- The Washington Times - Monday, April 23, 2001

Special Report

Planes, trains, automobiles — and buses.
The oft-overlooked fourth major mode of transportation carries more passengers than planes or trains, but survival has become a constant struggle for the many family businesses that run the nations bus services.
Rising costs for equipment, fuel, insurance and employees are taking a toll on the industry, since the nations 4,000 bus companies cannot raise prices since they fear competition from short-lived upstarts.
"Its getting to be a tougher and tougher business," said Al Spence, president and chief executive officer of A.S. Tours in Baltimore. He owns seven coaches, one minicoach and four limos. His company focuses on selling package tours to crab feasts, beaches or destinations like Disney World to church groups, college students and family reunions.
"You stay in it because you love it," he said.
Buses carried 860 million passengers in 1999, according to the American Bus Association, compared with the 582 million individuals who flew domestically that year, according to the U.S. Bureau of Transportation Statistics. About 22.5 million people rode Amtrak in 2000.
When most people think of buses, they imagine taking the Greyhound from city to city. But the industry actually is operated mainly by a patchwork of mom-and-pop businesses with little national image. And the bus companies rely on tour and charter buses for most of their sales:
* Half of the industrys mileage is scheduled, intercity trips, while the other half comes from tours and charters, said Michele Janis, vice president of communications, marketing and membership for the American Bus Association. The group represents 800 motorcoach operators and 2,300 travel and tourism groups.
* About 12 percent of the companies provide city-to-city service. Ninety-five percent do chartered trips.
* Most operators — 65 percent — own fewer than 10 coaches, according to the bus association.
"Its one of the last great American mom-and-pop industries," said Bruce Sankey, editor and publisher of Bus Ride magazine in Phoenix.
Gambling Meccas have become the top destination for tour and charter buses, as the growth of the gaming industry fuels passenger growth, Ms. Janis said.
"Ten years ago, these places didnt exist," said Bruce Sankey, editor and publisher of Bus Ride magazine in Phoenix, noting that there are 22 casinos in Mississippi alone.
One group of mostly older women charters a bus every few months to make the two-hour trip to Dover Downs, a racetrack and casino in Delaware.
Their most recent excursion was in mid-February, with each of the two dozen riders paying $5 for the bus ride to and from the casino and a buffet voucher. But they werent focused on winnings.
Yodelle Boddie, a 63-year-old D.C. resident who helped organize the trip, said the group travels every three months or so "just for an outing, to have fun."
Advertisements in newspaper travel sections frequently offer cheap rides to Atlantic City, N.J., complete with quarters for the slot machines and meal coupons.
Other tourist destinations, such as Dolly Partons Dollyland and country music Mecca Branson, Mo., are also popular, Mr. Sankey said. Middle Americans travel to these attractions because they are nearby and inexpensive.
"Its their escape," he said.

Leave it to the little guys

But high costs, especially new buses, are shrinking the companies profit margins and putting their businesses in danger, companies large and small said.
In the past 10 years, buses have become more luxurious, said David Bolen, owner of New World Tours in Lorton, Va. Most coaches have stereos and video screens so riders can watch movies. They have all-disc brakes and traction control. And restrooms have improved.
But those improvements have come at a price. A bus costs from $350,000 to $450,000, plus insurance.
Mr. Spence said his payments average $4,500 a month, and he turns buses over every five years when their warranties expire.
Profit margins average 10 percent or less, he said. Eyre Bus Lines operating income after expenses is 5 percent, said Ron Eyre, owner of the Glenelg, Md., company.
Operators feel pressure not to raise prices because of competition. Bob Fearrington owner of Potomac Valley Motorcoaches in Forestville, said he would charge $1,200 to charter a bus to Atlantic City, but customers arent willing to pay. So he ends up charging $1,000.
The rising cost of energy — specifically critical diesel fuel — is pinching profit margins as well.
Diesel cost an average of $1.44 a gallon as of Monday, the same as a year ago, the Energy Department reported. Despite the recent drop, prices have risen 30 percent since 1995.
"It hasnt gotten to the point where the gas and electric can put me out of business. The fuel can put me out of business because I constantly need it to operate," Mr. Spence said.
Another challenge for the companies is finding good drivers — people who are drug-free, willing to learn and reliable, said Mr. Fearrington, who also is president of the Maryland Motorcoach Association.
Clarence Kenny, a dispatcher and driver with New World, said the job can be difficult. The frequent travel is tough on families, and pay depends on how often drivers work.
He has been with his company for 16 years and now spends most of his time in the office, dispatching drivers and acting as a liaison between management and employees.
He misses the road, though, and still drives when customers request it. He led the Dover Downs trip.
"Being around people, traveling and getting paid for traveling," are the jobs advantages, he said. Indeed, he mingled well with the ladies on the excursion but was all business behind the wheel.
Not everyone is suited for the job, he said. "If their personality doesnt fit with this business, they wont last long."
But Mr. Kennys long tenure is a rarity.
Mr. Fearrington said his company is down to 10 drivers, even though he has 14 coaches.
While existing companies struggle, new entrants are flooding the market, Mr. Eyre said. Like many operators, his is a family business that he inherited from his parents, who started it in 1955.
"Its very easy for anyone to enter the motorcoach market," he said. Manufacturers put together financing packages that make it possible for almost anyone to afford a bus, he added.
Manufacturers offer most of their help on down payments.
"Its easy to get into it, but can you maintain it the question is, that payment is going to last for five to 10 years. Can you sustain it?" Mr. Eyre said.
Mr. Sankey of Bus Ride magazine agreed.
"The entry barriers are virtually nonexistent," he said. If someone can come up with $20,000, thats all he needs to finance a coach. Bus manufacturers are motivated by fierce competition, he said.
Meanwhile, repossessions are rampant because the operators who got those sweetheart deals arent able to make payments, he said.
Those here-today-gone-tomorrow companies pose a "short-term challenge," Mr. Spence said.
New companies charge lower prices and might have lower quality of service, "which hurts the industry overall," he said.
Like Mr. Spence, Mr. Fearrington said what keeps him going is his love of the business.
"Ive been injected with diesel," he said, a common expression in the business.

Giant troubles

The large bus operators are not impervious to the dilemmas facing their smaller competitors.
Two of the best-known companies, Greyhound and Coach USA, have been bought by foreign transportation companies in the past few years.
But the companies, and their new parents, are finding the motorcoach industry a minefield.
Stagecoach PLC, a Scottish company that owns Coach USA, has stumbled on a number of occasions. Last year, a top executive was arrested for soliciting a male prostitute in Houston, an embarrassing incident — especially since the companys chief executive has publicly opposed homosexuality.
Coach was already a large consolidator before it was purchased in 1999, buying up midsized bus companies around the country and putting them under the companys umbrella. Mr. Sankey said the business has been less than successful because the industry is so fragmented.
"Its been a challenge for them to consolidate and to achieve the efficiencies that they expected," he said.
Trying to consolidate 85 to 100 companies with different organizational structures is a difficult task. Add to that many of the experienced operators who sold out did not remain with Coach, leaving them with a dearth of good managers, Mr. Sankey said.
Cliff Henke, former editor and associate publisher of Metro magazine, said some owners have continued as managers. He added that Coach has not appeared to work on the integration common in other industries after mergers.
"I dont see them attempting really to do a lot of economies of scale," said Mr. Henke, now in the sales and marketing department of a transit-bus manufacturer.
But an executive with Coach USA said the company has been able to gain advantages with size.
Lee Schissler, national director of marketing, said the operator has greater purchasing leverage with fuel, parts and equipment, as well as better marketing leverage, than smaller companies.
"I think it will go down as a textbook success case that did work," he said.
Greyhound seems to be sailing along and is hobbled by its Canadian parent company, Laidlaw Inc., which bought it in March 1999, industry observers said.
Greyhounds intercity passenger loads have been rising, and the company, with is familiar dog logo, has expanded its charter service. But its focus remains on its bread-and-butter, scheduled service — a segment many other operators have abandoned because of tough competition with cars.
About 80 percent of people traveling city to city drive themselves, while 17 percent fly. Only 1 percent take the bus and 0.6 percent take the train, according to Eno Transportation Foundation Inc.s annual transportation report.
Though Greyhound is still going fairly strong, Laidlaw is not, Mr. Henke said.
"Laidlaw has been teetering on the brink of bankruptcy," he said.
Laidlaw, which also owns ambulances and environmental company Safety-Kleen, lost more than $3 million last year and more than $1.5 million in 1999. Net sales in 2000 were $4.3 billion.
Greyhound spokeswoman Kristen Parsley said her company is insulated from Laidlaws troubles.
The motorcoach operator needs funding to keep it going during its slow months. "Because could no longer provide that funding we went and sought outside funding, and so were protected," she said.
Greyhound has posted 10 percent revenue growth each year and had its best holiday season in a decade, she added.
Other large operators have regional name recognition, such as Peter Pan, which shares schedules with Greyhound, and VecTour, based in Pennsylvania.
Greyhound and Peter Pan pool their resources to provide more frequent service, Ms. Parsley said. For example, New-York bound buses leave Washington every half hour or hour.

Boomer appeal

Another large question mark looms in bus operators future: will car-happy baby boomers make the transition to motorcoach travel?
Forty percent of bus riders are under 25, and 40 percent are over 55, said Peter Pantuso, president and chief executive officer of the American Bus Association.
But baby boomers tend to be more car- and plane-reliant, and they have the money to spend on that type of transportation.
" that are the most progressive are starting to appeal to that middle group," Mr. Pantuso added. Mr. Eyre said that includes attracting baby boomers as well.
Mr. Sankey said the industry has long relied on large senior groups. Seniors, like Ms. Boddie who took the bus trip to Dover Downs, are sometimes reluctant to fly. And they frequently are on fixed incomes that make bus travel cheaper than flying.
The standard Greyhound fare from Washington to New York round trip, not counting senior discounts, is $80.
The same trip on discount airline Southwest can cost anywhere from $52 to $120, depending on day of travel and how early the flight is booked. But the airline doesnt go to downtown Manhattan; its closest airport is in Long Island.
But those seniors are getting older
"Now that that population has aged another 10 years, they arent traveling as much," Mr. Sankey said. The folks who made gaming destinations so popular are starting to stay home instead. Mr. Sankey said travel already has fallen to Branson, once the No. 1 bus destination in the country.
But baby boomers reluctance to travel by bus is more of a wild card than a foregone conclusion.
"I think as the baby boomers continue to age, its only going to get better," said Norm Litter, vice president of government affairs for the United Motorcoach Association.

On the horizon

Mr. Eyre said bus operators enthusiasm for the business isnt worth much if there is no business sense to back it up.
Faced with rising costs, stable prices and the possible deterioration of a prime customer base, the industry needs to become more savvy about marketing, he said.
Mr. Bolen of New World said one key element missing in the fragmented business is a coherent image.
"You have to change the American publics perception," he said.
But most operators dont have the money to throw at large advertising campaigns, Mr. Pantuso said.
"Aside from Greyhound and Coach, there are no national advertisers," he said.
On the other hand, there isnt much point in teaming up to present a national image if quality varies widely, Mr. Bolen said.
"You must have a consistent product to be able to change an industrys image," he said.
To improve that product and improve an operators strategy, the buzzword in the industry is diversification, especially into the tour business.
Operators also have expanded by entering the commuter market, contracting with local governments to move people around urban areas or to and from airports, Mr. Henke said.
Mr. Eyre started a travel agency about nine months ago to supplement motorcoach income. His bus business is split into several parts — commuter, 35 percent; charter, 50 percent; tour, 10 percent; Atlantic City daily service, 4 percent; and miscellaneous, 1 percent.
Greyhound created a travel division that contracts with cruise lines, sending employees to airports to meet and greet incoming cruise passengers.
Mr. Bolen is moving New World Tours headquarters to Northeast Washington and opening a garage. He will bring in a new influx of income by selling fuel to other bus companies and washing and servicing their vehicles.
"It would be expected that we would have a higher margin on that activity simply because theres not as much competition," he said.
"When people look to diversify, theyre looking for activities where theres high barriers to entry and low competition."
Mr. Bolen wants to open the new facility, which will begin construction in mid-May, early next year.
He said local companies might have an edge when it comes to driving to survive in the motorcoach industry.
"Were pretty fortunate, were in one of the best tourism cities in the country," he said.

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