What Amtrak Should Be Doing to Improve its Food Service Revenue April 1st, 2006
SPECIAL REPORT — Food and beverage service on Amtrak doesn’t have to be something akin to a national shame. It has the potential to be pleasant, profitable, and nourishing. It has the potential to be good, rather than a necessity begrudgingly dished out by a common carrier with no ambition for good passenger service.
There is a myth in railroading, that dining cars and the food service business are perpetual money losers. This is analogous to an urban myth that just won’t go away. Some will quickly say that even the private, pre-Amtrak passenger railroads didn’t make money on dining cars. Harrumph. Railroads have been manipulating financial numbers for over a century and a half to suit their needs, and dining car numbers were no exception. Back in the dark old days of the 1960s, at the end of private passenger rail service as we historically knew it, dining cars were shown to be money losers simply as a tool to get rid of them and in turn ultimately get rid of the trains they served.
If you want to talk about dining cars today, do so with an open mind to real financial numbers that go beyond the ghastly horror that is known as Amtrak financial accounting. Look at real numbers with real potential.
The United States House of Representatives Amtrak Working Group released its report to the House transportation committee this week (which will receive in-depth reporting in the next issue of This Week at Amtrak), and asked such questions as “When Amtrak is losing more than $80 million/year on its food and beverage service, why was/is it so difficult for the corporation to provide basic cost and expense data concerning those operations, as promised at the June 9, 2005 Rail Subcommittee hearing?”
One can’t help but be led to the conclusion that Amtrak has based its decisions on the future of morally admirable meals on Amtrak trains on bad numbers generated by bad accounting and reporting.
As reported in the March 15th edition (number 13) of TWA, Amtrak’s internal documents show all food and beverage services, including dining, cafe, and lounge cars, show a gross profit before labor, but after all other costs are included. And, we also know Amtrak probably doesn’t know true costs of the labor when it is applied to food and beverage services. So, therefore, Amtrak claims a huge loss on dining, cafe, and lounge car services when there is still a definite mystery to this claim.
Here are some ways Amtrak, even with its current dismal accounting practices, can improve dining, cafe and lounge car services financially without permanently resorting to the heartbreak of Diner Lite.
- The simplest way to increase sales is promote the service to those onboard Amtrak trains. Some simple steps Amtrak has taken in the past should be used systemwide, such as sample seatback menus in coaches. When passengers know what to expect, they are more likely to try the dining car versus grabbing the equivalent of a fast food meal in the lounge car. When this was tried back in the 90s on the Crescent, round trip sales for the dining car often went up as much as $2,000 per trip. That was $2,000 in revenue (with no increased labor costs) for an investment of less than $50 in printing costs per trip; not a bad return on investment.
- Pre-sell more dining car food before passengers board their train. This concept has served cruise lines well for decades, with all main meals included in the cost of travel. Amtrak is doing this now for sleeping car passengers (a wish move made years ago) and it can do it with coach passengers, too. Coach passengers could be given a choice of regular coach or premium coach, which would include all meals, just as the sleeping car passengers enjoy. Once the money has been collected at the point of sale for travel, Amtrak wouldn’t care if the coach passengers ate the meals or not; it has the predictable revenue. Now, every time a coach passenger boards a train, it’s a complete gamble whether or not they will choose to patronize the dining car. By having their decision in advance, costs – and (gasp!) profits – are better controlled and more predictable.
- Offering “early bird” meals at dinner time is a popular concept that has been proven a winner for decades in retirement areas. Senior citizens, which make up a large part of Amtrak’s clientele, often prefer smaller meals served earlier in the dinner cycle (usually beginning at 5 P.M.). The same holds true with families traveling with small children. These meals offered can be something easy for the chef to prepare (referred to as single dish meals, such as beef stew) that can be dealt with while completing preparations for the full evening dinner service. Early bird meals are sold at a reduced price, but because of smaller portions and less complication for preparation, are still profitable. These meals, which offer a passenger more choices, can be prepared without any additional labor costs.
- Keep the dining car open longer hours, preferably in a 24-hour basis, as was done in highly successful experiments on the Sunset Limited in 1999 and 2000. Dining cars are the single most expensive piece of equipment on a train, including the locomotive, yet they are also the most under-utilized equipment, too. Continuously operated dining cars can be operated with only two more crew members, both of which quickly pay for themselves with improved operating efficiencies and higher revenues. The passengers like the system because when traveling on vacation, they can eat when they choose, rather than having to conform to some regimented schedule. Crews like the schedule because work is more evenly spaced and there are less peak rush times (and, during every experimental trip, tips dramatically increased for each table server, too).Because trains are 24-hour operations serving major stations at any point on the clock, passengers want the availability of meals when entraining and before detraining. There are no downside aspects to this concept.
- Amtrak has long maintained that except for sleeping car passengers, coach passengers may only use the dining car for full meal service; anyone wanting less must be relegated to standing in line in the lounge car. This silliness excludes many coach passengers who may enjoy a cup of coffee and high priced piece of pie late in the afternoon, or a bedtime snack late at night. Almost to the point of class snobbery, this practice excludes many passengers from paying money for services which cost little to provide and bring in high revenue.
- Because of Amtrak’s regimented seating arrangements and the need to feed people in a set period of time that is convenient for the crew more than passengers, Amtrak is missing huge income from the sale of before-meal alcoholic beverages. The concept of a quiet drink at the table before dinner is served is completely lost on Amtrak. Those drinks cost almost nothing to serve and cost passengers a fortune; all revenue which is now lost. In addition, there is no time for high income breakfast mimosas, or other early morning eye openers. During later evening hours, the dining car with lights dimmed is much more conducive to a quiet drink and conversation than the lounge car. Again, revenue lost that costs little to generate.
- Most sleeping car passengers don’t realize Amtrak has always provided room service for those wishing to dine in their rooms. Beyond the ability for sleeping car attendants to bring full meals, there are also opportunities for snacks, desserts, and alcoholic beverages to be served frequently in sleeping car accommodations, too. The service of all of these items can accrue revenue to the dining car. Even the most mundane of medium priced hotels often offer room service. Amtrak is not making the most of its labor costs of sleeping car attendants by not promoting this service.
- One of the signature services of the Seaboard Air Line Railroad’s Silver Meteor and Silver Star was the afternoon orange juice service in the dining car. Since these were the railroad’s two primary Florida service trains, this daily ritual was thought to enhance the ambience of the trains for passengers bound for the Sunshine State. Amtrak has this same ability on all of its long distance trains to offer a “high tea” service in the afternoon. This could take many forms, including a wine and cheese offering as has been done on some trains, a real tea service with tea and biscuits, or a coffee and cake service. Whatever form it takes, it can generate extra income for the dining car without incurring extra labor costs.
There are other ways not mentioned above that clever people can introduce to increase dining, cafe, and lounge car service, all of which can produce higher income with either no or only modest costs increases. The basic idea is to find ways to take an existing overhead, and generate more revenue from the overhead, not merely squeeze more costs out of the overhead. A regimen of only cutting costs with compensating for better or equal services is doomed to failure.
While a certain segment of the traveling public prefers no-frills motels along with no-frills airlines, this is not the majority of the traveling public. It has been proven in credible studies time and again that when people are traveling, they are willing to spend reasonable amounts of money for comfortable vacation experiences that includes good food service.
It’s important to distinguish good food service from fine dining food service. Even though the cruise lines would like their passengers to believe they are experiencing traditional fine dining by definition, they often are not on the middle and lower priced cruise lines. Amtrak does not have to strive for a fine dining experience, but rather what is called in the hospitality industry a casual dining or family dining experience. This includes reliable table service, an acceptable choice of items on a freshly prepared menu, and a reasonable price.
Amtrak passengers on a train do have a choice when it comes to dining: they can either take it, or leave it. That’s about it. Passengers are often captive on a long distance train anywhere from two to 24 hours, and some trains up to two or three days. Not having morally admirable food choices negates all of aspects of train travel which may be considered positive experiences.
The bottom line is an economic one: good food service means happier passengers, which means more return trips and good word of mouth advertising. It’s a known fact that when there is a food service failure (whether intentional or unintentional) there is an overall failure. Americans like to eat, and we like to eat well. Whatever we choose to eat at home or in our work routines is often far different from what we choose to eat when traveling. Cruise lines, which are in their second golden era now, figured this out a long time ago, and have prospered because of their wisdom. Amtrak hasn’t come to the same obvious conclusion, and continues to suffer as a consequence.