PrintApril 9, 2011
Ditch high-speed rail-All Aboard Megabus!
While Barack Obama and Joe Biden (the sole member of the Amtrak fan club) tout high speed rail, private enterprise is already tackling the problem of transporting people between big cities in a reasonably priced and efficient way.
Business Week has a fascinating and fun to read article on Megabus, a company that puts the old Greyhound system to shame and gas been up and running for a while-with praise from just about everyone.
The secret sauce behind the fastest growing way to travel? Great service at a cheap prices - the reverse of what one would expect if government was in charge. Instead the innovation comes from capitalists
Megabus is "the largest of the private companies to corporatize New York's "Chinatown bus model of street-side pickup, express travel between sizable cities, and cut-rate fares". These type of buses have been successfully operating in Chinatown but only between New York City and Boston. Megabus, operated by Stagecoach Group, a British company, has bigger plans to remake travel in America
Forget those dingy Greyhound buses and those scary bus depots (my fraternity made a group of us go down to Chicago's Greyhound station late at night. It was during Hell Week - an apt description of the torments afflicted on us, including our trip to the bus depot); that was yesteryear when Greyhound, smothered by being part of a conglomerate, was on its way to decrepitude.
The recipe to its booming success is outlined by Dale Moser, the CEO of Stagecoach:
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.Megabus and Coach USA are owned by the British company Stagecoach Group, and they have fundamentally changed the way Americans-especially the young-travel, so much so that they may help kill plans for new railroads.In 2010, Megabus launched its third and fourth hubs, in Philadelphia and Washington. It currently does $100 million in business annually, operating 135 buses each day to 50 U.S. cities. While other companies downsized over the past two years, Megabus hired 270 additional workers and invested $36 million in the business. Each month this year it will add five to six new double-deckers to its fleet.
There are few fixed costs unlike the tens of billions that would be wasted in building high-speed rails. These rail projects are boondoggles and would impose astronomical costs on the cities and the states that would be saddled with them (a reason many states are turning down Obama's arm-twisting offers to jump-start them with seed money).
Capacity (buses and drivers) can be added or subtracted quite easily based on demand. Variable costs are easily controlled.
Profits have been building, as cities offer all sorts of inducements to become part of the Megabus route system. Traffic engineers and environmentalists are big fans, too because it takes cars off the roads. Buses are thrifty - not just for riders but they use a fraction of the gasoline that cars carrying the same number of passengers would burn. Buses are four times more fuel-efficient than cars. They are ideal for trips between 200 to 300 miles, the so-called medium-haul market.
The simplicity of the operating model, and its rationality, puts Obama's plans to shame.
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 young and the hip - not your typical image of a bus-rider-are hopping aboard in droves. They can get on and off board at curbside locations around cities; they also avoid the hassle of security lines at airports. They are the next hot thing.
More than half the riders are aged 18-34 and three quarters are college graduates. The on-board Wi-Fi service helps attracts riders, as do the cheap fares. Perhaps once they reach their destinations they can then rent Zip Cars - those increasingly ubiquitous rental cars scattered about urban areas, rented via computers and a credit card, with nary a human being involved.
Free enterprise works; government does not.
