Travel Trends: Train travel in the USA

Paul Theroux, the great American travel writer, once said, “Almost anything is possible in a train” — and that still holds true today. While the U.S. has not embraced rail travel as a primary means of transportation for several decades, a resurgence is growing. Passengers frustrated with airline delays and rising costs, the high cost of gasoline and road construction are beginning to give train travel another look.

These Aren’t Your Parent’s Trains
Without a lot of fanfare, Amtrak, which operates most of the passenger rail system in the U.S., has quietly been making small improvements. While capacity and routes have actually decreased since 1985, today’s passenger trains tout high-speed wireless access (on some routes), no baggage fees for up to three checked bags and the ability to bring golf clubs, bicycles and ski equipment. Some business class seats also have electrical outlets, conference tables and complimentary newspapers.

On longer routes there are dining and sleeping cars offering first class dining and turn down service. An Auto Train which runs from Lorton, Virginia to Sanford, Florida allows passengers to bring their vehicle along for the ride. It is arguably the longest passenger train in the world and is pitched as a cost-effective and environmentally-friendly alternative to driving for families on the East Coast heading down to Disney World.

Improvements for 2010 and Beyond
According to Bruce Richardson, President of the United Rail Passenger Alliance, “Even if train travel evolves at lightning speed over the next 10 years, it will still not be at the same point in North America it was in 1956.” The U.S. is severely behind other nations in providing high speed rail infrastructure and Americans are just now beginning to consider it as a mode of transportation again.

In looking at statistics provided by the Federal Railroad Administration, rail travel has fairly consistently increased over the past 25 years (see below). While there are no federally-approved forecasted numbers for 2010 and beyond, the expectation is that passenger rail travel will continue to increase every year. (For the purposes of this article, Gadling forecasted passenger traffic for 2010 and 2011, as shown in the graph below.)

As part of the American Recovery and Reinvestment Act of 2009, the Federal Government allocated $8 billion for high-speed and intercity passenger rail (HSIPR). In addition to that, the HSIPR Program includes an additional $92 million from an existing state grant program (see below for the allocation of money by state).Unfortunately, most of this money is going to a backlog of rehabilitations and upgrades of old Amtrak routes that have been needed for years — rather than to new routes — and some of the money is being spent on new maintenance facilities as well as IT projects. But still, improvements are being made:

  • In California, the Pacific Surfliner Route which runs from San Diego to San Luis Obispo with stops in Los Angeles is getting $51 million to build a new track between Fullerton and Commerce to ease congestion and upgrade the speed to 110 mph.
  • A whopping $590 million is allocated to the Cascade Service route which goes from Eugene, OR to Seattle, WA with routes to Portland, OR. Infrastructure improvements will allow for 2 additional round trips from Seattle to Portland (there are currently 4).
  • A few new routes are in the works. The Hiawatha route from Milwaukee to Madison, Wisconsin will be extended and have 3 new stations in Brookfield, Oconomowoc and Watertown. A new 3C Route in Ohio will go from Cleveland to Columbus to Dayton and Cincinnati.
  • Other existing routes are getting signals, stations and other infrastructure type improvements.

So where do these improvements leave us? We’re still way behind where we need to be for Americans to consider rail travel as a cost effective, first-choice of transportation. Existing routes need to be extended, more daily frequencies added and new long distance routes implemented. Amtrak routes that were discontinued in the 1990’s such as the Sunset Limited, which ran from New Orleans to Orlando, and the Desert Wind route between Chicago and Los Angeles need to be put back into operation to give travelers enough choices to ride the rails.

Data sources:

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Travel Trends: The effect of Southwest Airlines’ cheap fares on competitor fares

The last time you wanted to book a trip somewhere in the U.S., what airline did you think of first? If you’re like thousands of U.S. air passengers, you checked to see if Southwest Airlines flew in and out of the city you wanted to visit. Since its inception almost forty years ago in 1971, Southwest has been providing passengers all over the country with low-cost travel options.

Southwest uses several strategies to lower its costs so they can, in turn, can offer cheap fares. Among them:

  1. They mostly fly in and out of secondary markets, which are less costly.
  2. They only use one type of plane, the Boeing 737, which keeps maintenance costs down.
  3. They only fly domestically.
  4. Southwest Airlines is a “low frills” airline, dispensing with extras like meals or in-flight movies.

The formula seems to be working. The average Southwest Airlines ticket can often be a fraction of the price of a ticket on another major airline. Further, many passengers will drive out of their way to a secondary market in order to be able to take a Southwest flight. As a result of this success, other airlines have been pressured to lower their prices in order to compete. The average ticket price in markets with Southwest in them has gone down in the last ten years, while many markets without Southwest have gone up.

Because of Southwest’s policy of serving secondary markets, however, it’s difficult to do a simple analysis of the data to see in which markets the price has gone down, and in which markets it has gone up. Take, for example, Chicago Midway Airport, into which Southwest flies. Southwest does not fly into Chicago O’Hare, but prices there are still likely to be affected, since airlines at O’Hare want to compete for passengers who might otherwise go to Midway and use Southwest.

For a simple analysis, we looked at four cities in which Southwest had started service in the last ten years, and then compared ticket prices ten years later.

Buffalo started Southwest service in 2000. By 2009, Buffalo’s average fare had plunged by 19%. Southwest entered the market in both Dulles and Denver in 2006. From 2006 to 2009, the average ticket price at Dulles went down 1%; in Denver, the average ticket price dropped 13%. In 2007, service to San Francisco started; between 2007 and 2009, the average airfare went down 21%. None of these data account for inflation either.

By contrast, we also looked at the airfares from 2000-2009 in markets that did not have Southwest. Although the gains were modest by some means, in a world where most airfares have gone down in the last ten years, they were still significant. Not only does Savannah, Georgia, not have Southwest, but Southwest does not operate anywhere in the entire state of Georgia. Therefore, it was no surprise to see a 6% increase in fares over the last ten years. Alabama and Tennessee are both under served by Southwest, as well, which is reflected by Memphis increasing by 3% and Huntsville increasing by 9%. Finally, Reagan (Washington DC), which competes with Dulles, went up by 2%.

All in all, it’s cheaper overall to fly now than it was in 2000; but for the markets served by Southwest, it is cheaper still. The advent of Southwest and other low-cost airlines such as Air Tran have lowered costs all over the nation. Many people have reported that flying Southwest is a more pleasant experience in other ways as well; the facts bear this out. Southwest has the lowest customer complaints in the industry (as of 2009).

So what are you waiting for? Grab your sun tan lotion and your swimsuit — your next vacation in the California sun just got a lot cheaper.

Data Sources:

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Travel Trends: Pet travel

From doggy daycare to feline pampering to gourmet food and beyond, pet owners in the United States shower their furry companions with a healthy dose of attention. Although this affection is shown through lots of play time and generous ear scratching, it’s most easily recognizable by the billions of dollars spent every year in the pet industry.

Since 1994, the American Pet Products Association (APPA) has kept track of just how much Americans spend on their pets. The data verifies that with every new year, U.S. pet owners have spent increasingly more on their four-legged counterparts. In fact, within the 10 years between 1994 and 2004, the spending literally doubled from $17 billion to $34 billion. Fast forward to 2010, a mere 6 years later, and that number has skyrocketed to approximately $47.4 billion.

While money spent on pets includes vet fees, food and other typical expenses, a large chunk of that is devoted to leisure-related activities like pampering and lodging. This increased amount of spending is partially due to a growing trend in the pet industry that has owners toting their pets along with them on vacation.

The Travel Industry Association of America (TIA) released data in January of 2009 that said the most popular animal that pet owners bring with them on vacations is a dog. This is likely due to the canine’s happy-go-lucky attitude and ability to adapt to new environments quickly. Coming in at second place are felines at 15 percent, followed by birds at 3 percent and “others” at 2 percent (other includes ferrets, fish, rabbits).

As for how pets travel, transportation via cars is by far the most common. And, according to a the same travel poll conducted by TIA, only 6 percent of animals travel with an airline and 10 percent travel in a recreational vehicle.

Once a pet and its owner have finally reached their destination, finding a place to stay is the next detail to figure out. As of 2009, 32 percent of travelers stay with someone who they already know, such as a friend or relative. Twenty nine percent stay in a hotel, 16 percent opt for a recreation vehicle or tent and the final 10 percent stay in a cabin or vacation home. This information is also based on data gathered by TIA.

This discussion “begs” the question: do you travel with your pet(s)? No? Then be sure to check out “Ask Gadling: How to prepare for not traveling without your dog.”

Data Sources:

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Travel Trends: The rise of the ‘Free Independent Traveler’ (FIT)

Over the last few years, the world travel landscape has undergone significant changes brought by security concerns, the economic crisis and green considerations. These new conditions have given rise to a new type of tourist: the “Free Independent Traveler,” or FIT. The term refers generally to people over 35, of above average income, and who like to travel in small groups or as couples. They avoid mass tourism and the holiday package of traditional travel operators, and favor a more individualistic approach to travel. They may or may not be “Four Percenters.”

Free Independent Travelers as an alternative movement?
FITs tend to be environmentally aware, with the desire to experience new ways of life and usually are enthusiastic, off-the-beaten-track explorers with a thirst for experiencing the “real thing.” They enjoy good food, architecture, and the heritage of local cultures.

Also, they are an important and growing sector in the travel market. Governments, regional tourist boards and other public sectors responsible for tourism development try to attract them. Why? The basic principle is economics. FITs spread their money around in a more efficient fashion, buying from multiple locations driven by their own particular itinerary and tastes and by the intention of enjoying the local way of life. In contrast, tour groups concentrate in a few providers, which tend to spread money in a less than optimal manner.

The Power of Information

How FITs garner information for their trips is of vital importance. Not surprisingly, a wide variety of sources and/or tips from social websites are key.Sites such as Lonely Planet’s Thorn Tree forum or are both examples and represent the fundamental difference between the FIT and other types of traveler. Many FITs are even leraging Facebook, Twitter, Foursquare and other social networking sites to get information about trips. After all, independent travel is about the sharing and passing on of ideas and knowledge. The FIT vacation is a custom-built menu fed by suggestions from friends, forums, specialty providers or others. The rise of low-cost airlines in the US and Europe has also increased the supply of alternative and lower cost short haul destinations fueling demand for these newly available markets.

The internet is fundamental to the rise of the FIT, and as such, many traditional Travel Operators interested in tapping into this new, growing market are starting to offer fully customized travel options through their websites to create almost an oxymoron: Independent Travel Operators.

Take a look at the trends in information gathering and travel booking below. (Please note that all data points for 2010 and 2011 have been forecasted to show future trends. We can’t see into the future.)

Information Sourcing for Travel
As you can clearly see below, FITs have turned almost exclusively to the Internet for information gathering and trip-planning.

Where do people go to price airline tickets?
As you can see from this chart, FITs have largely abandoned advice from tour guides, tour books, friends, and relatives to price airline tickets. [Ed’s note — who ever asked their friends for details about airline ticket prices?!] With the rise of the Internet, FITs are instead going directly to the source to learn about and compare airline ticket prices. For anyone who has ever visited a booking aggregator or an airline website, of course, this makes perfect sense.

Where do people go to book tours?
As with the chart above, FITs have almost entirely abandoned tour operators for actually booking their trips and/or extended tours.

So are you a FIT traveler?

Data Sources:

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Travel Trends: Airlines spending less on food in 2010, but are healthier options around the corner?

Given the harsh economic conditions in the airline industry and the hyper-competitive market, it’s not surprising to find that the top US airlines have cut back the average amount of money spent on passenger meals.

According to the US Government’s Department of Transportation, from a high of almost $6 per person in 1991, to an average cost of $3.58 per passenger in 2009, the costs per person for food expenses has decreased by roughly $2.60. (NOTE: the chart above shows a forecasted figure of only $3.07 per passenger in 2010 — which would be an all-time low.)

Of course, not all airlines are created equal. Some pay a little more per passenger for food, like Alaska Air, while others invest next to nothing (we’re looking at you, Southwest). However, while not all carriers are the same, they all face the same challenge – how to manage food and service costs while at the same time giving customers what they want.

In the last few years, some carriers have been actively trying to change their airline food service while others are touting a low cost, no-frills approach; this partially explains the wide divide among carriers and the periods where spending increases.

What’s next for airline food?
Gregg Rapp, from Menu Technologies, has over twenty-five years of experience working with Casinos, the Cruise Ship Industry, and various restaurants. Rapp says:

How we present menus and healthy foods to kids from a marketing perspective can influence how our kids perceive healthy foods. Many of the airlines list their menus in the sky magazine. They could do much with the descriptions and placement to make this more appealing to kids and adults, including using the web to create characters and branding for the value of eating healthy.

Rapp recommends reading Mindless Eating from Cornell University’s Dr. Brian Wansink as an excellent way to understand how we pick up our cues on what to eat. Wansink is a Stanford Ph.D. and the director of the Cornell University Food and Brand Lab and has spent a lifetime studying hidden cues that determine how much and why people eat.

Vanessa Horwell, the Chief Visibility Officer at TravelInk’d, a PR and communications firm for the travel industry, tells us:

There are some huge developments taking place in airline food. In traditional airline foodservice, there is what is known as ‘junking’. This is the wasted food from the plane which actually costs more to dispose of than the cost of the meal itself and is a significant cost/overhead burden.

As carriers look ways to reduce costs, they are looking to technology for tighter controls on inventory, and targeting their offerings to what passengers actually want. Horwell continues:

Airlines are trying to deliver higher quality foods, and trying to shun the image of nondescript foods packaged in plastic containers. There is a lot of innovation through partnering with the restaurant industry and carriers teaming up with restaurant chains and chefs to “co-brand” their menus. This in turn has great appeal to a traveling public that is already familiar with a food or restaurant brand and can expect quality and consistency; an example is Air Canada where they serve Quiznos. It is a familiar brand and there is consistency across their network. Customers can now order their food vouchers directly in the booking path with their flight, and savvy airlines will be marketing their “celebrity chef” branded content at that time to encourage customers to book and order food ahead of time.

Airline food gets healthier, salads leading the way
Recently, Tom Douramakos, chief executive of GuestLogix, a company based in Toronto that makes the hand-held devices and software used by most North American carriers for in-flight sales, said carriers generated a net profit of only 5 or 10 cents on a $10 sale of in-flight food.

Douramakos’s Executive VP of Global Sales Brett Proud, tells Gadling, “Hand-held devices and software are making a huge difference with airline costs and customer service in the airline food industry.”

GuestLogix first started in 2006 by working with American Airlines. They used 3000 hand-held devices to use as a cash register on board, while also using the software behind the scenes to help the airlines provision the right products for each specific flight as a response to a changing trend. Since then, they have developed long term contracts with many of the domestic, European and Asian carriers.

Proud says, “About 8 or 9 years ago, services such as food, baggage, and even drinks were included in the price of a ticket, but in the last decade or so, the model has changed and the service package has become unbundled. Things like food, entertainment, and baggage are being billed separately.”

For the carriers that offer them, the top-selling item on board, is always some type of salad.

Those carriers in the top 10th of their service group are making roughly $.70 – .90 more per passenger

Currently, the Benchmarked Food product mix is about 42% fresh food items and 58% snacks, with a trend moving towards the healthier items.

By managing wastes and improving forecasting, airlines can afford to offer better quality, which is right in line with the feedback customers are giving them — they don’t want peanuts or cookies, they want a reasonably-priced healthy salad, a fresh sandwich or cheese and cracker platter.

Of the current GXI airlines, the top 10th Percentile Product Mix is 15% fresh food and 85% snacks.

The impetus to change can be seen in the last pie chart, indicating that of the 15% of the current top 10th percentile product mix, fresh food sales make up 85% of total revenues.

Today, globally, against all on-board revenues, junking costs are running 2% to 7%, making a great case for better provisioning, better in-flight cost management (where attendants can reduce prices later in the day to keep product moving), and offering the right mix of products, preferably pre-ordered that customers want.

This airline travel trend may show an increase in cost but also an increase in quality, service and more healthy options.

Data Sources:

CNN, Michelle Obama Obesity Campaign, 2/9/2010
In Flight Food Tries to be Tasty
Menu Technologies
Bureau of Transportation Statistics, Form 41 Financials

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