Experiential service class

Discussion related to Amtrak also known as the National Railroad Passenger Corp.

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Tadman
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Re: Experiential service class

Post by Tadman »

eolesen wrote:
Thu Dec 12, 2019 2:30 am
That's a pretty big **IF** there... especially when those long-distance routes are traversing the best parts of the journey at night. If it were indeed so lucrative to invest in new experiential equipment, why haven't the Canadians done it on their transcon? Instead, they keep rehabbing fully depreciated equipment.

Remember that domes were originally introduced to try and draw people away from airplanes.... it didn't work. Amtrak could have added a business class experience long ago, and that's been limited to daytime services only on the coasts. I'd think that this would have been added on the LD's if there were really demand.

It's my opinion that experiential services would never come close to breaking even.

There's a lot to this post. The assumption of "amtrak should just invest in some private cars" for experiential travelers has been a very mixed bag for AOE and Pullman Journeys. All ended poorly. Some of that can be attributed to railfan managers, but some also can be attributed to shoe-horning tourists into necessary transportation that keeps moving at night. It's just not the same business model. If I'm paying $5k+ for a ride over the American west, and my train runs 4+ hours late, the rockies are in the dark and Nebraska cornfields are daylight. I would be seriously unhappy!

Also, as a frequent traveler, the pre/post journey experience is a big deal! Rocky has their own station in Vancouver to provide a hassle-free and pleasant amenity to the people that shell out big money, who don't want to sit with bus passengers and college kids off the Cascade at Pacific Central. If Amtrak were to run a premium service, where do you dump the passengers? The NEC "premium" lounges are gross, often with rude staff. Chicago has a good one, and LA, NOLA, and Seattle barely offer anything but a room with a coffee maker. Waiting 2+ hours for a train or plane in a dirty or crowded area sets the tone of "we just don't care about your money" for the rest of the trip.

Regarding business class, it's on most corridors, and it's a total afterthought if it's not Acela-based. First, it's like a low-rent MBA student designed it. "Find some non-rev space, put in big chairs, charge 20% more". It gives no thought to pre-boarding conditions. At Detroit, you sit in the same grimy station with the a**hole security guard, immediately setting the tone of "we just don't care". Then, while the coach passengers are enjoying their recently refurbished car, you ride business in a beat up cafe amfleet. There is no on board personnel, the cafe guy makes a brief announcement and then stands behind his bar all day. The fare is usually 20% more, and this is part of the problem. The service is often sold out, why not raise prices? It might even cover the cost of an attendant to provide true service. They also allow short-haul business class, so a guy can buy a business ticket in New Buffalo to Chicago and block the Detroit passenger (and his revenue) from riding.

In the end, if there were a midwest/pacific business class manager that had some authority, this could be a far better operation with the same equipment and same trains.
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exvalley
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Re: Experiential service class

Post by exvalley »

The difference with AOE and Pullman Journeys is that they were not running a train anyways. It's a lot cheaper to add a couple of coaches to a train that you are already running.

VIA Rail Canada seems to make it work. That said, there is a good argument that it is profitable because they are using fully depreciated equipment.

CTRailfan
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Re: Experiential service class

Post by CTRailfan »

Tadman wrote:
Thu Dec 12, 2019 9:26 am
Capital is a finite thing, even for the US Government. Why should they borrow $200m for rolling stock to run a service that might subsidize a losing operation and maybe break even as a whole, when none of this is really essential? If that money were really available, why not use it to run more regional coach trains similar to the Palmetto on routes like MSP-Chicago or NOLA-Mobile? If there is the profit potential for elevated-offering long distance rail service, wouldn't someone already be providing it?
I think the fundamental question here is: Why should a government not be able to invest capital in some activities for profit like private corporations do, especially if that profit can be re-invested into services that don't turn a profit but serve a public good?

ryanch
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Re: Experiential service class

Post by ryanch »

CTRailfan wrote:
Thu Dec 12, 2019 8:59 pm
Tadman wrote:
Thu Dec 12, 2019 9:26 am
Capital is a finite thing, even for the US Government. Why should they borrow $200m for rolling stock to run a service that might subsidize a losing operation and maybe break even as a whole, when none of this is really essential? If that money were really available, why not use it to run more regional coach trains similar to the Palmetto on routes like MSP-Chicago or NOLA-Mobile? If there is the profit potential for elevated-offering long distance rail service, wouldn't someone already be providing it?
I think the fundamental question here is: Why should a government not be able to invest capital in some activities for profit like private corporations do, especially if that profit can be re-invested into services that don't turn a profit but serve a public good?
If you're saying profit after depreciation of the capital expense, then sure. If you mean bringing in more money than the operating expenses, then no business would actually do that, at least not intentionally.

Arlington
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Re: Experiential service class

Post by Arlington »

exvalley wrote:
Thu Dec 12, 2019 10:51 am
VIA Rail Canada seems to make it work. That said, there is a good argument that it is profitable because they are using fully depreciated equipment.
When I read VIA's annual report for 2018, what I see on page 10 is that the longhauls cost CAD 175m to operate and take in only CA$ 84m in revenue, resulting in a $570 loss per long-haul passenger. with the western one performing worse than the eastern one.
"Trying to solve congestion by making roadways wider is like trying to solve obesity by buying bigger pants."--Charles Marohn

CTRailfan
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Joined: Thu Jan 10, 2013 6:03 pm

Re: Experiential service class

Post by CTRailfan »

ryanch wrote:
Thu Dec 12, 2019 10:03 pm
If you're saying profit after depreciation of the capital expense, then sure. If you mean bringing in more money than the operating expenses, then no business would actually do that, at least not intentionally.
Correct, although you've just hit a MUCH larger issue with Amtrak. In many cases, they don't account for capital depreciation and technical debt in maintenance and upgrades. The NEC is not profitable if you account for capital expenditures that will be required in the future to maintain a state of good repair, as well as upgrade to handle more traffic.

exvalley
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Re: Experiential service class

Post by exvalley »

Arlington wrote:
Thu Dec 12, 2019 10:55 pm
exvalley wrote:
Thu Dec 12, 2019 10:51 am
VIA Rail Canada seems to make it work. That said, there is a good argument that it is profitable because they are using fully depreciated equipment.
When I read VIA's annual report for 2018, what I see on page 10 is that the longhauls cost CAD 175m to operate and take in only CA$ 84m in revenue, resulting in a $570 loss per long-haul passenger. with the western one performing worse than the eastern one.
My apologies. Since this thread is about "Experiential service class" I did not think that it had to be spelled out. I was referring to VIA's Prestige Class and not the Canadian as a whole inclusive of coach class. Prestige Class is indeed profitable.

eolesen
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Re: Experiential service class

Post by eolesen »

exvalley wrote:
Fri Dec 13, 2019 5:22 am
Prestige Class is indeed profitable.
Based on what metrics?

Arlington
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Re: Experiential service class

Post by Arlington »

I can't find any evidence that Prestige Class is profitable. Anyone got a link?

The 2015 annual report, touting its launch, declared it had exceeded revenue expectations but did not claim profits for it (no discussion of costs).

Leading up to and including launch, looses had been in the $500 ~ $600 per passenger for the Canadian (looking at 2013 and 2014 ARs)

The year after launch, losses had fallen to $433 per passenger. That could indicate profits in Prestige (or the new Economy?) or just a temporary "let's try it once" surge. In the earlier 2018 report link, Losses on the Canadian are back to $590.

My search didn't find VIA ever claiming profits for it, and losses per passenger on the Canadian "after" are in the same range as "before"

Where should I be looking?
"Trying to solve congestion by making roadways wider is like trying to solve obesity by buying bigger pants."--Charles Marohn

bretton88
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Re: Experiential service class

Post by bretton88 »

Arlington wrote:
Fri Dec 13, 2019 8:09 am
I can't find any evidence that Prestige Class is profitable. Anyone got a link?

The 2015 annual report, touting its launch, declared it had exceeded revenue expectations but did not claim profits for it (no discussion of costs).

Leading up to and including launch, looses had been in the $500 ~ $600 per passenger for the Canadian (looking at 2013 and 2014 ARs)

The year after launch, losses had fallen to $433 per passenger. That could indicate profits in Prestige (or the new Economy?) or just a temporary "let's try it once" surge. In the earlier 2018 report link, Losses on the Canadian are back to $590.

My search didn't find VIA ever claiming profits for it, and losses per passenger on the Canadian "after" are in the same range as "before"

Where should I be looking?
During the couple of years that the Canadian was a reliable train, Prestige class was indeed a profit maker. However the Canadian has become so unreliable that revenue is badly suffering across the board for that train.

Tadman
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Re: Experiential service class

Post by Tadman »

CTRailfan wrote:
Thu Dec 12, 2019 8:59 pm
Tadman wrote:
Thu Dec 12, 2019 9:26 am
Capital is a finite thing, even for the US Government...

I think the fundamental question here is: Why should a government not be able to invest capital in some activities for profit like private corporations do, especially if that profit can be re-invested into services that don't turn a profit but serve a public good?
It's not that they shouldn't be allowed to. The government has plenty of activities that make an operating profit. The problem I have is that government is not typically good at starting an innovative concept and making money over the long haul, because there's no incentive, and the culture typically isn't there. Imagine the government starting Fedex or Google. They had the USPS and the internet for decades before either came around, but could never manage such an innovation. Now there is Fedex and UPS, Google and ten other tech giants.

Looking at Amtrak, they run the business just like 1971 and even 1951. The best changes have not been internally innovated, but externally. The F40. The Superliner. The Amfleet. Those came from GM, ATSF, and Budd, sometimes in the ashes of a failed government spec. Now we have Amtrak and Via buying mass amounts of Siemens rolling stock, after Brightline started it all.

Having some premium and private or semi-private operators out there has done a lot of good for Amtrak, and bringing such function in-house will probably not do much good, and certainly will not lead to a lasting success.
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exvalley
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Re: Experiential service class

Post by exvalley »

eolesen wrote:
Fri Dec 13, 2019 7:51 am
exvalley wrote:
Fri Dec 13, 2019 5:22 am
Prestige Class is indeed profitable.
Based on what metrics?
VIA Rail's own reports. Prestige Class has not required a subsidy and played a role in significantly increasing revenues on the route. By all accounts it has been a success.

Report here: https://www.viarail.ca/sites/all/files/ ... 7_2021.pdf

From the report: It is worth noting that since it was introduced, the Canadian’s new Prestige service has not required a
subsidy and the Canadian makes a positive contribution during the peak season. This new service
significantly contributed to the 31.3% growth in the Canadian’s revenues from 2012 to 2016.


And the report from one year later: https://www.viarail.ca/sites/all/files/ ... an2018.pdf

From that report: From 2013 to 2017, the Canadian’s revenues increased 62.1% primarily due to the popularity of the
Prestige sleeper class, and increased fares in 2014. From a high of 112,000 passengers in 2012, ridership
has steadily declined to a low of 93,000 in 2016. This reflects a cut in frequencies and deterioration in OTP.

Arlington
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Re: Experiential service class

Post by Arlington »

exvalley wrote:
Fri Dec 13, 2019 5:22 am
Prestige Class has not required a subsidy and played a role in significantly increasing revenues on the route. By all accounts it has been a success.
So far "success" has not been shown to be "profitable"

"Not required a subsidy" would imply "breakeven" (not profit).

"Significantly increasing revenues" without reducing losses implies "but also equally drove up costs"

"Canadian makes a positive contribution during the peak season" can only mean "...loses enormous piles of money the whole rest of the year" given that it still averages out to loses $500+ per passenger (losses that are something like 2x per passenger as Amtrak sleepers)

It still is hard, given numbers stuck at that same loss-size PER passenger: To say that Prestige has added "profit" (or even breakeven). If a particular class of service were net-postive for the year, you'd expect the per-passenger loss to go down, and they haven't.

Even adding a whole bunch of breakeven (zero-loss) passengers should bring up the average (bring down the average loss), but we only see that in the first years.
"Trying to solve congestion by making roadways wider is like trying to solve obesity by buying bigger pants."--Charles Marohn

mtuandrew
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Re: Experiential service class

Post by mtuandrew »

Tadman wrote:
Fri Dec 13, 2019 9:48 am
Looking at Amtrak, they run the business just like 1971 and even 1951. The best changes have not been internally innovated, but externally. The F40. The Superliner. The Amfleet. Those came from GM, ATSF, and Budd, sometimes in the ashes of a failed government spec. Now we have Amtrak and Via buying mass amounts of Siemens rolling stock, after Brightline started it all.
Funny you use those three examples, because two of them are also exemplar failures of private industry (PRR with the Metroliner, GM-EMD with the SDP40F) that were funded and then bailed out by the Federal government. Also, Budd only came up with the Superliner concept - Amtrak hired P-S to essentially reverse-engineer and produce a new one.

NRPC specs and excessive oversight, both from them and FRA, is only ever part of the issue with Amtrak. That’s particularly the case with the V-II process (which is both a stone-age car and a revolutionary design in that it’s totally modular.) The other part of the problem is private industry over-promising and under-delivering.

Point is, Amtrak may or may not be able to deliver a premium product at the best price. However, they’re not likely to spectacularly fail like private industry sometimes does (cough IPH cough.)

exvalley
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Re: Experiential service class

Post by exvalley »

Arlington wrote:
Fri Dec 13, 2019 10:47 am
exvalley wrote:
Fri Dec 13, 2019 5:22 am
Prestige Class has not required a subsidy and played a role in significantly increasing revenues on the route. By all accounts it has been a success.
So far "success" has not been shown to be "profitable"

"Not required a subsidy" would imply "breakeven" (not profit).

"Significantly increasing revenues" without reducing losses implies "but also equally drove up costs"

"Canadian makes a positive contribution during the peak season" can only mean "...loses enormous piles of money the whole rest of the year" given that it still averages out to loses $500+ per passenger (losses that are something like 2x per passenger as Amtrak sleepers)

It still is hard, given numbers stuck at that same loss-size PER passenger: To say that Prestige has added "profit" (or even breakeven). If a particular class of service were net-postive for the year, you'd expect the per-passenger loss to go down, and they haven't.

Even adding a whole bunch of breakeven (zero-loss) passengers should bring up the average (bring down the average loss), but we only see that in the first years.
Neither you nor I have VIA's internal numbers. But what is abundantly clear from VIA's statements and plans is that VIA believes that the Canadian is much better off having Prestige Class. And that, really, is all that matters.

You also made a fundamental mistake in your analysis. You stated that if Prestige were profitable, you would expect per-passenger losses to go down. You left out a VERY important part of the equation - which was provided to you. Ridership itself went down. A decrease in ridership leads to an increase in per-passenger losses due to fixed costs.

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