Bus and Motor Coach Library

Is the Glass Half-Empty or Half-Full?

-author – Brian Crow (2002)                                                                         

This article was written by Brian Crow, President of Motor Coach Canada (MCC).  MCC is the leading national motorcoach association in Canada.  Although it focuses on major Canadian industry issues, you may be surprised at how similar and how accurately these issues reflect those that are important here in the United States.  It should make for an interesting read, particularly for those in the motorcoach segment of the industry. It will also reflect how you see yourself. Do you possess a positive outlook, and tend to be aggressively looking for new opportunities to grow even in these most troubling of times?  Or are things just too overwhelming, and you find yourself hoping that the marketplace will simply improve in the future. 

These are difficult times indeed for coach companies and tour operators.  The industry has struggled to regain its footing over the last several years, and while coach passenger volumes are gradually increasing, there is still a ways to go before we see a return to business levels experienced in the 1990’s.

For those who see the glass as half empty…
Tour operators have seen a drop in demand for domestic tours in Canada and the United States.  The demand for inbound Asian tours has also dropped significantly. Generally, there has been a drop in travel and tourism, and the motor coach travel has also been negatively impacted by low domestic airfares and changing demographics, which have affected the seniors travel market.

Soft charter and tour markets have resulted in equipment over-capacity for coach operators.  This in turn has depressed charter rates.  But while charter rates have dropped, coach operators must continue to make bank or lease payments for coaches, insure them, maintain and fuel them, pay their drivers and cover other overhead expenses.  Coach operators have also seen the asset value of their coaches diminish, as used coach prices have fallen dramatically, making fleet renewal extremely costly. 

As if that wasn't bad enough, soaring motor coach insurance rates have hit operators with double, and even triple digit increases as the insurance industry struggles to build reserves that were seriously depleted by huge claims coupled with poor investment returns.  Coach operators typically are now paying between $15,000 and $30,000 per coach for one year, where in previous years that figure was around $9,000.            

In addition, fuel costs have increased steadily since December due to supply disruptions in Venezuela, cold winter temperatures in Eastern North America and the Arab Gulf conflict.  Operators report fuel increases of 25 cents per litre (up about a dollar per gallon) in the past fourteen months alone…and we do not really know if they will rise or fall in the future.

Border crossing delays resulting from stepped up document inspections by U.S. and Canada immigration officials in the wake of 9/11 add to the cost of doing business and frustrate passengers anxious to get on their way.

And on top of everything else, responsible carriers who invest heavily to run a safe and legal operation find themselves having to compete with an ever-growing number of illegal operators, be they rogue van operators running inter-city scheduled services, or charter coach operators who compete by cutting corners on safety and maintenance. Not only do the legal carriers have to compete against the illegal bus companies, they also face unfair competition from subsidized government-operated transit entities and passenger rail services in many parts of the country.

Coach operators are not alone when it comes to tough times in the passenger transportation industry.  One only has to look at the airline industry in which carriers are suffering massive financial losses over the past year. The equation is quite simple, reduced demand for travel caused by world events, unrealistically low fares, soaring insurance and fuel costs and poor stock market performance equals costs that exceed revenues. 

Coach operators are being forced to take measures to mitigate losses and preserve operations during these difficult times.  Some have chosen to implement customer surcharges to help offset fuel and insurance increases.  Surcharges are common means of protecting carriers from expenses beyond their control during volatile periods and are commonly used by the trucking and airline industries.

For those who see the glass as half full…
While the current state of affairs for coach and tour operators is not the best, and there are number of negative factors and issues which are impeding our industry's ability to recover and growth, it is a fact that our industry is resilient, tenacious and is optimistic about the future.  Our industry has endured tough times in the past and has survived downturns in the economy, high insurance and fuel costs.  Our industry has so much going for it and boasts many advantages over other passenger modes:
- The most cost-efficient (the Canada Royal Commission on Transportation)
- The most effective passenger mode (service to over 7,000 communities in North America)
- The least subsidized passenger mode
- The most affordable passenger mode
- The most environmentally friendly passenger mode (White House Conference on Global Climate Change)
- The most reliable passenger mode
- The safest passenger mode
- The most frequent service
- The shortest trip time in short haul (200-miles or less)
- The quickest mode to add new services
- The most flexible passenger mode

For tours to the U.S., the Canadian dollar is above 70¢$US, and climbing enough perhaps to encourage Canadian travelers to more frequently travel into the U.S.  Orlando had $40 U.S. hotel rooms in February.  The cost to tour is lower and tends to offset increases in other costs.

Our recovery and growth can be enhanced by government policy and regulatory changes that remove barriers that stand in the way.  Governments need to take into consideration the simple fact that the greater use of our services means less congestion, cleaner air, less fuel consumption, less cost to the taxpayer and safer roads. 

We need government to stop using taxpayer dollars to subsidize our competition like VIA Rail (read Amtrak in the US) and government-operated transit on parallel routes. 
We need government to revoke the laws that create and protect bus transit service monopolies in our cities. 

We need government to encourage travel & tours (especially between Canada and the U.S.) by taking action to protect against terrorists, encourage friendly relations with our U.S. neighbors and partners, review and adjust immigration policy that welcome new immigrants who want to contribute to a safer and more vibrant Canadian economy and culture, but close the door on those who wish to terrorize us and destroy the North American economy.

We need more municipal governments to wake up and realize the enormous potential for savings and improved service levels that result from competitive tendering of transit services.
We need governments to make up their mind, one way or the other, on the issue of economic regulation/de-regulation of intercity bus services in Canada.

We need government to step up enforcement against illegal and unsafe coach operators who enjoy a competitive advantage over law-abiding operators.

We need governments to follow the U.S. federal government's progressive tax policy, which provides a rebate of 75% of federal excise tax for buses, in view of their social and environmental benefits.
Canada's (America's) motor coach industry has numerous strengths on which to build a sound future in service to Canadians (Americans), tourists, and visitors to our country.  A healthy and expanding motor coach and tour industry will result in safer roads, reduced congestion and gridlock, cleaner air, job growth, increased tourism, social integration, improved mobility and savings to taxpayers.