What is going on with Auto Train Pricing

[guest_nj_2]

to GML:

"Best" business is the one that operates at the "highest" ROI *for many years to come*.

If it can operate in this mode for only 1-2 years and then fall back, then it's ultimately a bad long-term strategy.

Take car insurance, for example.

A company that dominates in a certain region can just double their rates (let us assume for a moment

that regulators would allow this). At renewal consumers will be shocked, but many would still renew at the

doubled rate. Good for the company ? Absolutely great -- for the next 6 months. Because at the next renewal

consumers will start shop around and many would defect.

The more Amtrak raise prices way above the rate of inflation, the more its customers start looking to alternative

methods of travel. At least the "non-core" group of customers (the "core" group is price-insensitive and will pay

whatever Amtrak throws at them, so Amtrak will always have this minimal revenue floor from that group). But to assume

that EVERYONE will keep behaving like this "core" group is fallacious.

 

[user 1215]

To elaborate on Barciur's comments:

2. Amtrak does NOT have a competition, so it acts as a "natural monopoly".

Natural monopolies should NOT be allowed to increase prices uncontrollably (it is called "price gauging").

Public utilities (the other natural monopolies) provide a good comparative example.

People actually need electricity much more than they need Amtrak travel, and most people actually

CAN AFFORD doubling or tripling their utility bills, yet it doesn't mean that this is the right thing to do.

Regulators will not allow this to happen, as utility rates are modestly revised once every few years, and a hearing

is usually conducted.

Same logic should be applied to Amtrak -- especially since it gets public subsidies, it's fares should be

REGULATED by a commission and not allowed to increase uncontrollably (even if there exists a large demand

on certain routes).

There is plenty of competition for Amtrak - Greyhound across the country, Airlines, and the competition gets fierce in the NE with all the $1 busses (that really don't have seats for $1)...

Price gouging is not what Amtrak does. If it did, ridership would be all but eliminated.

 

[guest_nj_2]

This is EXACTLY what I'm predicting -- that in the next 2 years ridership START DECLINING, which may not necessarily

drop the revenue (it will be absorbed by the heavier increases on the "core" group), but the revenue would stagnate.

In the NE, airlines are not really in competition with Amtrak, but cars and buses definitely are.

Not at those ridiculous $1 fares, but at very reasonable $20-$25 one-way fares NY-BAL, for example.

Half of the lowest-bucket NE Regional fare.

If you have a family (or a group of 3-4 friends), driving or bussing beats Amtrak [price-wise] hands down,

even at the lowest bucket fares.

And, as long as those Amtrak fares keep rising, people will "discover" these other options (cars/buses)

and some would switch.

 

[Green Maned Lion]

The oldest the equipment (Superliner IIs) on the AT was built in 1993. This makes the equipment barely 21 years old - or less.

Actually, the AT lounge cars are Superliner I diners and they are ~ 35 years old.

 

[Green Maned Lion]

to GML:

"Best" business is the one that operates at the "highest" ROI *for many years to come*.

If it can operate in this mode for only 1-2 years and then fall back, then it's ultimately a bad long-term strategy.

Take car insurance, for example.

A company that dominates in a certain region can just double their rates (let us assume for a moment

that regulators would allow this). At renewal consumers will be shocked, but many would still renew at the

doubled rate. Good for the company ? Absolutely great -- for the next 6 months. Because at the next renewal

consumers will start shop around and many would defect.

The more Amtrak raise prices way above the rate of inflation, the more its customers start looking to alternative

methods of travel. At least the "non-core" group of customers (the "core" group is price-insensitive and will pay

whatever Amtrak throws at them, so Amtrak will always have this minimal revenue floor from that group). But to assume

that EVERYONE will keep behaving like this "core" group is fallacious.

*blinks* Why are you trying to tell a guy with an MBA who has built a business pulling up by its boot straps what good business strategy is? Honestly.

 

[Green Maned Lion]

I don't publicly attack posters on this website. Arguing opinions and directly attacking a particular person are different.

 

[guest_nj_2]

to GML:

Many people *WITH MBAs* did not see the 2001 and 2008 crises coming.

Having an MBA does not preclude the individual from making a mistake (including a business mistake).

It's terrific that you've built a successful business for yourself (that is presumably operating "at the highest

ROI imaginable"). This does NOT mean that what Amtrak is currently doing with its price increases / amenities

cuts is right.

 

[Paulus]

This is EXACTLY what I'm predicting -- that in the next 2 years ridership START DECLINING, which may not necessarily

drop the revenue (it will be absorbed by the heavier increases on the "core" group), but the revenue would stagnate.

In the NE, airlines are not really in competition with Amtrak, but cars and buses definitely are.

Not at those ridiculous $1 fares, but at very reasonable $20-$25 one-way fares NY-BAL, for example.

Half of the lowest-bucket NE Regional fare.

If you have a family (or a group of 3-4 friends), driving or bussing beats Amtrak [price-wise] hands down,

even at the lowest bucket fares.

And, as long as those Amtrak fares keep rising, people will "discover" these other options (cars/buses)

and some would switch.

Why exactly are you trying to pretend that price elasticity of demand is some sort of revolutionary concept that neither Amtrak nor we have ever heard of? Amtrak is capacity limited, they have no reason not to try and skim off the highest value passengers. If things change and they are no longer capacity limited at those high rates, they can always drop the fares to a point where they will once again be capacity limited. Why should Amtrak bother trying to compete with a bus company which makes $15 per passenger when they can fill themselves up with $75 passengers?

Transportation is not a zero sum game nor is it some sort of winner takes all contest. Amtrak does not need, nor should it attempt to be, all things for all people.

 

[Joeker]

In the NEC, Amtrak can offer itself as a premium and faster alternative to the Megabus, Bolt Bus etc. It does not have to compete directly on price because it can get you there faster than the bus with better seating and amenities. If all you want is lowest cost then the bus will win.

If you need to get there faster than the train then there are the airlines at a higher cost (generally) , though for downtown to downtown travel the train still holds the edge.

 

[guest_nj_2]

Faster - yes; premium -- NO.

Have you tried a new Greyhound bus lately ? They have Wi-Fi and power outlets,

and their seats have elbow rests (that Amfleet I cars do NOT have).

The "quality" of bus travelers is also much higher than 10 years ago.

But the point is -- how much can you charge for that "premium experience" before people

decide to balk and start looking at other alternatives ? People don't have infinite amounts

of money to spend on Amtrak travel.

to Paulus:

This is exactly the attitude that would doom Amtrak in this country.

In other parts of the world, the "train culture" implies that trains are available to MASSES,

not just to "selected few" with gobs of money.

Sure, people who plunk $3,000 for a roundtrip on Auto Train now can probably pay $4,000 without a blink.

But others will stop riding, so ridership would decline.

Good luck then arguing for the public subsidy if trains really get unaffordable to the general public.

 

[Ryan]

Good luck then arguing for the public subsidy if trains really get unaffordable to the general public.

Ridership numbers clearly prove this to be untrue.

 

[rrdude]

A real-life example may illustrate what "Guest" is arguing about.

The owners of my company have frequently chosen to ride the Regionals to NYC for the ten years I have been with the company.

However, the last two trips that were taken, they both choose MegaBus, because it offered internet also, wasn't too long of trip, and the cost-differential was so vast. Try as I might, to dissuade them, they said they were gonna try to the bus, and after they did, they liked it well enuff to do it again.

This is from a couple that own a private plane, and drive Teslas............ I could not believe it. Both are in their mid-fifties, considered left-of-center, highly educated, and very well to do. But when discussing with them, they said the price difference was thee major factor. Had it been "close" (their words) they said they probably would have taken Amtrak. As a bonus, the bus dropped them off directly in front of the Javits Convention Center.

It might just take one "bus trip disaster" to change their mind (Waiting in rain, long traffic back-ups, etc.) but for now, they are "all in" on the bus.

They have taken Acela, but think the fares are far-too-high, for only about a 15-30 minute decrease in travel time, between DC and NYP.

I just hope they don't force us employees to ride the dog.............

 

[Paulus]

to Paulus:

This is exactly the attitude that would doom Amtrak in this country.

In other parts of the world, the "train culture" implies that trains are available to MASSES,

not just to "selected few" with gobs of money.

Sure, people who plunk $3,000 for a roundtrip on Auto Train now can probably pay $4,000 without a blink.

But others will stop riding, so ridership would decline.

Good luck then arguing for the public subsidy if trains really get unaffordable to the general public.

And in other parts of the world they have the capacity to do that. The Northeast Corridor currently does not.

 

[guest_nj_2]

RyanS;

you keep missing the point -- the ***CURRENT*** ridership numbers do not reflect this.

Wait until the next big fare hike and / or amenities cut arrive.

This is why I say -- ridership would decline *IN THE NEXT 2 YEARS*.

Amtrak apparently does not take this issue seriously ("good times last forever" attitude) and

concentrate exclusively on the short-term picture, not on the long-term.

 

[Ryan]

You say that as if Amtrak just raised fares for the first time yesterday.

They have been constantly going up, and ridership and revenue have continued to increase.

I'm certain that if prices get to the "unsustainable" point, Amtrak will back off. It's all about finding the balance.

 

[Allypet]

Good luck then arguing for the public subsidy if trains really get unaffordable to the general public.

Ridership numbers clearly prove this to be untrue.

I think he is referring to the future, so to quote TV commercials, "Past Performance is Not Necessarily Indicative of Future Results"

 

[Ryan]

Yeah, I already addressed that 10 minutes ago.

Paulus addressed it 2 hours ago.

Why exactly are you trying to pretend that price elasticity of demand is some sort of revolutionary concept that neither Amtrak nor we have ever heard of? Amtrak is capacity limited, they have no reason not to try and skim off the highest value passengers. If things change and they are no longer capacity limited at those high rates, they can always drop the fares to a point where they will once again be capacity limited. Why should Amtrak bother trying to compete with a bus company which makes $15 per passenger when they can fill themselves up with $75 passengers?

Transportation is not a zero sum game nor is it some sort of winner takes all contest. Amtrak does not need, nor should it attempt to be, all things for all people.

 

[user 1215]

This is from a couple that own a private plane, and drive Teslas............

I think the Teslas are great. Only, you can't drive one from coast to coast. And that's ridiculous.

 

[tonys96]

You say that as if Amtrak just raised fares for the first time yesterday.They have been constantly going up, and ridership and revenue have continued to increase.I'm certain that if prices get to the "unsustainable" point, Amtrak will back off. It's all about finding the balance.

You were also certain that Amtrak would fix the website 'glitch' on sleeper fares when they found out about it. Seems they are aware of it, and it has yet to be fixed.

So, who knows for sure if they will 'back off'??? I am careful about being 'certain' about anything Amtrak nowadays.

 

[Ryan]

"Past Performance is Not Necessarily Indicative of Future Results"

 

[Ryan]

This is from a couple that own a private plane, and drive Teslas............

I think the Teslas are great. Only, you can't drive one from coast to coast. And that's ridiculous.

Because that's a common use case for cars.

 

[guest_nj_2]

RyanS:

We'll see.

To date, we haven't seen much "backing off" either, so I won't hold my breath.

If anything, the "screw the passenger" attitude seem to prevail lately.

RRDUDE:

My company refused to pay Acela roundtrip (NY-WAS), but they allowed me to drive.

(so, no requirement to "ride the dog" -- yet)

At personal car mileage rate, NY-WAS roundtrip runs about $250 (+ tolls).

I could have argued for a NE Regional fare (the cheapest "last-minute" one was $145 one-way),

but decided to drive anyway (as $145 NY-WAS on a Regional seems like a rip-off).

It actually wasn't a bad drive, and I was even able to visit a few friends on the way back (what

I wouldn't be able to do if I took the Regional).

 

[Ryan]

RyanS:

We'll see.

To date, we haven't seen much "backing off" either, so I won't hold my breath.

We haven't seen declining ridership either. Why would you expect to see "backing off"?

 

[guest_nj_2]

Because it's a better long-term strategy.

I guess "promoting train culture", "mending fences with the public", etc. are taboo words in Amtrak lexicon.

It's much easier to lose the trust of travelling public than to win it back.

Even when Amtrak starts "backing off", most people won't be able to see it.

For us who swear by Amsnag (running it multiple times a day) it will be easy to spot a price drop on a desired route.

But for others ?

Casual riders, once convinced that Amtrak is too expensive for them, will just stop checking prices

and considering it as a travel option.

 

[henryj]

Well stated GML. I have learned to keep my opinion to myself usually. I will post the facts that I have learned from 41 years of railroad time (40 Amtrak), also can rely on over 135 years of rail experience in my generation and the previous generation (wife, mother, sister, and father in law all railroaders).

I would like to add that I also have met Ryan and totally agree with Guest_SANSR_.

Since this seems to be the cheer leading for Ryan thread, I'll add that I met Henry at the Texas mini gathering a while back, and found him to be a very nice, respectable and decent person, who has a strong fondness for trains of all types, from Amtrak to local commuter trains and old trolleys.
We also met Saxman, DA, Misty, JimHudson, and others, good people all. We are blessed to have had the honor of sharing a table and breaking bread with these good folks. Had a great time with peace and harmony prevailing throughout.

Thanks for the support Tonys. I enjoyed meeting everyone at the mini also. I have kinda quit responding to all the attacks on here. Besides it's spring time in Texas and I am outside most of the time.