A series of high-profile expansions by scheduled intercity bus operators is shaking up the competitive landscape of U.S. intercity travel, according to new research data compiled by the Chaddick Institute for Metropolitan Development at DePaul University.
The institute publishes its “Intercity Bus Update” once a year to provide a snapshot of the intercity bus industry and assess changes to the sector’s competitive landscape. The study is conducted by Joseph P. Schweiterman, Marisa Schulz, Brian Antolin and a team of data collectors who sift through the schedules of more than 90 scheduled operators.
Shunning traditional stations by operating from curbside locations in many cities, BoltBus and Megabus have together grown by more than 25% over the past 18 months. These discount city-to-city, sometimes called “corporate curbside,” carriers offer ultra-low promotional fares and issue tickets primarily via the Internet.
Greyhound, too, is on a hot-streak with its heavily advertised Greyhound Express, offering premium service that includes guaranteed seating, leather seats, Wi-Fi and power outlets.
“Only a few years ago, most people thought of scheduled intercity bus service outside of the Northeast as being only for lower income people and college students. Now, families, leisure travelers and the middle upper class are onboard,” says Antolin, founder and president, Philadelphia-based CoTo Travel.
For five years running, DePaul University research has shown that this once-struggling sector has been America’s fastest growing form of intercity travel.
Growth pains, however, are evident. Building product awareness has proven difficult in some regions. Some consumers still prefer the more traditional services with traditional agents.
“Companies are finding they need a balance. Not every market is ready for an online ticketing model,” says Antolin.
The industry’s renaissance comes in the wake of a painful last half of the 20th century, when buses were relegated to the margins of transportation.
The review of historical trends in service shows that U.S. cities lost nearly one-third of their scheduled intercity service between 1960 and 1980 and more than 60% of the remaining services between 1980 and 2005. The sector was written off as being mostly irrelevant in any broader analysis of the national transportation scene.
That changed in rapid fashion after Megabus launched its Chicago hub, its first in the U.S., in 2006. The carrier’s U.S. operation, operated as a unit of Coach USA, a division of Stagecoach Ltd., expanded into the Northeast two years later. Boltbus, jointly owned by Greyhound and Peter Pan Bus Lines, launched its service from New York to Washington, D.C. that same year. BoltBus helped Greyhound defend its turf against Megabus and the feisty “Chinatown” bus operators linking big cities.
Heading out west
All of these early expansions, however, focused on building hubs in traditional transit-oriented cities, such as Chicago, New York, and Philadelphia, where riding buses has almost always been a routine part of daily life. In May 2012, however, BoltBus surprised many observers when it launched a Pacific Northwest division, its first operating unit outside of the Northeast. Service started with Portland to Seattle trips and was supplemented with Seattle to Vancouver service two weeks later.
Megabus then captured headlines with large-scale expansions in California, Nevada and Texas. Focusing heavily on the Dallas-Houston-San Antonio Triangle, the Texas service, launched in June 2012, was made possible by its acquisition of Kerrville Bus Lines and other regional properties.
This new service was not without its difficulties, partially due to the lack of attractive pickup and drop-off locations. Even so, revenues have been building as consumers take notice. The carrier’s 70 daily departures focus on corridors that had for generations lacked high-quality ground transportation alternatives to the private automobile.
Megabus’ California and Nevada service, launched in November, has particularly exciting implications for the sector, allowing the company to tap into some of the country’s most heavily-traveled corridors, including the Los Angeles to San Diego, Las Vegas and San Francisco markets.
At older hubs, Megabus has been busy with more targeted expansion, such as adding service to Athens, Ga.; New Orleans; Grand Rapids and Lansing, Mich.; Louisville, Ky.; Morgantown, W.V.; Newark, Del.; and Saratoga Springs, N.Y.
Altogether, DePaul’s research estimates that the discount city-to-city corporate curbside sector has grown from roughly 589 departures in 2010 to 798 in 2011 and 1,052 in 2012.
“Topping the 1,000-daily-bus threshold in a tough economy is a remarkable achievement,” says Schulz, a co-author of the DePaul study.
Such vigorous expansion prompted Megabus to air its first-ever television commercial, which appeared primarily in Texas markets last year. Megabus is also a lead sponsor of Jason Bowles, a NASCAR Nationwide Series racecar driver.
“BoltBus and Megabus have achieved, in only a few years, an extremely high level of brand recognition in the densely populated Eastern states,” notes Lauren Ames Fischer, a research fellow at Columbia University who has surveyed bus passengers.
Smaller operators have also added new routes. Such ambitious expansion, however, carries with it an enormous financial risk. It is unclear whether any of the new routes in Texas and the West have yet become profitable. Adding to the difficulty, a debate over the locations of bus stops has raged in Dallas, New York and Pittsburgh. Some pickup locations have become crowded and confusing.
To provide customers more timely information both onboard and at stop locations, Megabus rolled out the “Megabus USA” app, available through the Apple store and linked to real time GPS data, which has helped to alleviate some of the communication problems between customer service and passengers. Because of this app, passengers are now able to track their bus in real time. Dealing with all the growth, however, will require much more.[PAGEBREAK]
Greyhound defends its turf
Greyhound is protecting its turf with its own targeted expansion. No longer does the carrier try to be “everything to everybody.” Gone are the coast-to-coast buses and once-a-day “milk runs” making stops at tiny hamlets. Instead, Greyhound has become a focused competitor devoting most of it resources to the most lucrative markets, while still trying to maintain its kingpin status on the national scene.
This legacy carrier has been investing most heavily in Greyhound Express, which was previously largely confined to Chicago and the Northeast, but now, has been rolled out in California, Kentucky, New England, Nevada and Texas.
“Greyhound and Megabus appear keenly aware of each other’s next move,” says Fischer.
This past July, Greyhound also launched Crucero Direct, designed with the same features as Greyhound Express and oriented toward Latino travelers. This branded service is now provided in the Los Angeles to San Diego-San Ysidro, Calif. corridor.
Chinatown operator crackdown
Both convention and discount city-to-city bus lines appear to be benefiting from the federal crackdown of Chinatown bus operators, several dozen of which were shut down on May 31, 2012 for non-compliance with certain safety regulations. The crackdown was the result of years of work by the Federal Motor Carrier Safety Administration (FMSCA) to deal with concerns over safety and business transparency among the Chinatown bus companies.
Driver fatigue, violations of drivers’ hours-of-service on their logbook, vehicle maintenance and driver registration were among the problems that brought the matter to a boiling point in 2012 when the FMSCA shut down 26 of the worst violators. Prior to the shutdown, the FMSCA had trouble keeping tabs on these operators, as it was easy for reprimanded carriers to simply remake themselves into new carriers with new names. In May of this year, the shutdown of Fung Wah, a major Boston to New York operator, sent shock waves through the sector.
Although issues of enforcement still loom, conventional and discount carriers are clearly benefiting from the notoriety. Both conventional carriers and Megabus have taken steps to inform the public about their commitment to safety. In October 2012, Greyhound and Peter Pan Bus created Yo!Bus to serve the New York Chinatown to Philadelphia market; more recently, it has started a New York to Boston service as well.
“The new brand was accepted by consumers fairly quickly,” says Antolin.
Yo!Bus offers the same fares offered by Chinatown carriers, but with refurbished buses equipped with Wi-Fi, leather seats and more legroom. A Chinese-based ticket agent in New York facilitates customer service to make the transition for customers accustomed to using Chinatown operators as easy as possible.
Too much too fast?
How big has intercity bus travel become? While it is still smaller than in the glory years of head-to-head competition between Greyhound and Trailways, analysis indicates the total number of daily scheduled operations rose from 3,608 at the start of 2012 to its present level of 3,879 at the start of 2013, a 7.5% increase. These estimates do not include Chinatown and airport-shuttle operators.
The sector’s growth easily outpaces the expansion of rail service, which grew in seat-miles by 3%, as well as the slow-growth results being reported by airlines and agencies tracking automobile travel.
Lurking behind the dramatic press releases about new service is the question of whether the discount operators, like BoltBus and Megabus, must now follow a somewhat more cautious approach to expansion. The past several months have been remarkably quiet, although summer loads were reportedly quite strong. Even so, the next several years promises to be bring more surprises as scheduled operators jockey for market position.
“Given that the battle for market share in the intercity bus sector is intensifying, it seems likely that another wave of expansion is on the horizon,” says Schulz.
Joseph P. Schwieterman is director, Chaddick Institute for Metropolitan Development, DePaul University. A copy of his most recent study on the intercity bus industry can be found at las.depaul.edu/chaddick