US inter-city bus market

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Part
01

United States Intercity Bus-Market Size

While there is no publicly available information to fully answer your question, we've used the available data to pull together key findings: Based on the US revenue for the overwhelmingly dominant players, Greyhound and Stagecoach, we triangulate that the US Intercity Bus segment of the Scheduled and Charter Bus Services Industry to be worth approximately $1.71 billion in 2018. Below you'll find an outline of our research methodology to better understand our findings and the necessary calculations to arrive at this figure.

INITIAL RESEARCH FINDINGS

We began our research with an attempt to find existing market research reports. While such reports are proprietary and often expensive to obtain, it is very common for them to provide the market size and some additional information in the public summaries. In this case, we were unable to find a report that perfectly fit the report criteria, but did find some valuable information which helped to frame and verify our ultimate conclusion.

According to the summary page for a for-pay market report by IBISWorld, the total revenue for the US Scheduled and Charter Bus Services Industry — which includes but is not limited to intercity transportation — was about $5 billion in 2018. Unfortunately, the breakdown by segment which would have let us determine the answer of the question as given was not available in the summary, though an unlabeled chart suggests that the Intercity segment could be, at a maximum, about two-fifths of that. This gave us an upper bound which served as a guidepost for the rest of our research.

Note: Due to the way IBISWorld handles incoming links, the above inline citations may redirect to the site's homepage instead of the report. Screenshots of the data have been included in the attached document and if needed, the following direct URL may be used instead: https://www.ibisworld.com/industry-trends/market-research-reports/transportation-warehousing/transit-ground-passenger/scheduled-charter-bus-services.html

Our second discovery was a report from the DePaul College of Liberal Arts and Social Sciences entitled, "New Directions: 2019 Outlook for the Intercity Bus Industry in the United States." While this report was extremely detailed and provided valuable context, to our surprise it did not provide any revenue figures for the industry as a whole. It did, however, provide the names of some major players in the market and, in some cases, links to their annual reports.

We found it telling that even a report specializing in this very segment did not provide the market size, leading us to hypothesize that, perhaps due to the number of small players, is not widely known. Nevertheless, we branched our research to include official government sources, particularly the US Department of Transportation and the Bureau of Labor Statistics. The former provided one report with some relevant data, but as it dated to 2005, we deemed it too old to be useful and so was not cited. A search of Google's scholar database likewise found no salient data, as the few academic works on the subject were more interested in either measuring intercity bus travel by road miles than dollars or in measuring the impact of government spending in this sector. Again, as these are not relevant, we have not cited them below.

Next we studied the annual reports of the largest players to see if either contained an estimate of the total market, but this proved not to be (though said reports proved instrumental in our ultimate triangulation; see below). Finally, we conducted a broad search of trusted news sources, both business-oriented (e.g., Forbes, Business Insider) and general interest (e.g., the New York Times, the Washington Post, US News and World Report), but found no articles with the needed information.

THE MAJOR PLAYERS

Since the size of the US Intercity Bus segment does not seem to be in the public domain, the next natural step was to attempt to triangulate it from the available data about the major players in the aforementioned "New Directions" report, including Greyhound (owned by FirstGroup), Stagecoach (owner of Megabus and Coach USA), RedCoach, FlixBus, OurBus, Vonlane, BestBus, Catskill Carriage, Trailways of New York, Concord Coach Lines, and Washington Delux. It also gave us the names of several of the lesser players, like Limoliner, Tripper, and Vamoose, many of which operate only in specific regions or even states.

We then attempted to pull the revenue figures for each, using their own annual reports wherever possible. This gave us the following figures for the two largest companies, which are also the only two publicly-traded companies:
Greyhound - $912.7 million
Stagecoach - £470.9 million

Both of these revenue figures were for the North American market, not just the US, which will be taken into account in the ultimate triangulation.

We found that none of the other companies listed as "main players" in the report even came close to the big two, and several were set aside on other considerations. For a few representative examples: We found that Flixbus is a German company which has only just reached the US and which has only $48 million in annual revenue, and so we judged it to be inconsequential to the US market. OurBus proved to be a startup "travel and transportation platform" rather than a bus company, and so was also removed from the list. Vonlane operates only in Texas and only reached the $10 million mark in 2017, which proved to be about average for the smaller players whose revenue we could locate. (Note that as it ultimately did not factor into our calculations and to keep a clean source list, we have not attempted to document the revenue of every smaller player.) Finally, in many cases, like RedCoach and BestBus, the companies were so small that they did not appear in company data repositories like D&B Hoovers or Buzzfile, indicating that they must be very small indeed.

ASSUMPTIONS AND CALCULATIONS

Ultimately, the sheer number of small bus companies and the lack of credible public sources for their current revenue meant that attempting to track every small company would be an exercise in futility. However, since our research was conclusive that Greyhound and Stagecoach were the two largest players by an enormous margin, we can triangulate the US market by applying the 80-20 rule, aka the Pareto principle. As explained by Investopedia, "80% of outcomes (outputs) come from 20% of causes (inputs)." In this case, we would expect 80% of the Intercity Bus market segment to come from the companies in the top 20% of the market; in this case, from Greyhound and Stagecoach.
While the Pareto principle is only a general principle and the fragmentation of the market might result in us, if anything, underestimating its size, given the dearth of information available in the public domain, this provides us with the best estimate possible of the US Intercity Bus market.

We next converted Stagecoach's revenue to US Dollars. At current exchange rates, Stagecoach's £470.9 million North American revenue equals $612.5 million. Since we could find no public source that directly provides Canada's share of the North American Intercity Bus market, we triangulated the US share via a ratio of the two nations' populations using the following formula: 331.2 million [US] / (331.2 million [US] + 37.4 million [Canada]) = 89.9%
Therefore, after adding the revenues for Greyhound ($912.7 million) and Stagecoach ($612.5 million) to arrive at $1,525.2 million, we multiplied this by the US share of the North American population (89.9%) to arrive at US revenue of $1,371.2 million. If this indeed represents 80% of the US market, then the total US Intercity Bus market in 2018 would be approximately $1,713.9 million (1,371.2 / 0.8). This accords perfectly with our earlier observation from the IBISWorld report that the Intercity segment could be no more than two-fifths of the $5 billion Scheduled and Charter Bus Services Industry; that is, it must be equal to or under $2 billion.

CONCLUSION

Based on the above, we triangulate the US Intercity Bus market at approximately $1.71 billion in 2018. While IBISWorld indicates that the bus transportation industry, in general, is experiencing 0.9% annual growth (CAGR), we cannot say that this is true of the Intercity segment in particular based on the extant data in the public domain.

Part
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Part
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United States Intercity Bus Market-Historical Changes

The four major historical changes that changed the shape and size of the intercity bus market are the deregulation of the bus service in 1983, the emergence of Chinatown buses at the beginning of the century, the expansion of curbside drop off services by Megabus and Greyhound Lines starting in 2006, and the entrance of Flixbus into the market in 2010.

DEREGULATION

Express bus lines and private new entrants into the intercity bus market have entered the bus travel market in 1983 after the deregulation of intercity bus services which had the task of removing price and entry controls on interstate routes, and allowing private companies to enter the market. The deregulation did not immediately have an effect in innovation and new service offerings, and therefore the decline in bus service demand continued through the 1990s. This resulted in big cuts in service, especially on rural routes.

EMERGENCE OF CHINATOWN BUSES

At the beginning of the 21st century, almost two decades after the deregulation was put into place, Chinatown buses were instated throughout the Northeast Corridor (NEC), from Washington, DC to Boston, MA. Chinatown buses are called after the fact that most of them were owned and operated by Chinese immigrants. The buses gradually expanded to other routes as well while still keeping costs low by avoiding using any terminals. Instead, the buses were dropping off passengers at curbside locations. As the network continued to expand and the economy continued to grow, it resulted in investor interest and an even bigger expansion of the network.

EXPANSION OF CURBSIDE BUS SERVICES

In 2006, Scotland-based company called Megabus opened its operations in the Eastern US with its hub located in Chicago. In 2009, Greyhound Lines, the largest bus line in the US, established its own curbside bus service called BoltBus with a primary focus on the main cities served by Chinatown buses. This led Chinatown bus dominance to decline, and Megabus and Boltbus to take over. Megabus grew at a large speed by launching its own NEC service in 2009 and subsequently adding services in the interior regions and West Coast between 2010 and 2014. BoltBus was focusing on growing in the Pacific Northwest in 2011 and California/Nevada in 2013. Moreover, Federal Motor Coach Safety Administration (FMCSA) canceled operations of many of the Chinatown bus operators in 2012 and 2013 as they were violating safety regulations. Greyhound currently serves approximately 42 million people annually.

FLIXBUS DISRUPTION

The American intercity bus sector is currently undergoing the latest big change that will change both the shape and the size of the market. Up until recently when Flixbus entered the market after acquiring Megabus, taking the bus was deemed to be reserved only for those who were strapped for cash or for retired people who had enough time and lower incomes. The entrance of Flixbus into the market is modernizing the concept of riding the bus, with the operator allowing for tracking of buses on the move, booking of tickets online, extremely cheap tickets for a wide range of locations, and WiFi onboard. According to reports, Flixbus is planning to cover the whole US in the coming years, much like the company is currently doing in Europe, with every major city hub connected to virtually any other hub by bus lines. Currently, the bus travel is increasing in size by 6% annually but this number is expected to rise as the Flixbus network expands. For Flixbus, the number of trips increased by 32% in 2018 with the key to this expansion the fact that the company is offering tickets between major hubs such as New York and Philadelphia, or Boston and Washington, for as low as $1, with typical one-way fares between $15 and $27.
Part
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Part
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United States Intercity Bus-Opinions

American buses have been known to have consistently had lower ridership levels, shorter service hours, and longer waits between buses than any other buses in virtually every comparable European and Asian country. The reasons for the public not using buses as a means of long distance travel are mainly based on low fuel prices for car travel, consistent drops in airline prices, a lack of luxury options on board buses, ground transportation gaps, a lack of low cost bus options, less-advanced technological advancements in bus travel, a lack of ticket aggregation, and too closely-spaced bus stops.

REASONS FOR THE PUBLIC NOT USING BUS AS A MEANS OF LONG-DISTANCE TRAVEL

1. LOW FUEL PRICES
Relatively low fuel prices in the last decade have been one of the main reasons why people have not considered bus travel as a long-distance travel option. The low prices have nullified some advantages of bus travel being a fuel-efficient travel for long distances.

2. DROP IN AIRLINE PRICES
On the other side, the constant drop in airline prices, with airline fares at new lows each year, have been hurting long-distance travel as people will rather opt for getting on a plane and arriving at a destination more quickly than they would by bus.

3. LACK OF LUXURY OPTIONS ONBOARD
The lack of diversification of services on board of buses has been one of the biggest drivers of high-income people choosing car and air travel instead of bus travel. The lack of a business class and luxury services give bus travel the impression of being a purely low-cost option.

4. GROUND TRANSPORTATION GAPS
In the US specifically, many corridors can be regarded as "ground transportation gaps", as they also lack rail-passenger service, making options for ground travel other than by private automobiles extremely limited. Moreover, most American cities, especially those outside the Northeast and Rust Belt, are new cities that have been built to accommodate mainly car travel since they are sprawled out away from the city center.

5. LACK OF LOW COST BUS OPTIONS
While bus travel is perceived as a low-cost option, that is not always the case. In the US market, there is a significant lack of companies providing the most basic, ultra low cost bus travel, which is available in Europe by Flixbus.
6. LESS-ADVANCE TECHNOLOGICAL INNOVATIONS
Bus travel has historically been accompanied with less technological innovations than any other form of travel. Up until recently, the majority of bus travel providers did not offer journey tracking or e-ticketing options, which have long been present with rail and air travel.

7. LACK OF TICKET AGGREGATION
Historically, customers have been forced to check each individual bus travel provider's ticketing options in order to find out about travel routes and travel times. There was no one place to go to to find the options available, which makes planning for bus travel a long affair.

8. CLOSELY SPACED BUS STOPS
Bus stops in the US are planned to be spaced very closely together compared to the rest of the world. If the bus stops were more spread out, the efficiency of bus travel could be increased through speed and frequency. However, this has been proven to be politically difficult to execute. The reason why it is hard for politicians to be efficient in this area is the fact that most of the voters live in rural areas in the US, and therefore, any kind of changes that would deem to be unsuitable to the voters in rural areas, even if they would overall contribute to the efficiency of the bus network, could potentially cost the representatives of those areas their votes. Therefore, the bus stops haven't been changed since the early 1940s.

DRIVERS OF CHANGE FOR PEOPLE TO START USING BUSES IN THE FUTURE

1. DOWNSIDES OF AIR TRAVEL
When it comes to airline travel, the long TSA security lines are a major downside to traveling by air. This means that people are actively taking into account the full travel time of plane travel by arriving ahead of time at the airport, waiting in TSA security lines, and arriving early for boarding. They also take into account waiting at baggage claim and control checks after the flight has landed.

2. SUBSIDIZED BUS TRAVEL
Since 2017, there has been an increase in public agencies providing subsidized bus services to link rural communities with population centers to form an interlined connection network. This has been improving the overall image people have of traveling by bus, especially when traveling from rural areas into metropolitan areas and vice versa. Moreover, state-supported services have been one of the main growth drivers in the industry over the past five years, and are becoming more present through strategic partnerships and federal funding.

3. PRE-ARRANGED RIDE SERVICES
Pre-arranged ride services such as Lyft and Uber but with pre-booked rides for buses have been emerging on the market, with people being able to get a quote on their on-demand travel in advance. This offering is strongly geared towards small groups and corporate travelers and enables business travelers to group together.

4. CROWD-SOURCED BUS SERVICE
New technological platforms have been emerging that are now allowing bus services to set schedules through crowdsourcing: "If enough travelers express a willingness to pay, a bus can operate between two points at a set time on a particular day." RallyBus and Skedaddle allow customers who launch the bus trip to travel free if there are enough other riders who sign up to join the ride. On the other hand, if the trip fails to attract enough riders, the bus line does not operate and no fares are charged.

5. MARKET ENTRY OF LOW-COST OPERATORS
The ultra low cost options that Flixbus provides launched in the US in 2017 by acquiring Megabus' retail operation in the United States. The interest in sophisticated pricing strategies is growing, which is mirroring low-cost airline pricing.

6. RECENT TECHNOLOGICAL INOVATION
Technological innovation has pushed scheduled long-distance bus travel in important new directions. In the last couple of years, several technologies have disrupted the market. This is mainly applicable to a system-wide rollout of e-ticketing and improvements to bus tracking programs.

7. NEW TICKET AGGREGATOR WEBSITES
New ticket aggregator websites are continuing to make headway when it comes to improving the shopping experience for bus travel. Companies such as Wanderu, are selling tickets for all major U.S. bus brands as well as for many international brands. This allows customers to search for tickets across the board and not have to go to each provider to check available connections.

8. POP-UP SERVICES
New options such as pop-up services from locations on or near college campuses, operating only during college breaks, have been driving growth in bus travel usage with students in the recent years. Pop-up services act as a great alternative for the student population to be able to reach their homes in other cities during college breaks. The pop-up services are expected to be introduced in the future not just on college campuses but also in other places which operate seasonally, such as possibly ski resorts, beach towns for holidays, etc.
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