Intercity Buses the Forgotten Mode by Randal O’Toole

No. 680 June 29, 2011 Intercity Buses The Forgotten Mode by Randal O’Toole Executive Summary The debate over President Obama’s fantasti- transportation mode, with ridership growing cally expensive high-speed rail program has ob- almost twice as fast as Amtrak. scured the resurgence of a directly competing Intercity buses carry at least 50 percent mode of transportation: intercity buses. Entre- more passenger miles than Amtrak in Amtrak’s preneurial immigrants from China and recently showcase Northeast Corridor. They do so with privatized British transportation companies almost no subsidies and at fares that are about have developed a new model for intercity bus a third of Amtrak’s regular train fares and little operations that provides travelers with faster more than 10 percent of Amtrak’s high-speed service at dramatically reduced fares. Acela fares. Intercity buses are safe and environ- New-model bus companies save money by mentally friendly, suffering almost 80 percent selling tickets over the Internet and loading fewer fatalities per billion passenger miles than and unloading passengers at curbsides rather Amtrak and using 60 percent less energy per than in expensive bus stations. They speed ser- passenger mile than Amtrak. vice by running most buses non-stop between Policymakers can encourage expansion of major cities rather than making numerous in- intercity bus services by ending subsidies to termediate stops. Some companies distinguish Amtrak and minimizing regulatory barriers to themselves from their competition by provid- new bus start-ups. Cities concerned about con- ing leather seats, free wireless Internet, more gestion and parking problems caused by curb- legroom, and—in a few cases—onboard meal side bus operations can sell curb rights—the service and movies. right to load and unload passengers at various In 2006, scheduled intercity bus service locations—at prices equal to the market rate for reached its lowest level in decades, yet intercity parking. Federal and state agencies can enforce buses still carried almost three times as many existing safety rules but should hesitate to im- passenger miles as Amtrak. Since then, intercity pose new rules that could increase costs and buses have become the nation’s fastest-growing reduce competition without clear safety gains. Randal O’Toole is a senior fellow with the Cato Institute and author of Gridlock: Why We’re Stuck in Traffic and What to Do about It. Between 2007 and The Fastest-Growing Mode small grantmaking programs to help bus com- 2010, ridership panies comply with the Americans with Dis- In December 2007, the final report of the abilities Act and meet national security needs. on intercity buses congressionally chartered National Surface Altogether, these subsidies are estimated to cost grew nearly twice Transportation Revenue and Policy Study about $63 million per year.10 As scheduled in- as fast as on Commission, Transportation for Tomorrow, urged tercity buses represent only about a quarter of Congress to increase spending on intercity pas- the motorcoach industry, they receive less than Amtrak. senger trains by seven to nine times—the largest $17 million in annual subsidies, compared with increase proposed for any mode of transporta- nearly 100 times that much for Amtrak.11 tion.1 Although the report devoted many pages Ironically, the lack of subsidies may be a to intercity passenger trains, it mentioned inter- major reason policymakers so easily ignore in- city buses only twice: once to suggest that buses tercity buses. While the government regularly should be considered as an alternative before issues many megabytes of data on Amtrak investing in passenger trains, and once to admit ridership, public transit usage, and other sub- that buses use about 60 percent less energy per sidized transportation, the government col- passenger mile than trains.2 lects almost no data regarding intercity buses. Some might forgive the writers of a 2007 Though some motorcoach companies provide report for ignoring intercity buses. After all, commuter service similar to that provided by the intercity bus industry had been declining public transit agencies, for example, the Fed- since at least 1980.3 Yet despite this decline— eral Transit Administration refuses to include which was exacerbated by government sub- them in its National Transit Database because sidies to Amtrak—intercity buses still carried they do not receive federal subsidies. three times as many passenger miles as Am- trak in 2007.4 Moreover, by 2007 it was already apparent to The New Model transportation experts that intercity buses were experiencing a significant resurgence.5 “The The recent growth in bus ridership was intercity bus sector began to reassert itself in driven partly by the Internet, which helped the transportation market later in 2006,” says generate a new model of intercity bus service. a report from DePaul University. “By late 2007, Under the old model, bus companies main- the sector was enjoying a significant rebirth and tained stations on expensive downtown real was expanding throughout the country at the estate, complete with ticket agents, waiting fastest rate in more than 40 years.”6 rooms, and baggage handlers. Under the new Intercity bus service has grown particularly model, tickets are mostly sold over the Inter- rapidly in the Northeast, Midwest, and Califor- net, buses pick up and drop off passengers at a nia—three regions targeted by passenger rail curbside, and drivers handle the baggage. advocates for heavy government investments. Under the old model, buses typically made Between 2007 and 2010, intercity bus ridership intermediate stops between major city end- grew by an estimated 22 percent, making inter- points. For example, a bus from New York to city buses “America’s fastest growing transpor- Washington, D.C., might stop in Philadelphia, tation mode.”7 During that period, intercity Wilmington, and Baltimore. Under the new bus ridership grew nearly twice as fast as the 12 model, most buses are nonstop, with sepa- percent growth in Amtrak passenger miles.8 rate buses serving the New York–Philadelphia, Moreover, while passenger rail requires large New York– Wilmington, New York–Baltimore, and growing subsidies, the growth in bus ser- and New York– Washington markets. vice is largely unsubsidized. Motorcoach com- Because of the old model’s high overhead panies pay a lower federal fuel tax of just 7.3 costs, just one, or at most, two carriers (for cents per gallon (compared with 18.4 cents for example, Greyhound and Trailways) served auto drivers).9 Congress has also created two most markets. With the new model’s low 2 overhead costs, many different carriers might In June 2009, I compiled a database of the serve some markets. For example, more than a Internet schedules for all available buses in the dozen different bus companies operate in the Boston–Washington corridor. Many carriers Boston– Washington corridor. provide more buses on Friday through Sun- Low overhead and competition has reduced day than Monday through Thursday. Based fares. While the old model offered one fixed on that month’s schedules, 13 different com- price for any trip, many new-model carriers panies provided about 3.6 billion seat miles rely on yield management, meaning that some of service per year. It is likely that some com- seats are sold for very low prices while others go panies were not counted because they do not for higher prices. In the New York– Washington advertise on the World Wide Web. market, several carriers sell the first seat on any In May 2011, I updated this database us- bus for $1 (plus a $0.50 reservation fee). The ing the Internet schedules for the week of May next few seats may sell for $5, then $8, then 15. By this time, 16 different carriers provided $10, eventually reaching $20. Even $20 is far about 4.0 billion seat miles of service per year— less than the lowest Amtrak fare of $49 or Am- about a 10 percent increase from 2009. Mem- trak’s high-speed Acela fare of $139. bers of the American Bus Association report Competition has also led carriers to rapidly that they fill an average of about 60 percent of innovate to distinguish themselves from their their seats in intercity service. Chinatown bus In the Boston- competitors. A typical intercity bus has 56 companies (most of which are not members to-Washington seats, but some companies offer more legroom of the association) tend to fill an even higher corridor, by removing some seats, reducing their capaci- share of seats.12 This suggests that buses car- ties to 50 seats. Many carriers offer leather seats, ried at least 2.4 billion passenger miles in this intercity buses power for personal electronic devices, and free corridor in 2010. The actual number is prob- carry some 50 wireless Internet. Another distinction is pro- ably greater, as some Chinatown buses are not percent more vided by the neighborhoods the buses serve. advertised on the Internet. Rather than all going to downtown Washing- By comparison, Amtrak reports that it of- passengers than ton, D.C., for example, some buses from New fered about 3.4 billion seat miles in the Bos- Amtrak. York terminate in Washington suburbs such as ton–Washington corridor and filled about Arlington, Virginia, and Bethesda, Greenbelt, half the seats, for about 1.7 billion passenger Rockville, and Silver Spring, Maryland. miles.13 While Amtrak frequently brags that The new model has also led to classes in it carries as many or more passengers in the service. In the Boston–Washington corridor, Northeast Corridor than the airlines, it carries the lowest class of service is offered by the so- little more than two-thirds as many passengers called “Chinatown buses,” which typically are as intercity buses. Overall, counting air, train, operated by small bus companies that begin bus, and auto, Amtrak has about a 6 percent and end their routes in predominantly Asian market share of Northeast Corridor travel, air- neighborhoods of major cities.

Load more