Amtrak's New Math for Long-Distance Route Expenses: Marketing Yes, Amenities No

Against a backdrop of unprecedented ridership, constrained capacity, and operational challenges, Amtrak's national network of the 15 long-distance routes recently came under the aegis of Mark Murphy, Amtrak's new General Manager Long Distance Services. The reorganized business line is now largely overseen by a cadre of Amtrak veterans such as Murphy, who graciously presented to the joint NARP and RailPAC (Rail Passenger Association of California) “Steel Wheels” member meeting in Los Angeles on February 1.

Alongside his experienced deputies Joy Smith (Business Liaison Director of Service Excellence) and Mike Dwyer (Route Director for the Coast Starlight and Southwest Chief), Murphy outlined an optimistic vision for the national network trains whose sense of security has ebbed and flowed with the political winds and Amtrak's finances over the years. With diminished debt, record ridership for 10 of the last 11 fiscal years, and a record 89% operating ratio (89 cents in fares recovered for every dollar of expenses), Amtrak is the strongest it has been in modern times – albeit below its historical high water-marks of route breadth and fleet size.

The long-distance trains are the linchpin of this success, accounting for 44 percent of all Amtrak passenger-miles (actual transportation output). They punch far above their weight considering that they carry only about 16% of total system passengers. The average trip length is 600 miles, and 23 states have no other form of intercity passenger trains (many communities also have little in the way of air or bus service). Murphy articulated a tripod strategy to build on this success, focusing on Financial Excellence (further improving the operating ratio), Safety and Security (forging industry-leading safety standards), and Customer Focus (“to acquire and retain the most satisfied customers of any travel company in the world”).

To the latter point, Murphy was also bold in declaring that “every revenue opportunity is on the table” and that cost-cutting will not be the prevailing mentality going forward, even as Amtrak seeks to make food and beverage services more efficient. One of his slides concluded, “We're not trying to chop our way to success.” So imagine the shock of rail advocates when Amtrak issued an internal notice three days later announcing the elimination of many on-board amenities in the coming weeks for the long-distance trains, whose product had always been at the heart of their appeal for choice riders (particularly in the highly profitable sleeping cars).

There was a subsequent memo announcing the elimination of the separate sleeper lounge and wine reception on the Auto Train. While these cuts are fairly small in the grand scheme, they make the product incrementally less attractive. They're also a reminder of the very short institutional memory at Amtrak, despite the experienced management.

In 2007 the Coast Starlight's Pacific Parlour Cars for sleeper passengers – the crown jewel of the long-distance fleet – were endangered due to mounting maintenance costs and lack of directly-attributable revenue. Management at the time was able to recapitalize and save this valuable subfleet by turning it into a revenue center, with the traditional wine tastings becoming fee-based ($5, or $10 for any coach passengers wanting to occupy any unused spots), plus the addition of an alternative meal service option. A few years later, the wine tasting fee went away. So why now throw the baby out with the bath water by eliminating this signature event? If the goal is to control food and beverage costs, why not bring back the tasting fee? Living in San Francisco, I often face from friends some variant of the question, “I know there's a train from Oakland to LA, but it takes all day. Why should I ride?” No longer can I cite the memorably differentiating factor of the wine tastings.

While this is a relatively picayune digression from NARP's challenge to preserve and expand the national train network as essential transportation, it speaks to a larger disorder within Amtrak. It's incumbent on Murphy to fully implement a service vision that's cost-effective but also decisively telegraphs whether the train is a special experience, or merely a bus on rails. In the words of RailPAC Director Bill Kerby, “What disappoints is not the huge boulders that knock down the traveler’s anticipation for a good trip, but the small grains of sand that grind away the expectation for an excellent travel experience as the journey continues.”

Meanwhile, on the Marketing side, Amtrak is acting quite emboldened to splash out dollars and resources to promote the long-distance experience to a variety of audiences. Under the aspirational-viral hashtag #AmtrakLive, dozens of creative influencers rode the Texas Eagle from Los Angeles to Austin for the South by Southwest (SXSW) Festival. This is a shrewd play for Amtrak to gain cultural currency amongst a group that skews towards the young, affluent, and highly connected.

Even more exciting from the perspective of guerrilla marketing is the burgeoning #AmtrakResidency program to give away long-distance tickets to influential writers. Amtrak made the program official just over the weekend, yet had officially leaked the details weeks ago to generate initial buzz. If these writers occupy sleeper space on trains that end up selling out, there could be potentially tens of thousands of dollars in directly foregone revenue. Yet unlike some observers, I have no problem with Amtrak investing in what will surely be heaps of free publicity from the writers' output (even if it's not uniformly positive, and even if there will be fewer amenities to affect one's perception on the margins).

Finally, as NARP reported last week, Amtrak's Marketing brain trust is launching a national advertising campaign to promote long-distance trains and their extant amenities, at what appears to be an unprecedented scope. (Individual routes have long had varying degrees of regional advertising.)

Ultimately, while these Marketing campaigns will likely be very successful and deliver a handsome return on investment, there is no substitute for the marketing power of excellent product itself. The recent contrast of events brings to mind cognitive dissonance, Jekyll & Hyde, or merely the left and right hands within Amtrak being siloed from each other.

As rail advocates, it's our job to defend Amtrak against scurrilous political attacks on the very notion of offering high-quality food and beverage services and other amenities that define the train as the most human intercity travel option. At the same time, the announced cuts play into the hands of “concern trolls” within a micromanagerial Congress who claim to want Amtrak to become more efficient and operate more like a business, but who in their hearts are philosophically opposed to competitive passenger train service and would rather dictate or incent artificially inferior service. It dignifies the framing of “freebie” amenities being a waste and not a valuable marketing tool or a potentially key driver of revenue.

Ultimately Congress must level the playing field to place passenger trains on the same footing of dedicated, stable, long-term funding that other surface transportation modes receive, and set Amtrak free to execute a truly long-term strategic plan that leverages its inherent strengths. Amtrak too must step off its historic roller coaster of short-term product investment and cuts, instead resolving to work across departments and crafts – and with passengers themselves – to continually innovate a product that maximizes ridership, financial performance, and customer satisfaction. The traveling public deserves nothing less.

NARP looks forward to hearing Mark Murphy further articulate his vision for the future of the long-distance network when he addresses the Association’s Spring Council of Representatives Meeting in Washington, DC next month.

Matthew Melzer is a NARP State Representative from San Francisco, Cal. and serves as NARP’s Southwest Division Leader. The views expressed in this post are strictly his own and do not necessarily reflect NARP policy. Click here for Carl Morrison's full article on the RailPAC-NARP Steel Wheels Conference.