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Greyhound to use airline pricing model to boost profit |
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Posted by Flxible4life on Thu May 23 20:03:28 2013 Greyhound (FGP), the iconic U.S. bus brand, has turned to pricing models used by the airline industry as it seeks a ticketing system capable of boosting profitability by charging more for travel during peak periods.Enlarge image Greyhound bus riders find ways to pass the time on a morning trip from West Palm Beach to Orlando, Florida. Photographer: Erik Lunsford/Palm Beach Post/Zuma Press FirstGroup Plc (FGP), the U.K. company that owns Greyhound, will spend as much $40 million on computerized yield-management technology to replace Greyhound’s flat-rate charging plan, and has engaged a U.S. carrier to help with the design, Chief Executive Officer Tim O’Toole said. “No longer will a trip on Greyhound cost the same on July 17 as the day after Thanksgiving,” O’Toole said in a telephone interview from London. “Pricing will be much more dynamic.” Yield management was introduced in the airline business in the 1980s, when Robert Crandall, CEO of American Airlines, began employing mathematicians to develop models able to predict demand during given time periods and price tickets accordingly. It has since become a critical tool for most of the world’s carriers, as well as in other businesses such as hotels. O’Toole declined to say with which airline Dallas-based Greyhound is working as it bids to lift its $1 billion in annual sales. The plan also includes an airline-style loyalty program. Dominant Player Founded in 1914, Greyhound operates 1,700 buses to 3,800 destinations and carries almost 25 million passengers a year -- making it 10 times the size of its nearest rival -- yet lacks a system able to analyze who is getting on where and when. FirstGroup, which acquired Greyhound via the $3.4 billion purchase of Naperville, Illinois-based Laidlaw International Inc. (FGP) in 2007, has already applied yield-management tools at the Greyhound Express service introduced in late 2010 with routes serving Chicago and other cities in the U.S. Midwest. The Express unit, pitched between the traditional brand and the BoltBus unit that FirstGroup runs in the northeastern U.S., increased passenger numbers 10 percent last year, faster than the old Greyhound, and serves 900 cities after entering markets as far apart as California, Louisiana, Delaware and Canada. “You’re selling seats on a bus,” O’Toole said. “The trick is to take your management system and graft it onto the bigger Greyhound, which requires a lot of computer work. You need algorithms to constantly be balancing the business.” The introduction of yield-management technology comes as O’Toole seeks to steady FirstGroup following the loss in October of a 5.5 billion-pound contract to run Britain’s West Coast rail line, one of the busiest in Europe, after the U.K. Department for Transport discovered flaws with the bid-assessment process. Rights Offer Aberdeen, Scotland-based FirstGroup said yesterday it would raise 615 million pounds from a three-for-two rights offer, helping it to retain an investment-grade credit rating, remove balance-sheet constraints and ease spending plans. The company plans to invest 1.6 billion pounds over the next four years across five divisions that include First Student, operator of more than 50,000 yellow school buses in the U.S. Some of that money will go towards an overhaul of its information technology systems. Megabus, owned by FirstGroup’s U.K. rival Stagecoach Group Plc (SGC), has employed yield management since it began operating in North America in 2006. The unit links more than 100 cities with 250 buses after growing via the 2012 purchase of nine Coach America Inc. units from bankruptcy protection for $134 million. Mexican Foray “Getting the pricing right has been particularly important in the current economic climate because everyone needs to make their dollar stretch further,” spokesman Steven Stewart said from Stagecoach’s headquarters in Perth, Scotland. Greyhound, which already has routes in Canada, is gearing up to commence operations in Mexico after becoming the first U.S. bus company certificated there, O’Toole said. “We’ve always moved people in partnership with Mexican bus lines, but now we can actually go into Mexico,” he said. We’re completing a terminal and we’ll be initiating the service soon.” The first route will start this summer, with 10 buses running from Nuevo Laredo, across the border from Laredo, Texas, to Monterrey, Mexico’s third-largest city, about 140 miles away. The Greyhound brand was introduced to Britain in 2009 as FirstGroup sought to tap demand from motorists no longer willing to get behind the wheel on crowded roads. Leather, Wi-Fi The U.K. buses, given women’s names from American songs including “Sweet Caroline,” “Peggy Sue” and “Jolene,” have more in common with the Bolt and Express fleets and are fitted with power sockets, leather seats and air conditioning. Passengers get a complimentary newspaper and free wireless Internet access. Similar upgrades will be soon rolled out across the main Greyhound fleet in the U.S., according to O’Toole. “You’ll notice the old Greyhound white bus being replaced by a blue and gray one,” he said adding that the makeover will include features such as wi-fi access. “I hope we’ll make substantial progress over the next two years.” FirstGroup shares fell 30 percent yesterday after it halted dividend payments to focus on the rights offer, saying the next award will be for the six months ending March 31 next year. Chairman Martin Gilbert will also leave when a successor has been found, after 17 years on the board. Here's my take.... I don't like the idea. There's a reason why a lot of people ride Greyhound. It's because of reasonable prices compared to the airline industry. Business is business and staying competitive against your rivals I get it, but come on. I better not pay a $400 round trip ticket from NYC to Toledo, OH under this new structure. If prices get jacked up we the people need more express trips, more trips on certain long distance routes and more new buses. New MCIs and Prevosts Maybe some can educate me on the business structure and how it benefits both Greyhound and it's customers |
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Re: Greyhound to use airline pricing model to boost profit |
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Posted by Busdude on Thu May 23 22:05:24 2013, in response to Greyhound to use airline pricing model to boost profit, posted by Flxible4life on Thu May 23 20:03:28 2013. If you compare Amtrak and the 'Hound the fares are pretty similar. I doubt they'd price out their market too much. |
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Re: Greyhound to use airline pricing model to boost profit |
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Posted by RailBus63 on Thu May 23 23:16:34 2013, in response to Greyhound to use airline pricing model to boost profit, posted by Flxible4life on Thu May 23 20:03:28 2013. Greyhound is not in the business of providing reasonable fares to intercity passengers, though - it's in the business of making money. It can offer more reasonable fares than an airline because its costs are lower. That being said, there are times when the demand is much higher and the cost of providing service (including protection buses) is higher as well. Charging a higher fare at those times does make sense. If passengers want the convenience of just showing up at the bus station and traveling the day before Thanksgiving, for example, they may have to pay a higher fare for that convenience. If they can plan ahead, be flexible and travel at other times when demand is lower, then they will likely save money. |
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Re: Greyhound to use airline pricing model to boost profit |
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Posted by Flxible4life on Thu May 23 23:56:05 2013, in response to Greyhound to use airline pricing model to boost profit, posted by Flxible4life on Thu May 23 20:03:28 2013. Thanks gentlemen for your take on this and the education. |
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Re: Greyhound to use airline pricing model to boost profit |
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Posted by metrolinecoach111 on Fri May 24 00:17:54 2013, in response to Greyhound to use airline pricing model to boost profit, posted by Flxible4life on Thu May 23 20:03:28 2013. From someone who's worked for them:This is the way they had to go to survive. Notice how almost every one of their competitors utilizes some form of demand-based pricing. They are literally the last big intercity transport venture in this country to adopt this model. They've been pricing their tickets this way since the early 90s - and have been losing so much money from it. Yes the prices will trend up, in all transportation ventures prices go up. In fact, everything goes up with time. But under this model, the prices will stratify, or stretch according to when you book. They will be able to offer more discounted fares to passengers in almost every market by educating them to book early. Of course, the later comer will pay more - but that's the way it is for every other service. In fact, that is how the system is right now with Advanced Purchases online - but it just doesn't properly account for demand. This is the necessary first step to fixed capacity - in other words, tracking who's going where and properly planning and allocating drivers and vehicles to where people are going. This will ensure a greater level of customer service on all ends, and eventually minimize the hours upon hours of waiting for another bus because of open ticketing and open sections. It also assists the planners in Dallas on when to add sections and where in advance, instead of the existing policy of blanketing protections into historical flows that are subject to change without notice. Take it from someone who's been on the other side, open sections on Greyhound schedules is the one impediment to the whole system. It's a part of the service, but it's time to change. Can't keep playing the guessing game on drivers and schedules, no matter how educated the guess is. |
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Re: Greyhound to use airline pricing model to boost profit |
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Posted by Nabinut on Fri May 24 00:40:46 2013, in response to Re: Greyhound to use airline pricing model to boost profit, posted by RailBus63 on Thu May 23 23:16:34 2013. Greyhound does that kind of pricing already as it's $70 R/T New York from Baltimore and Washington for the Memorial day weekend. I doubt people would want to book tickets three months in advance for a trip the day before and after the major holidays as vacations are easily to plan as opposed to one day trips. |
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Re: Greyhound to use airline pricing model to boost profit |
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Posted by Edwards! on Fri May 24 00:46:58 2013, in response to Re: Greyhound to use airline pricing model to boost profit, posted by Nabinut on Fri May 24 00:40:46 2013. 35 BUCKS each way is the old fare. |
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Re: Greyhound to use airline pricing model to boost profit |
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Posted by The Flxible Neofan on Fri May 24 11:51:36 2013, in response to Greyhound to use airline pricing model to boost profit, posted by Flxible4life on Thu May 23 20:03:28 2013. I'll miss the days of the affordable impromptu last minute "hey, I'm bored or I have no plans tomorrow; why don't I go on a short day trip to Washington DC/New York" trips.That's actually why I haven't been using Boltbus and Megabus as much as I thought I would. Oh well, such is life. |
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Re: Greyhound to use airline pricing model to boost profit |
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Posted by FWT9000 on Fri May 24 18:32:12 2013, in response to Greyhound to use airline pricing model to boost profit, posted by Flxible4life on Thu May 23 20:03:28 2013. Airline pricing model?Hmmm.... Lets see..... I guess they can really make money: Bathroom fee Charge per piece of luggage Surcharge for the window seat Surcharge for families to sit together Wifi fees electric outlet use fee reboarding fee if anyone gets off at a rest stop require heavy set passengers to buy two seats charge for car sickness bags have I missed anything? |
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Re: Greyhound to use airline pricing model to boost profit |
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Posted by merrick1 on Fri May 24 20:07:55 2013, in response to Re: Greyhound to use airline pricing model to boost profit, posted by The Flxible Neofan on Fri May 24 11:51:36 2013. Shouldn't unsold seats get cheaper as it gets closer to departure? They should have a smartphone standby system. You show up at the bus stop and use an app to indicate what you are willing to pay. The price would drop as the departure got closer and, when it got to your price point, your ticket would appear on your phone. |
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Re: Greyhound to use airline pricing model to boost profit |
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Posted by NIMBYkiller on Sat May 25 23:18:58 2013, in response to Re: Greyhound to use airline pricing model to boost profit, posted by metrolinecoach111 on Fri May 24 00:17:54 2013. Totally agreed, it's screwed them in the long run b/c you end up exhausting your driver roster unnecessarily and then you end up with no drivers, which is why a midnight to Montreal won't go out until 4am. I did notice, however, that they are simply implementing a system to indicate peak demands and charge accordingly. It said nothing about using that system to also control capacity. THAT is the big difference between the model Megabus/Boltbus uses and what it sounds like GLI is implementing. The other guys use a model that allows customers to pretty much decide when and where the demand is, but it also keeps them from overselling. Greyhound sounds like they're just using a model that's going to jack up the price during peak travel times w/o keeping track of how many seats they sell. If that is in fact the case, then the plan is SERIOUSLY flawed because that is a step they desperately need. |
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Re: Greyhound to use airline pricing model to boost profit |
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Posted by NIMBYkiller on Sat May 25 23:20:35 2013, in response to Re: Greyhound to use airline pricing model to boost profit, posted by merrick1 on Fri May 24 20:07:55 2013. BUT if they do that, the fear is that people will catch on and then everyone will wait until last minute to buy their seats and then they can't sell any high priced seats because nobody will buy them b/c they know they can wait til the last minute and get it at a discount |
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Re: Greyhound to use airline pricing model to boost profit |
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Posted by b1bus on Sun May 26 16:23:21 2013, in response to Re: Greyhound to use airline pricing model to boost profit, posted by NIMBYkiller on Sat May 25 23:20:35 2013. Isn't that what Lastminutetravel and Hotwire and priceline.com are for? |
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Re: Greyhound to use airline pricing model to boost profit |
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Posted by metrolinecoach111 on Sun May 26 18:04:45 2013, in response to Re: Greyhound to use airline pricing model to boost profit, posted by NIMBYkiller on Sat May 25 23:18:58 2013. That's the first step - second step is to integrate with capacity planning to optimize drivers and equipment. |
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Re: Greyhound to use airline pricing model to boost profit |
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Posted by NIMBYkiller on Mon May 27 02:36:24 2013, in response to Re: Greyhound to use airline pricing model to boost profit, posted by metrolinecoach111 on Sun May 26 18:04:45 2013. I see...should've gone the other way around |
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