The benefits of competition

26Jun08

For anyone travelling between Toronto and New York, I whole-heartedly endorse Greyhound’s new Neon Express service. I have to admit I barely even noticed the ‘express’ modifier, since that term rarely seems to apply to inter-city buses. But it’s actually express – there is a single rest stop, the mandatory customs stop, and nothing else. As a result, the ride felt lightning-quick – under 9 hours. Go to sleep once Homeland Security is done with your backpack, wake up in the Holland Tunnel.

This makes bus travel on the TO-NY route quite time-competitive, compared with flying (which I estimate at 6 hours, with all the necessary airport time) and the train (which comes in at a sluggish 14 hours, and offers no overnight service). Other benefits include wifi (which is probably more useful for people who don’t get motion sickness after two minutes of Google Reader) and movies.

Most importantly, though, Neon Express offers variable ticket pricing – if you book early, it’s ridiculously cheap. There is the much-advertised $1 fare per bus, which must get snapped up quite early, but 2 weeks out I got a round-trip ticket for $90 USD (contrast that with Greyhound’s normal $200 r/t fare). Even the 2-day advance ticket is $120, which is still the cheapest way to make the trip outside of hitchhiking/car-sharing.

So what made Greyhound start this service? The appearance of Megabus, the European discount bus line, in North America (in terms of my endorsement, I equally recommend Megabus – my deciding factor was merely which line had cheaper tickets for my particular date, so one should comparison shop).

I had always been curious about Greyhound’s profitability – while they enjoy a near-monopoly, this seems to be achieved partly through running service to a lot of money-losing areas. Well, the answer must be that Greyhound is very profitable, since they can afford to mimick their competitors’ deals perfectly. Megabus sails to America and starts running TO-NY service with variable pricing, express service, wifi and $1 fares. Suddenly, Greyhound rolls out the same service. Clearly, there is room for North American bus fares to come down. (My other example: I discovered that while a standard Toronto-Guelph fare is $40, a same-day fare is $22 – the exact amount charged by GO Transit for their bus service, popular with commuters, but not occasional travellers).

Oil prices are at record levels, and everyone is anticipating the same record highs in transportation costs – but I think the Megabus story tells us to be optimistic. As the demand for the fuel efficient transport increases, these new economies of scale may just as well bring prices down as push them up.

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One Response to “The benefits of competition”

  1. 1 Milan

    That sounds very useful. Emily and I have been thinking about visiting NYC at the end of July.


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