To Make a Buck, Should Amtrak Cut Costs or Add Benefits?
This is about two railroads: Amtrak and Iowa Pacific Holdings—which doesn’t sound much like a railroad at all, does it? Mostly, IPH runs excursion trains which you can check out on their web site.
Ed Ellis, the guy who runs IPH, has some innovative ideas, one of which is generating more and more interest. Here’s some very brief background:
Ellis’ company is under contract with the State of Indiana to run the Hoosier State train four days a week in both directions between Chicago and Indianapolis. It’s a 200 mile trip that takes less than five hours.
On the other three days of the week, Amtrak’s train, the Cardinal, traveling between Chicago and New York City, covers the Chicago-Indianapolis segment. That, however, is where the similarity ends.
First, it costs more to ride Ellis’ train—roughly $19 more for a one-way adult ticket, whether you’re in coach or in Business class.
Amtrak now offers the same upgrade to Business Class on the Cardinal, an extra $16 buying you a leather seat, a free non-alcoholic beverage and access to the Metropolitan Lounge in Chicago’s Union Station.
The Business Class upgrade on the Hoosier State gets you access to the upper level of IPH’s classic dome car, where you can sit, enjoy the enhanced views of passing scenery and imbibe the beverage of your choice.
But the Hoosier State also has a dining car—a real one!—where fresh-cooked meals are served on real china with silverware, all on tables covered with white tablecloths. Yes, you pay extra for your meals and any beverages but, I am told, the food is very good and the prices are reasonable.
And that’s the difference in the two business philosophies. Ellis is betting that if he enhances service on the Hoosier State, giving people a much more enjoyable experience, they will be willing to pay for it and his company will make money.
Amtrak, of course, has taken quite a different approach. They are striving to break even by cutting costs in every possible way and hoping that ridership and revenues won’t decline as a result.
It’s too soon to say who’s right or which marketing approach will be proven right, but a helluva lot of people are rooting for Ellis.
Well it’s not too soon to notice that Amtrak long distance trains – where most of the cuts have been concentrated – have been loosing riders. Amtrak blames it on gas prices. But other data show that train travel isn’t much affected by gas prices.