Jeramey Jannene

Amtrak Should Innovate with Hiawatha Service Pricing

By - Oct 25th, 2010 12:25 am
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Milwaukee Intermodal Station

Milwaukee Intermodal Station

If you want to ride Amtrak’s Hiwatha Service line between Milwaukee and Chicago, the cost is $22 per ticket. If you buy your ticket in advance, the cost is $22 per ticket. If you ride on the weekend, the cost is $22 per ticket. If you want to ride in the middle of the day, you guessed it, $22 per ticket. With Interstate 94 under construction between the state line and Milwaukee for the next few years, new equipment on the way from Talgo, a new Milwaukee Intermodal Station train shed coming, and a route extension to Madison under construction, it’s time for Amtrak, iDot, and WisDOT to explore new pricing models for the state-sponsored rail service to encourage more riders and raise more revenue.

Amtrak, to their credit, does offer discounts for children (ages 2-15) who ride for $11 each with the purchase of an adult ticket (up to two discounted tickets per adult ticket). They also frequent rider discounts, in the form of a ten-ride ticket for $165 (that expires in 60 days) and an unlimited route ridership pass for a calendar month for $358. Those options leave a lot to be desired though.

Before I propose my list of pricing suggestions, it’s worth noting that the 2010 Amtrak Fiscal Year (October 1st, 2009 – September 30th, 2010) resulted in record ridership and record ticket revenue for the Hiawatha Service (and Amtrak as a whole). The Milwaukee to Chicago route had 783,060 trips and generated $14,092,802 in ticket revenue, for an average of $18.00 per ride. More valuable than the average revenue per ride would be to know both how many riders paid full price (and at what time of the day and day of the week), but unfortunately Amtrak doesn’t release that data. For the sake of this article, we’ll use my informal observations from riding and the data we have available to assume that a very high percentage of unique, adult riders pay full fare.

The pricing suggestions I propose are aimed at increasing ridership and marginal revenue simultaneously, while not requiring any service changes. They might have the added positive externalities of reducing congestion, reducing pollution from automobiles, improving the reputation of Amtrak, and encouraging travel and business between Milwaukee and Chicago, but if any of those things happen it’s merely a bonus.

Pricing Suggestions

Megabus Model - Megabus is famous for their $1 tickets, despite the fact that rarely anyone actually gets to buy one. The service is sold on a yield management pricing model, where the first one or two tickets are $1 with prices increasing incrementally from there. Amtrak could offer the Megabus pricing model not on all trips, but on the lowest ridership ones. This is likely to be especially valuable given that Megabus has drastically scaled back service out of Milwaukee.

Badger Bus Model – Badger Bus, the bus company that currently offers inter-city bus service between Madison and Milwaukee, has a pricing model for frequent riders that allows the company to collect interest off future ticket purchases. Amtrak currently offers a 10-ride ticket for $165, but it expires within 60 days. Using the Badger Bus model, Amtrak would allow customers to give the customers a large sum of money up-front in exchange for a discount whenever those funds are used to buy a ticket. In the case of Badger Bus, a $125 deposit gets you $175 in purchasing power (29% discount). The benefit maxes out at a $325 deposit ($485 purchasing power, 33% discount). If Amtrak were to offer something similar, they could be collecting interest on my money just like Badger Bus is (the last time I put $125 with Badger Bus it took me two years to use it all). An added revenue bonus is available with the model in the form of permanently unused funds, similar to gift cards that go unused. Amtrak would need to analyze exactly what deposit amount to collect, and how big of a discount to give.

Hessenticket Model – Germany has an innovative weekend pricing model available with their national rail system. The state of Hesse (home to Frankfurt) offers a weekend pass for 29 euros, where you and up to four others can ride the system’s non-high-speed all day on either Saturday or Sunday, anywhere you wish to go, getting on and off as you please. Their is a national pass with similar rules available for 33 euros as well.  Implementing the idea between Milwaukee and Chicago might not work quite as well, but with future service extending to Madison it might make more sense. It seems reasonable to assume Amtrak could offer up a four-rider, $50 weekend day-pass with the requirement that the riders sit together (to prevent abuse).

Off-Hours Pricing – The current system prices every single-ride ticket equally, regardless of the time of day or day of the week. It’s worth exploring the idea of pricing lower ridership trips at a cheaper fare.

Wisconsin Vouchers – Scott Walker has managed to make an Amtrak service extension as political as possible (see: NoTrain.com). The victor on November 2nd would be wise to explore sending a non-transferable voucher to every taxpayer when the new Talgo equipment is put into service, giving them one free one-way ticket on the Hiawatha. It would be great for Illinois to do the same (tourism dollars on top of increased revenue). It’s hard to find someone who has ridden the service, but dislikes the quality of the ride. It is, however, easy to find someone who thinks the service is a “boondoggle” and has never ridden. The vouchers would serve as a new-customer acquisition strategy, generating a lot of new customers who would effectively be getting a half-off first trip. The long-term value of those new customers could be enormous. As an added bonus, angry Journal Sentinel commenters no longer can argue they get nothing in return for the state sponsorship of the rail line.

Corporate Pass – What if businesses got a discount when they purchased tickets? Could the company car be replaced (or the least supported) by the company rail pass? A program where the more tickets a business buys annually results in a greater and greater discount could increase revenue.

Advance Purchase Discount – Hotels often offer a price discount for booking your room early, Amtrak should do the same. Even if it’s only a 5% discount, or the ticket has to be bought at least 6 months in advance, Hiawatha ridership might increase (and Amtrak might collect interest) if customers book their tickets early.

Buy-One, Get-One – As one boards the Hiawatha they notice that the greatest unused inventory isn’t two empty seats together, but the empty seat next to a rider. To make better use of the marginal inventory, Amtrak should offer some form of buy-one, get-one free (or half off) for riders that sit together.

What are your ideas for Hiawatha Service pricing?

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10 thoughts on “Amtrak Should Innovate with Hiawatha Service Pricing”

  1. Tracy says:

    I recently did a 2 week trip in Germany and traveled using the Deutsche Bahn. My gf and I used a couples pass which was a reduced fair, unlimited rail pass good for 7 days. If you were to exchange from euro to dollar and compare to Amtrak costs, the pricing was very comparable, with the DB being on the high end compared to the two (the ICE trains are amazing).

    These suggestions are great and would def. help boost ridership. If WI can find a dedicated funding source for the trains I am all in favor of building a regional or inter-city line from CHI-MKE-MAD. Hopefully some good thought and research goes into the whole process.

  2. nathan says:

    I would love if on weekends costs were similar to the METRA in chicago, if they were me and my family would take the trip to shop, go to aquarium, museums, cubs games, etc, but at 22$ a ticket it is a non-starter for us, I would rather drive and chance finding a cheap parking space then pay that much.

    7$ for a weekend pass for all the riding you want to do and kids under 11 ride free, http://metrarail.com/metra/en/home/tickets.html?cq_ck=1251746486500#5WeekendPass

  3. Nick Aster says:

    Excellent suggestions. I would suggest that Amtrak give out those “wisconsin vouchers” right NOW – ie, before the election. It wouldn’t really cost them that much, just some administrative costs and would result in tremendous good will, and a strong message to the winning candidate.

  4. Jeramey Jannene says:

    @Nathan – Yeah, the pricing model is geared to get single drivers out of their cars, but it isn’t setup to get families on the train. At the same time, my experience riding it on the weekend is that the early and late trips are definitely pretty packed, so maybe they shouldn’t worry about pricing structures for families until they have more capacity.

    Long-term, the KRM will probably solve that market niche, connecting into the Metra system at Kenosha. Commuter rail is significantly slower than inter-city rail.

  5. dan says:

    When I want to travel with my family via train we drive down to Round Lake just over the border and take the Metra in to Chicago. For my wife and I the Amtrak is a great option. With the kids not so much. I like the off-hours and advanced purchase pricing ideas.

  6. alex says:

    reduce prices so that people can choose train over car to downtown chicago. I think $5 dollars one way will make ridership skyrocket. How about $5 one way if you spend at least $5 bucks for services inside train or something like that.

  7. Jeff Jordan says:

    There are more benefits to riding the train v driving. Wear and tear on your brain being the most unquantifiable. And remember, statistically you are putting your family in the most danger you can by putting them in a car. But as a father and grandfather, I get it. You’re a family and you want to go to the Shedd or the one of the other iconic sites in Chicago. The car is free, if you forget the gas, parking and tolls on the interstate or the mind numbing ride down 41 to avoid the interstate. It’s a lot of money out of your pocket to take the family. Or is it?
    You really want to save money by taking the train. Go to Chicago spend the day and evening enjoying the museums shopping and sights, than have a nice dinner and attend a play. Problem, you can’t get back to Milwaukee without staying overnight in a hotel. The one of the biggest drawback to Amtrak to Chicago is the lack of late night service. That flaw also effects people that may want to live at either end of the line and work on the other
    Oh and by the way, everything I’ve said about people wanting to go to Chicago on the train works in reverse for Chicago people that want to come to MIlwaukee

  8. Jeff says:

    Totally agree. Round trip for two is $88, which means you really have to hate Chicago traffic and parking to take the more-expensive train. Another improvement Amtrak might consider: enlarging the cramped, stuffy waiting area in Chicago. That’s usually the worst part of the trip.

  9. EWO says:

    METRA Weekend passes are the way to go, a lot of people visit Chicago because of the good deal.

    Most national train system out side of the US have coach and 1st class like our airlines do.

  10. Ryan says:

    The federal government estimates the cost of operating a personal vehicle is 50 cents a mile. That includes gas, maintenance and depreciation. Not even counting parking, that makes the train cheaper than driving for two people traveling.

    I agree with the author that creative pricing along with marketing could go a long way to increase revenue.

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