How Can Amtrak Achieve 100% Cost Recovery? (F&B losses)

[PaTrainFan]

A tip of the cap to all this. Take any 3 or 4 diamond national hotel chain, almost all offer upscale dining onsite. I am not an accountant and I have never played one on TV so this is hardly a scientific evaluation, but take a look at peak mealtimes and how many are more than 50 percent capacity? Very few. I could be all wet on this, but are they making money? Doubtful, even at their upscale prices. They have just accepted the fact that losing money on food and beverage is a cost of doing business. There is the argument that they are not subsidized but, alas, many are. How many hotels in mid sized cities are in fact subsidized through TIFs and other tax breaks? I'd venture to say a fair amount.

I think the goal of achieving profitable F&B operations is a false hare. After all, why does Amtrak (or any transportation or lodging organization) offer F&B services? It is certainly not to turn a profit on that part of their operations! Examples abound:

1) Airlines giving food and drinks away to some or all of their passengers, thus making a guaranteed loss of 100% on those particular operations

2) Hotels giving free food away to their customers in the form of breakfast buffets and the like, thus making a guaranteed 100% loss on those operations

3) All-inclusive resorts giving all you can eat food and drinks away to their customers

None of these businesses are charities: they give food away because it _makes them money overall_ by drawing customers in to their business. Somehow their accounting practices are able to understand the idea of a loss leader. Why can't Amtrak's?

Now, you could make the argument that Amtrak's F&B operations lose _so much money_ that they are a net loss to the company, even after taking the increased business into account. But that argument would be based on zero evidence provided by Amtrak.

If you look at the difference in price for sleeper accommodations on the SS and the SM, for this August, say, it appears that Amtrak charges roughly $100 more per sleeper passenger to ride the SM from New York to Florida. This is at least in the same ballpark as Niemi's estimate of average F&B losses.

So why can't Amtrak do the accounting like any other business? And don't say, "because Congress won't let them": it is Anderson's job, among others, to educate Congress on the realities of running a transportation and lodging company.

Ainamkartma

 

[tricia]

Yep, you can lead a Jackass to Water, but you can't make them drink!

Perhaps better suited to many among our current crop of elected representatives is the alternative Dorothy Parker invented when asked to use the word "horticulture" in a witty sentence: You can lead a ***** to culture, but you can't make her [or him] think.

 

[jis]

I suspect that a vastly greater business for the kitchen serving the various food outlets at upscale hotels is in providing room service. It is hard to tell how poorly or richly the kitchen's services are patronized by looking at the occupancy rate of the upscale restaurant.

 

[jebr]

I suspect that a vastly greater business for the kitchen serving the various food outlets at upscale hotels is in providing room service. It is hard to tell how poorly or richly the kitchen's services are patronized by looking at the occupancy rate of the upscale restaurant.

Along with that would be any food for conferences they're hosting at the hotel; usually those restaurants have exclusive catering rights to any events or conferences at the hotel.

 

[neroden]

100% cost recovery is fundamentally impossible with the long distance trains; recovery requires high numbers of passengers and appropriate meal times. If Im not mistaken, the Pacific Surfliners F&B revenues currently exceed every LD train with the possible exception of the Auto Train and a good chunk of the LD trains combined (currently forecast at 7.8 million for the next fiscal year); this despite significantly lower costs to operate it.

So, I agree with ainamkartma that separating out F&B makes no sense (its only purpose is to attract riders, it's not supposed to make money separately).

In terms of cost recovery for the so-called long-distance trains *overall*, the way to improve cost recovery is, of course, economies of scale. Run two a day on the LSL line. Run a Broadway Limited on the Pennsylvanian/Capitol Limited route. Run the Cardinal daily.

But on the point Philly asked originally.... I actually have no problem with the idea of a food service with a lower labor cost structure. While I like having waiters... if there's a way to do everything with chilled boxed meals, that's OK, as long as the boxed meals (a) are decent, (b) have decent selection for people with dietary restrictions, and (c ) are supplied in sufficient numbers. If the full ingredients lists (including additives) were available online *before* getting on the train, and you pre-ordered the meals online with your reservation, and I could get cold boiled eggs and bacon for breakfast... it would be OK. If Amtrak would deign to pay for a chef, one could also pre-order hot meals, and the chef could have a "meal production list" at the beginning of the day, and mass-produce eggs or French toast and pop them into boxes for passengers -- waiters still not really necessary.

Somehow Amtrak is managing to Do It Wrong. It feels malicious to me. If I, with no personal experience in the business, can design a better way to do "low labor meals" than they propose, in five minutes, what's wrong with them?

Pre-ordered meals would also substantially eliminate wastage: the train could load almost *exactly* what the passengers ordered, probably with one or two extras in case of damaged packages.

 

[Lonestar648]

F&B costs are a cost of doing business. Hotels in order to get a big conference at their hotel cut hotel room rates in half, offer free continental breakfast, but charge big time for the conference and ball rooms, their set up, and the catering comes with a huge price, but businesses can easily write this off, hotels know this and they know many attendees might look elsewhere to stay if not getting a special rate. In the end, the GM has to know did they make a profit on the conference. It is everything combined that attracted the conference to use a specific hotel. For Amtrak, the Dining Car is one aspect of travel that attracts people to purchase a ticket. Make the reasons to travel on Amtrak less attractive, then why travel by rail, maybe drive or fly, or do something totally different.

 

[Philly Amtrak Fan]

F&B costs are a cost of doing business. Hotels in order to get a big conference at their hotel cut hotel room rates in half, offer free continental breakfast, but charge big time for the conference and ball rooms, their set up, and the catering comes with a huge price, but businesses can easily write this off, hotels know this and they know many attendees might look elsewhere to stay if not getting a special rate. In the end, the GM has to know did they make a profit on the conference. It is everything combined that attracted the conference to use a specific hotel. For Amtrak, the Dining Car is one aspect of travel that attracts people to purchase a ticket. Make the reasons to travel on Amtrak less attractive, then why travel by rail, maybe drive or fly, or do something totally different.

The key word you said was "business". Hotels have to offer amenities knowing that they are competing with other hotels for business. Airlines do as well but it seems like all airlines seem to be de-emphasizing perks and amenities (or are they, I haven't been aboard an airline in over 20 years?) Amtrak is competing with themselves in the LD passenger rail market, they have a monopoly. They have no incentive to attract people. Their customers can't go to a competing train between Chicago and New York/Washington/Cleveland, etc.

 

[Lonestar648]

They can decide to fly, or drive, or do something else. Amtrak can lose current customers to other modes of transportation, so there is competition, Amtrak is just ignoring this fact. It took me a while to convince my team to travel with me, but once they did they continued to do so. We had coffee all day, some great meals in the Dining Car, our beds completely made up or down, a newspaper in the morning with orange juice, there were a few snacks available if desired. When we stepped off the train, we were fresh, prepared, and ready to go on site for a week.Since we cut out a hotel night using the train, management accepted the variable fares because we produced results. When our business changed, and Amtrak reduced amenities, my team members one by one stopped using Amtrak, they didn't have the love of trains like I did, so Amtrak lost 5 - 12 business travelers. How many others try Amtrak and never come back? or stop using Amtrak.

 

[neroden]

F&B costs are a cost of doing business. Hotels in order to get a big conference at their hotel cut hotel room rates in half, offer free continental breakfast, but charge big time for the conference and ball rooms, their set up, and the catering comes with a huge price, but businesses can easily write this off, hotels know this and they know many attendees might look elsewhere to stay if not getting a special rate. In the end, the GM has to know did they make a profit on the conference. It is everything combined that attracted the conference to use a specific hotel. For Amtrak, the Dining Car is one aspect of travel that attracts people to purchase a ticket. Make the reasons to travel on Amtrak less attractive, then why travel by rail, maybe drive or fly, or do something totally different.

The key word you said was "business". Hotels have to offer amenities knowing that they are competing with other hotels for business. Airlines do as well but it seems like all airlines seem to be de-emphasizing perks and amenities (or are they, I haven't been aboard an airline in over 20 years?) Amtrak is competing with themselves in the LD passenger rail market, they have a monopoly. They have no incentive to attract people. Their customers can't go to a competing train between Chicago and New York/Washington/Cleveland, etc.

Amtrak's competing with air (which is faster), and more so, Amtrak is competing with cars.

I dislike long drives intensely. But if the food service on Amtrak gets bad enough, I'll just drive from upstate NY to Chicago. And North Dakota. And St. Louis. And San Francisco. It's slower, but at least I have food.

 

[neroden]

They can decide to fly, or drive, or do something else. Amtrak can lose current customers to other modes of transportation, so there is competition, Amtrak is just ignoring this fact. It took me a while to convince my team to travel with me, but once they did they continued to do so. We had coffee all day, some great meals in the Dining Car, our beds completely made up or down, a newspaper in the morning with orange juice, there were a few snacks available if desired. When we stepped off the train, we were fresh, prepared, and ready to go on site for a week.Since we cut out a hotel night using the train, management accepted the variable fares because we produced results. When our business changed, and Amtrak reduced amenities, my team members one by one stopped using Amtrak, they didn't have the love of trains like I did, so Amtrak lost 5 - 12 business travelers. How many others try Amtrak and never come back? or stop using Amtrak.

Write to Coscia, certified mail, and explain the business Amtrak lost through idiotic nickel and diming:

https://www.amtrak.com/board-of-directors

 

[frequentflyer]

They can decide to fly, or drive, or do something else. Amtrak can lose current customers to other modes of transportation, so there is competition, Amtrak is just ignoring this fact. It took me a while to convince my team to travel with me, but once they did they continued to do so. We had coffee all day, some great meals in the Dining Car, our beds completely made up or down, a newspaper in the morning with orange juice, there were a few snacks available if desired. When we stepped off the train, we were fresh, prepared, and ready to go on site for a week.Since we cut out a hotel night using the train, management accepted the variable fares because we produced results. When our business changed, and Amtrak reduced amenities, my team members one by one stopped using Amtrak, they didn't have the love of trains like I did, so Amtrak lost 5 - 12 business travelers. How many others try Amtrak and never come back? or stop using Amtrak.

Interesting story. However, you are not the majority as regards business travel outside the NEC and maybe Surfliners. Though Amtrak has been trying for years to sell what you described for overnight travel between CHI and WAS/NYP.

I would love to know what percentage of pax on a LD train eat in the dining car. Prices are high and many are taking Amtrak because its affordable. Even I told a friend who took a LD trip from Texas to Phx to buy a bucket of KFC chicken because the food on the train is high. I was joking of course but he did it and thanked me for suggesting it to him.

 

[jis]

Travel time between Chicago and Washington or New York on overnight trains has to come down to 14-15 hours or lower for business travelers to consider it seriously I think. 18 to 22 hours simply does not cut it. With proper prioritization and dispatching this is likely possible today, But the United States is not organizationally set up at present to achieve that. Indian Railways manages 16 hours overnight service between location a little further apart than Chicago and New York, and a lot further than Chicago and Washington DC over far more congested routes. But it involves granting absolute priority and holding other trains, including other express trains in sidings, sometimes for extended periods of time, which the flight of 6 overnight business trains are prioritized through the rest of the mess each night. That is how it was done in this country too before the whole thing went to pot.

 

[neroden]

The one thing I'll give Anderson credit for -- he or someone he's authorized is doing everything he can to eliminate station loading/unloading delays. I don't think this will really help, but at least he can make it absolutely clear to everyone that ALL the train delays are caused by bad dispatching by the freight railroads.

Specifically, there have been some really bad practices historically on the Empire Corridor and the LSL by Amtrak conductors. These are gone. The trains are now departing in less than the scheduled dwell time, consitently.

And then CSX and NS delay us.