put that beaver logo on the bus! How's that for a powerhouse brand? They'd lock the market up. You heard it here first. If somebody does it, I want a commission, dammit! ;-)
Labels: high-speed rail, mobility strategies, rail