James A. Bacon
In 2006 the Megabus inter-city bus line opened its Chicago hub serving a handful of Midwestern cities. Today the company has 300 buses operating in 100 cities across the United States and Canada. Not only does the bus line now serve millions of riders annually, the so-called “Megabus effect” has inspired numerous imitators to pile into the market for inter-city bus service. After 35 years of decline, inter-city bus service has rebounded.
Megabus, which is owned by the United Kingdom-based Stagecoach Group, has plenty of room to grow, said Dale Moser, president and COO of Coach USA Monday at the American Dream Coalition conference. The potential market is vast: all inter-city travel, especially travel in cars and airplanes. “We’re converting 60 percent of our customers from cars — it’s a huge modal shift.”
Moser received a warm reception at the conference, attended by fiscal and free-market conservatives. Attendees were big fans of shared ridership travel modes — when they can be operated without government subsidies. And Megabus, Moser emphasized, can charge insanely low rates — only $7 to downtown Washington, D.C., in one of the six departures tomorrow from downtown Richmond — and yet receives no federal or state subsidies.
The Megabus business model has stripped out many of the costs associated with traditional inter-city bus carriers. Most notably, it has no terminals. It picks up customers curbside at pre-determined, city-center locations, and it books 98% of its customers online. (A few buy walk-up tickets.) Thanks to a double-decker configuration, the company also packs more customers onto a bus without sacrificing comfort. Wi-Fi and electrical outlets allow passengers to use their laptops and tablets during the trip.
Unlike some of the so-called “China buses,” Megabus has an impeccable safety record, Moser said. “We believe we’re the safest operator out there.”
Without a lot of fixed investment in terminals to tie it down, the company is extraordinarily flexible. It moves into new markets quickly — and leaves just as quickly. If business materializes — typically by word of mouth — the company stays. If it doesn’t, it packs up and leaves.
Needless to say, bus travel is more energy efficient and environmentally benign than riding in automobiles or airplanes., especially when the double-decker buses are traveling fully loaded. “When all other things are equal,” Moser said, “consumers turn to the green alternative.”
One of the company’s major hurdles is finding locations to pick up customers and drop them off. Megabus typically needs municipal approval to top at a particular location, and neighbors sometimes object. “People don’t like their quiet streets becoming a bus terminal,” Moser explained. But it’s a problem the company has been able to work around so far.
Bacon’s bottom line: No state or federal policy wonk foretold the revitalization of inter-city bus. We don’t need more government subsidies and industrial policy to solve our transportation problems — we need more innovation, more disruptive business models, more out-of-left-field thinking in a free-market economy.
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