Insight Features

Megabus.com drives growth in inter-city bus travel in North America

Discount travel brand megabus.com has sparked a renaissance in inter-city bus travel in North America over the past six years. Here we look at how the brand has grown to become the leading national low-cost carrier in the United States and Canada.

For 50 years, the inter-city bus market in North America was a graveyard of shrinking networks and declining passenger volumes. Cities in the United States lost nearly a third of their scheduled inter-city service between 1960 and 1980. The picture got even worse in the following quarter century, with a further cut of more than 60% of the remaining services between 1980 and 2005.

“The intercity bus industry suffered from a reputation as the travel means of last resort for many years,” said Joe Schwieterman, executive director of the Chaddick Institute and a professor of public service at DePaul University in Chicago.

Then in 2006, there was a dramatic reversal with the launch of Stagecoach Group’s discount inter-city bus service megabus.com. For the first time in years, the sector reported growth rather than decline. In 2006-07, the market grew by 6.9%.

Megabus.com’s first routes in North America used Chicago as a hub and in the following six years more than 25 million passengers have got on board with the market-leading brand. It now covers over 120 key destinations in the United States and Canada.

Some 8 million passenger trips are currently being taken with megabus.com in North America each year and that figure is growing rapidly.

In 2012, megabus.com continued to invest in an expanding network, with the launch of new Dallas, San Antonio, and Houston, Texas hubs in June and Los Angeles and San Francisco hubs in California in December. Nearly 100 new double-decker coaches were introduced in 2012 to support the expansion of the network and megabus.com also aired the company’s first-ever TV commercial.

The success of megabus.com has had a positive impact on the economy, helping support tourism spend in areas covered by the company’s network, which now covers around 40 US states. New jobs have also been generated. More than 1,000 new employment opportunities have been created by the company since it started services in North America in 2006.

A new report, The Motor Coach Metamorphosis, released by the Chaddick Institute in January 2013, shows the “Megabus effect” is still a massive influence in transforming the once declining sector. It found that inter-city bus services grew by 7.5% between the end of 2011 and 2012 - the highest rate of growth in four years. The report, which looked at more than 90 companies, found that in comparison conventional bus services expanded by 1.4% after a modest decline between 2010 and 2011.

But the biggest impact came from the discount bus sector, including operators such as megabus.com, where services surged by 30.6%. For the first time, discount operators now run more than 1,000 daily scheduled services. The expansion of the inter-city bus market has also come against the backdrop of a relatively weak economy in North America.

Dale Moser, President and COO of megabus.com in North America, said: "We’ve seen impressive growth across North America. As well as helping connect people across the United States and Canada, we've also created hundreds of new jobs. We are confident that our 21st century double-decker buses with Wi-Fi and power outlets, combined with our outstanding prices, will continue to prove popular."

Table 1: Changing level of inter-city bus service, % annual growth and decline

Table 1: Changing level of inter-city bus service, % annual growth and decline

Source: Chaddick Institute, De Paul University, Chicago

The Chaddick Institute report states that a Federal crackdown on low-grade operators who were failing to comply with safety regulations has benefitted the rest of the industry, including megabus.com. In May 2012, the Federal Motor Carrier Safety Administration (FMCSA) shut down 26 bus companies that blatantly and repeatedly violated safety rules.

In contrast, megabus.com has continued to put safety first, investing $150 million dollars in new motor coaches with the latest safety technology. The company has a 24/7 support centre monitoring its fleet. All vehicles have electronic tire monitoring technology, seatbelts in every passenger seat, an electronic lane changing warning device, stability control systems, an engine fire suppression system, and dashboard electronic monitoring.

Discount operators are also developing new technologies to keep customers informed about how services are running. Megabus.com has led the way by rolling out a new mobile phone application. The app, which is linked to GPS data, allows passengers to track their bus in real time.

Table 2: Changes in inter-city services level by mode, 2012 v 2011

Table 2: Changes in inter-city services level by mode, 2012 v 2011

Source: Chaddick Institute, De Paul University, Chicago

Note: Intercity bus service is measured by changes in daily bus operations, while air and rail service is measured by the year-on-year changes in Amtrak seat-miles from January to September. Auto mileage is measured by year-on-year changes in private automobile mileage between January and September.

The De Paul University study concludes that the bus “remains America’s fastest growing form of inter-city travel by a comfortable margin”. The sector’s 7.5% growth is well ahead of the 3.0% expansion in rail seat-miles. It also easily outstrips the less than 1% growth being reported by both airlines and agencies tracking car travel.