The intercity bus industry is again picking up speed, having already navigated speedbumps created by plummeting oil prices in 2014 — a year that ushered in a period of abnormally cheap fuel and the end of an era of frenetic growth. With the country’s economy improving and high gasoline prices increasing the cost of automobile travel, demand for bus travel is inching upward and the sector is regaining its mojo.
But, strategies have changed greatly since the days when BoltBus and Megabus rolled out major hubs and route networks to bring express service to population centers across the U.S. mainland. The most recent expansion has been more nuanced, generally spurred by a desire to fill gaps in the system, improve connectivity with Amtrak, and strengthen existing routes with new intermediate stops.
As highlighted in our new report, “Driving Demand: 2018 Outlook for Intercity Bus Industry,” carriers are working to strategically expand without flooding the market capacity. For example, by leveraging existing routes, BoltBus recently added stops in Fresno, Calif., and Megabus has done the same in Florida. Go Bus expanded beyond the Northeast by adding service from Miami to Key West, Fla., and Jefferson Lines drew up its strength in the Dakotas by returning to Winnipeg. OurBus, a fast growing startup, has put itself on an impressive growth trajectory, serving niche markets to and from New York.
Pool Agreement Elimination
There have recently been some dramatic moves as well, many coming in the wake of the heavily publicized termination of the Pool Agreement between Greyhound and Peter Pan Bus Lines last September. This agreement, having been approved by federal agencies in 1997 and 1998, allowed the carriers to coordinate schedules and share revenues with antitrust immunity. The Pool Agreement governed just four corridors — Boston to Albany, N.Y.; Boston to New York; New York to Philadelphia; and New York to Washington, D.C. — but they were outsized revenue generators that encompassed prominent intermediate stops.
The notable upside of this agreement’s adoption is that it allowed passengers to freely switch between departures with minimal hassle — a convenience that permitted carriers to compete more effectively with Amtrak and airlines. Passengers enjoyed service at regular intervals, often hourly, in major corridors. However, the downsides gradually grew more severe. The agreement proved administratively complex, created difficulties with e-ticketing, and added complications to providing guaranteed seating to all ticketed passengers.
With the Pool’s elimination, Greyhound and Peter Pan are once again head-to-head competitors. Each has rolled out e-ticketing (with boarding passes usable on smart phones), and Greyhound has added significant capacity on most major Northeast Corridor routes, including New York to Boston and Washington. The historic carrier also launched new routes linking Boston to Philadelphia and Washington, D.C. via Hartford, Conn. and the George Washington Bridge Station in northern Manhattan. At the same time, both carriers continue to share space in most of the terminals previously used for Pool service.
Staking a claim for market share
Other bus lines are also staking their claim to more of the Northeast market. BoltBus recently extended its service to Richmond, Va., and Megabus added routes to Annapolis, Md. and Norfolk/Virginia Beach. Peter Pan added new departures as well. The impetus for this appears to be improving finances. As recently as the 2017 fiscal year, which ended in March of that year, FirstGroup’s Greyhound year-over-year revenues dropped 2.2% in U.S. dollars. During the first six months of the 2018 fiscal year, which ended last September, it saw a 1.2% gain in revenue, despite major weather-related disruptions in Florida and Texas.
Scotland-based Stagecoach Group reported a 2.4% drop in revenue from its North American operations during its 2017 fiscal year, which also ended in April 2017.
However, performance improved sharply during the first six months of the present fiscal year, which ended in October. Total revenues fell 1.3%, but margins improved from 6.7% to 8.3%, and like-for-like revenues on this continent, rose 0.1%. On its Megabus unit, revenue-per-bus mile rose 3.2%. In short, conditions appear to be improving.
Oil is once again trading at more than $60 per barrel, which plays to the advantage of fuel-sipping buses compared to less efficient cars and planes. Our analysis suggests that passenger traffic on scheduled intercity carriers nationwide remains in the 60 to 65 million range, and that traffic was likely up slightly — perhaps 1% — in 2017.
Business Class Boom
A big story since the start of 2017 has been new premium services, including business-class offerings. These services are intended to capitalize on the airport “hassle factor” and consumers’ desire to avoid driving amid worsening congestion. Concord Coach and C&J Bus expanded business-class service between northern New England and New York. Texas’ Vonlane, which has luxurious 22-seat buses, including four seats in a small conference room, launched a Fort Worth-to-Austin service, complementing its Texas Triangle service. TripperBus rolled out “Elite” business-class service between New York and the nation’s capital, and RedCoach enhanced its expansive intra-Florida network with a new overnight business-class service from Miami to Tallahassee, to give travelers an early start to their destinations.
The most heavily publicized new service of the year, Cabin, launched in July between Santa Monica, Calif., and San Francisco. Originally piloted in 2016 as “Sleepbus,” Cabin describes itself as a moving hotel, featuring private sleeping cabins that allow passengers to lie flat, while also offering onboard lounges with conventional seating. Cabin’s attendants work to keep passengers comfortable while also positioning themselves as a lifestyle and hospitality brand — and one making a bold shift away from the standard seating configuration used by other premium providers. Cabin operates several times a week, with an 11 p.m. departure and 7 a.m. projected arrival in both northbound and southbound directions.
Enhanced coordination between Amtrak and motorcoach lines, meanwhile, indicates that both types of transportation providers see untapped potential in bus-train transfers as part of the Amtrak Thruway bus program. With many people looking for alternatives to private vehicle travel, Amtrak is expanding its Thruway network and making its amtrak.com website a more prominent hub for multimodal travel. Thruway service allows passengers to buy tickets involving bus-rail connections with a single click, and typically uses buses that are emblazoned with the railroad’s logo. To support these connections, Greyhound has opened ticket offices in several railroad depots, including Chicago’s Union Station.
The result of this enhanced coordination is a bevy of new travel options. For example, Barons Bus established a new route linking Charleston and Clendenin, W.V., with stops in Morgantown, Clarksburg, and other points offering train connections. In Michigan, Indian Trails Bus Lines, working with the state’s transportation department, aligned all of its schedules to facilitate bus-train transfers, while Miller Transportation/Hoosier Ride launched Thruway service between Detroit and Port Huron. In Pennsylvania, Bieber Tourways announced an agreement with the passenger railroad to operate new Amtrak Thruway services from Philadelphia to Allentown, Bethlehem, and other points. In New England, Vermont Translines’ new twice-daily “Vermont Shires Connector” links Manchester and Bennington, Vt., to Amtrak’s Albany/ Rensselaer station. Many of these routes are supported by the Federal Transit Administration’s Section 5311, which provides funding for transportation services to communities outside of urban areas with populations of 50,000 or less.
What Lies Ahead?
The outlook for the next few years suggests that the industry can expect the following:
• Guaranteed seating and the ability to change tickets online becoming pervasive on all major bus lines including Greyhound, which has eliminated obstacles to these enhancements with the cancellation of its Pool Agreement with Peter Pan.
• E-tickets becoming an industry standard, much as Wi-Fi and power outlets became several years ago, closing a gap with air and rail service.
• Increased efforts by tech-oriented bus lines and startups to use crowdsourcing and dynamic scheduling to attract new markets, including those involving Lyft, Uber, and charter bus trips open to the general public.
Our analysis also shows that several likely developments in route planning and competition also stand out.
• More growth of business-class and luxury bus services to destinations that have not yet had a taste of these offerings, particularly outside Florida, the Northeast, and Texas. These services will increasingly offer reserved seating comparable to that on most airlines.
• A push to move intercity bus service into public transit terminals and Amtrak stations, a trend that has been gaining traction for several years, resulting in the closure of many traditional intercity bus stations.
• More feeder routes to Amtrak stations as state governments seek to expand mobility while lacking the budgets for significant increase in train service.
As the market evolves, the demand for specialized services will likely outperform that for traditional rural collector services and conventional services offered by legacy carriers. For some locally-oriented services, traffic may remain flat over the next few years, much as it has been for bus services by metropolitan transit operators, which is struggling as of late.
Finally, strategic moves by Flixbus, the German-based company that recently announced it will commence U.S. operations in 2018, seem destined to capture the spotlight. Known for its lime green buses and rapid expansion into new markets, the company seeks to change the way people see and use intercity bus services.
Flixbus partners with existing bus lines to operate the service while retaining control of all pricing and scheduling decisions. Backed by extensive venture capital, it has gained significant market power in major European markets. Although details are scant, there are indications that Flixbus operations here will be based in Los Angeles and encompass routes in Arizona, California, Nevada, and Utah.
With its mojo back, expect the intercity bus industry to take more surprising turns and roll out new services to attract new types of passengers over the next several years.
Joseph Schwieterman, Ph.D., and Brian Antolin are authors of the annual DePaul University year in review of intercity bus travel.