Bus Articles

Bus Stop Down the Road - bus operators

Charter buses carried 860 million passengers in 1999, compared to 582 million who flew domestically. Bat the industry operates by a patchwork of mom-and-pop operators with little national image.

Planes, trains, automobiles ... and buses. The off-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 nation's bus services. Rising costs for equipment, fuel, insurance and employees are taking a toll on the industry because the nation's 4,000 bus companies cannot boost prices for fear of competition from short-lived upstarts.

"It's getting to be a tougher and tougher business," says Al Spence, president and chief executive officer (CEO) of A.S. Tours in Baltimore. Spence owns seven coaches, one minicoach and four limos. His company focuses on selling package tours to crab feasts, beaches and destinations such as Disney World to church groups, college students and family reunions.

Companies increasingly rely on tour and charter trips for most of their sales: Half of the industry's mileage comes from that sector, says Michele Janis, vice president of communications, marketing and membership for the American Bus Association. While only 12 percent of the companies provide city-to-city service, 95 percent offer chartered trips.

Gambling meccas have become the top destinations for tour and charter buses, as the growth of the gaming industry fuels passenger growth. "Ten years ago, these places didn't exist" says Bruce Sankey, editor and publisher of Bus Ride magazine in Phoenix, noting there are 22 casinos in Mississippi alone. Other popular tourist destinations include Dolly Parton's Dollywood in Pigeon Forge, Tenn., and country-music haven Branson, Mo., convenient and inexpensive for middle Americans.

But high costs are shrinking companies' profit margins and putting their businesses in danger, owners complain. In the last 10 years, buses have become more luxurious, says David Bolen of New World Tours in Lorton, Va. New coaches have all-disc brakes and traction control. Most coaches have stereos and video screens. Rest rooms are more comfortable.

All these improvements come at a price, of course. Today, a bus costs $350,000 to $450,000, plus insurance. Spence turns buses over every five years when their warranties expire. Profit margins average 10 percent or less, even as low as 5 percent.

The rising cost of energy, specifically critical diesel fuel, pinches profit margins as well. Diesel was averaging $1.45 in mid-May, the same as a year ago, the Energy Department reports, but a 30 percent increase since 1995. Companies also find it difficult to locate good drivers -- people who are drugfree, willing to learn and reliable. Frequent travel is tough on families, and pay depends on how often drivers work.

Nevertheless, entrepreneurs remain eager to jump into the business. "It's very easy for anyone to enter the motorcoach market;" says Ron Eyre of Eyre Bus Lines, based in Glenelg, Md. "The entry barriers are virtually nonexistent," Eyre says. "If someone can come up with $20,000, he can finance a coach" Meanwhile, repossessions are rampant because the operators who get sweetheart deals still aren't able to make payments. But new companies charge lower prices -- and provide lower quality of service --"which hurts the industry overall" Eyre says.

Large bus operators are not impervious to the dilemmas facing their smaller competitors. Two of the best-known companies, Greyhound and Coach USA, are owned by foreign transportation companies, Stagecoach of Scotland and Laidlaw of Canada. But they, too, are finding the motorcoach industry a mine field. Trying to consolidate 85 to 100 companies with different organizational structures is a difficult task. "It's been a challenge for them to achieve the efficiencies that they expected," Sankey says.

But Lee Schissler, national director of marketing with Coach USA, says the company has been able to gain advantages with size, benefiting from greater purchasing leverage for fuel, parts and equipment. "I think it will go down as a textbook success case that did work," he says. Greyhound has posted 10 percent revenue growth each year and had its best holiday season in a decade. Its intercity passenger loads have been rising, and the company, with its 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.

This is the question that clouds bus operators' futures: Will Car-happy baby boomers make the transition to motorcoach travel? The industry long has relied on seniors, many who sometimes are reluctant to fly and travel on fixed incomes. Forty percent of bus riders are older than 55, but 40 percent are younger than 25. "The operators that are the most progressive are starting to appeal to that middle group" says Peter Pantuso, president and CEO of the American Bus Association.

Article by

Julie Hyman