Is MegaBus a High Speed Rail alternative or a ridership canary?

This post is a quickie from economist Mary Parry, and I’m not sure if I am being fair to what he is actually saying here, but this is what he says:

Megabus is a great example of a competitive, flexible, low-cost (sometimes free), consumer-driven, market-based solution to inter-city transportation that has thrived without any government subsidies, tax breaks or taxpayer funding. Contrast that alternative to government transportation options like Amtrak and high-speed rail proposals that are the opposite: non-competitive, inflexible, high-cost, politician-driven, and not market-based, requiring massive amounts of taxpayer funding and subsidies.

He starts out with talking about Megabus’s free ticket promotions, and says that Amtrak has never given away tickets. Not sure if they have, but regional metro agencies do so routinely as a matter of promoting their service. I’m not sure that matters all that much.

The real question is whether Perry is right in that MegaBus would be a good alternative to building billions of HSR in California.

If you look at the information in the CAHSRA business plan (pdf link), despite all the ballyhoo about “taking cars off the road”, most of the market capture of other high speed rail companies comes from airline travel:

Voila Capture119

Yes, the car mode share shrinks, but the air mode share really shrinks. It would be really interesting to if there were Megabus type services in parallel with European HSR and what happened to those businesses when the HSR got built.

Remember that it is possible for total car usage to go up if aggregate travel demand goes up, even as mode share shrinks. So we might not be taking cars off the road, but putting fewer cars on the road in the future than if we didn’t provide the HSR. Those are somewhat things analytically.

However, Megabus had a West Coast Line they closed in 2008. Here’s why:

When asked for a comment, Dale Moser, president and COO of megabus.com, offered the following statement to Suite101 Budget Travel:

“Due to ridership growth trends, megabus.com no longer serves the West Coast. We take megabus.com to different markets and try to create positive ridership trends and if we can’t we move on to new markets. As megabus.com’s service continues to thrive in the Midwest and the Northeast megabus.com looks forward to the possibility of returning to the West Coast should there be adequate demand.”

So the California Business Plan is predicting a lot of passengers by 2040:

Voila Capture120

So currently the LA to SF corridor does not have sufficient demand for MegaBus service for the company to keep it rolling. But it does have sufficient demand to make a HSR company $2 billion (am I reading that right?) in revenue in another 30 years.

Proponents will tell me that HSR is so much better than MegaBus that the services are simply not comparable. I’m not sure what to think here.

2 thoughts on “Is MegaBus a High Speed Rail alternative or a ridership canary?

  1. Some of our students are doing research on inter-city buses, and there are a couple of things that jump out. MegaBus and rail (esp. Acela) in the Northeast serve very different populations. Bus riders are very price sensitive, so much of the travel wouldn’t occur if the prices were high. In the Midwest this is a bit different as air travel is a bit less frequent (think Indianapolis). But not only are bus riders price sensitive, they overwhelmingly use MegaBus for recreational travel. HSR will serve business travelers, buses serve a lot of college kids going to the big city for a fun weekend. MegaBus has not cut into Acela traffic, for instance, but there are a lot of young adults spending weekends in different cities and immigrants working multiple jobs in multiple cities.
    One potential explanation for the success of MegaBus in the Midwest is that short haul air travel is declining, and airlines are less interested in supplying short haul flights. I don’t think this is the case between LA-SF, however.
    Overall, though, the market for buses and expensive rail (or air travel) are pretty close to mutually exclusive. However, buses are a reasonable substitute for discretionary travelers who are price sensitive. Looking at the projected demographics of the state it is worth considering that there will be a lot or price sensitivity in the future.

  2. one of the troubles with Megabus when they came out to the west coast was the routes and the stops were all wrong. Yes there is no way Megabus could compete with airlines out here yet they made San Francisco to LA there key route. That was a bad move. They also put the bus stops in questionable out of the way locations. They need to make Sacramento the main hub and court the College travel market. This is the same market that has provided Amtrak California with many travelers even though their fares are expensive in my opinion. Megabus could do well to have the following routes. Sacramento-Davis-Bay Area, Sacramento-Chico-Portland, and Sacramento-Modesto-Bakersfield-LA. As well they would need to have timed transfers between some of these routes in Sacramento. I used to drive the Amtrak Thruway buses for Amtrak and have seen a huge ridership base for most of these city pairs. Yet Amtrak charges around 27.00 one way from Sacramento to the Bay Area and still fills trains. Just imagine a bus that is not greyhound with fares as low as a dollar to these same locations.

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