Passenger Trains > Railway Age: Amtrak’s Interregional Growth Opportunities

Amtrak’s Interregional Growth Opportunities
Railway Age
by Andrew Selden

Years ago, the Minnesota Association of Railroad Passengers ran an
experiment. It published a quarter-page print ad in a weekly
“shopper” newspaper in a small town in North Dakota served by the
Empire Builder. The paper laid out the ad for free. It had no glitz,
no slogans, just hard information: when and where the train went,
where it connected to others, sample fares, onboard amenities, and
the local station address and telephone. No “800” number, no web
address, no ad agency fees. The ad ran four weeks in mid-Fall, when
coach seats are abundantly available.
 
The local Amtrak agent (remember them?) monitored the results. The
agent was astonished at the number of calls and visits to the station
(which tapered off starting about two weeks after the insertions
ended). Many in this small town and its hinterland said they were
unaware that the train even existed, or where it went. Sales
skyrocketed. Incremental sales over the baseline at this one station
during the experiment accounted for a 1,700% return on the cost of
the four print ads.
 
Amtrak ignored the results.
 
Two things have been manifest ever since W. Graham Claytor, Jr. left
the helm at Amtrak roughly 25 years ago: Its subsequent leadership
hasn’t understood the company’s mandate or its business environment
and opportunity, and the company’s executives mistakenly believe that
their only route accounting system portrays accurately the financial
results of operations of various business segments. It doesn’t.

Suffice it to say that the APT costing system that management uses is
not a financial accounting system, is not compliant with GAAP
(Generally Accepted Accounting Principles), and therefore cannot, and
does not, report the financial results of operations of any train,
route, or group of routes.
 
The result is that Amtras’s largest and most commercially successful
business segments languish, starved of capital and unable to exploit
sterling growth opportunities, while capital provided by taxpayers is
lavished upon the smallest and least commercially successful business
segment, where historic ROI has been negative. This is the segment
least capable of growth.
 
Given Amtrak’s tiny market share (it produces fewer annual passenger
miles than do motorcycles), growth is a survival imperative to create
social relevance for passenger rail. Growth should be pursued where
it is easy, inexpensive and the most remunerative.
 
It is well-established that interregional trains as a group carry the
most intercity passengers, generate the most annual passenger–miles,
have the highest load factor, and in their respective corridors have
the greatest market share for intercity passenger transport, of any
trains Amtrak operates. They have by far the highest return on
invested capital. And, according to ex-CEO Wick Moorman, echoing
Graham Claytor’s public expressions, they produce the only real
annual profit. These are the trains that objectively warrant
aggressive investment, growth and exploitation. But how to do that
seems challenging, due both to inherent constraints of operating as
an unwelcome and perhaps un-remunerative tenant on other people’s
industrial property, and to false perceptions that the shorter
corridors are more attractive investment prospects.
 
Closer examination shows that the interregional business can be
expanded faster, easier, more confidently, more lucratively and far
less expensively than any short corridor. Let’s explore ways to do
that.
 
Growth can come from organic growth—pushing more sales through
existing channels—and from scale growth—adding channels.
Interregional trains easily can do both.

Organic growth can occur only where inventory exists or can be added
in existing channels. That will be hard to do with ultra-high-value
sleeping car sales because relatively little unsold inventory exists.
A larger fleet is necessary. That is not the case with coach seats,
where off-peak season sales plummet. But that occurs in a marketing
vacuum. Amtrak makes no effort to promote and sell coach seats on
interregional trains in slack periods, and in fact would rather
withdraw inventory by suspending car-lines than trying to sell the
seats.
 
So let’s start here with the low-hanging fruit.
 
The North Dakota off-season local ad experiment can be repeated
everywhere interregional trains call at smaller communities (the ad
money would be wasted in larger metro areas, buying impressions with
large numbers of people who are not candidates for interregional
coach rail travel). Small-market print ads are effective, inexpensive
and easy to do, even by in-house marketing staff.
 
Awareness and purchase intent also can be stimulated by promotional
activities. This list is very long, but one simple example is to give
two seats each to small town radio stations to use in contests and
sweepstakes, in non-overlapping communities all across the route of a
train.
 
It goes without saying that infrequent rail travel by many people
will result in strong impressions, and word-of-mouth transmission of
those impressions to many, many more people. That impression had
better be positive, and that means that Amtrak needs to stop
stripping away the amenities that make longer-distance rail travel
attractive in the first place. One example: People whose trips on
average cover several meal periods cannot reasonably be expected to
make do with junk food from a snack bar. They don’t want or need
five-star fine dining, either, but “airport food” in a cardboard box
is not the answer. It is a false economy.
 
Amtrak’s pricing policy in its surviving dining cars is foolish
because it deters coach usage of the service and thus longer-distance
coach travel altogether. When the diner is there already to feed
sleeping car passengers, and paid for by transfers from sleeper
revenue accounts, incremental use by coach passengers can be highly
profitable because it need cover only the direct variable cost of
food and utensils, and incremental labor costs only if a server is
added. Everything else is already covered. Dining car menu prices
should be cut by half.
 
Other simple innovations will contribute to organic growth. One would
be to turn two or three seat pairs in each coach into facing pairs
better to accommodate families and groups traveling together. Cost:
zero.
 
The business class (premium coach) car on the Coast Starlight has
been largely ineffectual, but that and other one-night trains (e.g.,
the Atlantic Coast Corridor trains, the Capitol Limited and City of
New Orleans) could add a premium coach in an underutilized coach
carbody fitted instead with second-hand (i.e., cheap) airline
business class flat-bed recliner seats to create a product and price
point between coach and sleeping car.
 
Scale growth of potentially huge volume is also available in
interregional markets, easily within the constraints of the existing
trunk railroad industry.
 
First and most obviously, adding cars to existing trains does not
challenge rail infrastructure. Every western train needs and can sell
out additional sleeping car inventory, year-round. These new cars can
be leased rather than purchased, and could be “wet”-leased with
long-term warranty/service contracts by the manufacturer. Many
western trains already double-stop smaller stations, so that is not
an added burden. Added traffic in the diner can be easily
accommodated, and the highly successful 24-hour dining car service
pioneered years ago on the Sunset Limited could also be re-launched.
Amtrak ignored that, too, despite turning the diners into actual
profit-centers.
 
Next is the biggest growth driver possible: expanding the scale of
the network through individually small additions to the
interconnectivity of the existing route system. These are not “new
routes” in the conventional sense, but small enhancements to the
existing network, which nevertheless drive exponential (not merely
additive) growth. These examples illustrate the concept, but many
other possibilities exist all across the system.
 
Create a regional network in New England by originating either the
Adirondack or the Maple Leaf train in Boston rather than New York and
schedule the two trains to “hub” at Albany/Rensselaer in each
direction. At almost zero incremental cost, the two trains can enable
customers to travel between all points east and south, and west and
north, of Albany, rather than only providing non-synergistic
point-to-point services. Extend an existing route to a better
end-point. The Saluki should go to Memphis (not just Carbondale) and
the Palmetto to Jacksonville. The Carl Sandberg should go to St.
Louis, not just Quincy. By serving much bigger markets, the trains
will do much more work. Interconnect existing interregional routes.
Multiplying the matrix of possible origin/destination pairs on really
long routes will blow the lid off productivity of the affected
trains. A good place to start: Extend one round trip of the Missouri
River Runner beyond Kansas City to Omaha, to add all of downstate
Illinois and Missouri to the route matrix of the California Zephyr.
Run that train all the way to and from Chicago via St. Louis.  It
doesn’t matter whether anyone ever rides locally just between Kansas
City and Omaha.)  Guarantee the connection. And advertise it.
Yes—Amtrak will have to add cars to the CZ to carry all the new
traffic, but that is a benefit, not a problem. Extend the Heartland
Flyer to Denver and Cheyenne via Newton and La Junta on the Southwest
Chief to connect Texas and Colorado. Drop through cars from the
Southwest Chief at Barstow for Oakland via Fresno. New train-miles
are minimal and additive, but expansion of the network, and usage, is
exponential.
 
Computer modeling of modest enhancements like these to the Southwest
Chief route several years ago predicted that with no change in
on-board service and no change in rates of market penetration, i.e.,
do what we are already doing, just do it in a larger O/D market
matrix, would multiply average daily ridership on the stem train of
the Chief by a factor of six. Yes—that requires a second train, and
that in turn a new commercial arrangement negotiated with the host
railroad. Adding a second daily train also adds further to ridership
growth. These are normal challenges of real growth. They are
positives and can be managed, not reasons to shy away from growth.
Amtrak’s inability or unwillingness to exploit easy growth
opportunities does not mean that these opportunities are not there
for the taking.
 
Amtrak’s obsessive fixation on carrying mostly commuter traffic in
the Northeast Corridor with only a tiny market share but at a public
subsidy cost exceeding $1 billion dollars a year, combined with its
self-inflicted dependence upon the deeply-flawed APT costing system,
blinds it to these and many other lucrative, low-cost, high-ROI
growth opportunities throughout its national network.
 
Amtrak itself stands between America and the passenger rail network
America wants and could have.


https://www.railwayage.com/news/amtraks-interregional-growth-opportunities/

 

As usual Andrew writes with his common-sense understanding of what Amtrak ought to be vs what it is. If Amtrak had management brains like his then it would be more like "what it ought to be". But that's the whole problem.  Mr. Selden always writes quality material but what we need to know badly is how to get the bums out.

RPA board please read this, then read again.

It covers the basics of my expiernece in passenger rail going back to 1952.
 

mundo Wrote:
-------------------------------------------------------
> RPA board please read this, then read again.
>
> It covers the basics of my expiernece in passenger
> rail going back to 1952.
>  

“RPA” is almost as bad as Amtrak these days. I miss NARP.

Posted from iPhone

"Many in this small town and its hinterland said they were unaware that the train even existed, or where it went."

Shocking, isn't it?

The airline business class seats/flat beds for shorter overnight trips is an excellent idea. What ever happens to those older units that airlines are swapping out for something newer and better?  Could they be bought for a deal?

SanDiegan Wrote:
-------------------------------------------------------
>
> “RPA” is almost as bad as Amtrak these days. I
> miss NARP.
>
> Posted from iPhone
Yes I guess this helps to explain the name change. Part of their agenda  - kill NARP because of what it stood for.

PRSL-recall Wrote:

> Yes I guess this helps to explain the name change.
> Part of their agenda  - kill NARP because of what
> it stood for.

I heard the new name was chosen so as to appeal better to Millenials. How it does that, I have no idea. But it makes it appear that NARP collapsed and was reorganized as RPA, whose acronym is also easily confused in the NY/NJ area with the  www.rpa.org. Board and Staff were made aware of this potential confusion, but didn't seem to care. I wasn't terribly pleased with NARP in later years before the name change either, but it has since gotten more incompetent, non-analytical (no mention any longer of the cost accouting White Paper authored by older NARP Directors), lacking of passenger focus, "Beltway" insular, and playing into Amtrak's snow jobs. I am also tired of hearing from both Amtrak and "RPA" that the Millenials want this or they don't want that because neither enterprise has a clue. In any case ,most Baby Boomers have not gone off to God's Waiting Room facilities yet and have more disposable income than younger generations to travel.

andersonb109 Wrote:
-------------------------------------------------------
> The airline business class seats/flat beds for
> shorter overnight trips is an excellent idea. What
> ever happens to those older units that airlines
> are swapping out for something newer and better? 
> Could they be bought for a deal?

You can't fit very many flat beds in a passenger car.

The 1950's Sleepy Hollow seats with leg rests would be fine. Without elaborate bathroom lounges, should be able to get 56 seats in a car.

joemvcnj Wrote:
-------------------------------------------------------
> The 1950's Sleepy Hollow seats with leg rests
> would be fine. Without elaborate bathroom lounges,
> should be able to get 56 seats in a car.

Yep! I was questioning airline style flat beds.



Edited 1 time(s). Last edit at 10/08/19 09:29 by ts1457.

ts1457 Wrote:
-------------------------------------------------------
> andersonb109 Wrote:
> --------------------------------------------------
> -----
> > The airline business class seats/flat beds for
> > shorter overnight trips is an excellent idea.
> What
> > ever happens to those older units that airlines
> > are swapping out for something newer and
> better? 
> > Could they be bought for a deal?
>
> You can't fit very many flat beds in a passenger
> car.

Probably could fit in 33 assuming a 2-1 set up and 7 ft. total length between seats and a single vestibule.  Might as well just have a sleeper.

abyler Wrote:
-------------------------------------------------------
> Probably could fit in 33 assuming a 2-1 set up and
> 7 ft. total length between seats and a single
> vestibule.  Might as well just have a sleeper.

Appreciate it. What about the restrooms

Not sure whether 2-1 works. I think each one needs access to an aisle. Without that, the window seats with the paired ones could be blocked when its mate is in the bed position. Maybe 7' between the ones on the single side, but 10' on the paired side, so that one could get around the aisle seat in the bed position by going around its end. by now, with restrooms, the capacity is down to the mid-twenties. Yes, just have a sleeper instead.



Edited 1 time(s). Last edit at 10/08/19 22:57 by ts1457.

joemvcnj Wrote:
-------------------------------------------------------
> The 1950's Sleepy Hollow seats with leg rests
> would be fine. Without elaborate bathroom lounges,
> should be able to get 56 seats in a car.

However comfortable those seats were, I rode many times in them, they still don't recline to a flat position. 
 

mundo Wrote:
-------------------------------------------------------
> RPA board please read this, then read again.
>
> It covers the basics of my expiernece in passenger
> rail going back to 1952.
>  

Should say the same with Airline Boy and co.!

Posted from Android