Do sleeping cars make money?

At first glance, it seems that sleepers make money for Amtrak. Deluxe rooms especially cost megabucks whenever I look up the fare for a trip I'm considering. If deluxe rooms actually make money it might pay for Amtrak to order more sleeping cars with all/most deluxe rooms. If they are profitable, it might be possible to get private financing.
But do they actually make money? I suspect that they don't.
For starters, can someone post how many seats a deluxe superliner room, and a deluxe viewlier room, take up? Also, sleepers have higher labor costs than coaches. And, you probably have to have diners if you have sleepers. (Yes, I know the Night Owl/Shoreliner/Federal doesn't have a diner, but if you are providing deluxe sleepers at deluxe prices you probably neeed a diner.)
In the sixties, when railroads, were trying to get rid of their passenger trains, I don't recall that they tried to keep their sleepers. I suspect that the potential profit of sleepers is illusory, but I'd like to see what facts other members may have.

A factor of two to consider, Mr. Grossman, is first, that "the railroads" never operated a Sleeper, beyond the Slumbercoaches, that had a capacity exceeding 21 passengers; at least that was the capacity of the unbquitous 10-6 (9-6 available for sale). A Superliner is good for 40 pax; a Viewliner for 30. Amtrak can command $300 a night for a Standard during peak season, railroads even at the end only got $15 a night from a roomette (get your inflators out for that one, folks).

Of course, in any business enterprise, where there is overhead "material in nature and scope" to allocate, to what extent any segment is profitable comes down to devising systems to report whatever "Big Daddy wants to hear". I may be a (now retired) CPA in this life (and free to be a cynic), but that is simply my apprasial of any system out there to determine "segment profitability".

Of course I think the paucity of supply, while doing wonders for the "revenue yield per room" adversely affects the "product line revenue yield". The Central and Santa Fe, I think from having been able in this life to say "been there done that", sought to keep the Century and Super "sold, but not sold out". And they, folks, without the luxury, account ICC regulation or, failing that, computers to call upon demand pricing models, only had the alternative of adjusting supply to meet demand.

No, I do not think just because they cost a lot to ride that they make any more money than anythng else. Why? One, they are more expensive to build, also more expensive to maintain and operate, all the plumbing, beds, lights extra, whereas a coach is just a simple row of seats, comparatively.

Also the capacity of a sleeper is much less than a coach, so the money has to come from somewhere, more expensive to build, more expensive to stock and keep up, and fewer people to foot the bill. It all ads up to a much higher cost to ride, but not probably any higher profit.

Well, take a look at the numbers that the spreadsheet below gives once you fill in 40 passengers, 1 attendant per car, and 2.5 million as a capital cost. Of course the assumption I have used is that this car is charged only it’s incremental costs and that a dinner need not be added. However, the current Private Car mileage rate I have assumed may be a little high at $1.75 a mile, as it was $1.15 a mile just a bit ago. Amtrak must of course charge what the market can bear as a lot of other costs such as those for stations and administration have not been considered along with the train costs not currently recovered.
Virgil Payne


http://pages.prodigy.net/virgilp/_uimag ... arCost.xls

Mr Payne's spreadsheet seems to say that adding sleepers to an existing train would be profitable for Amtrak.
So, if Amtrak privately borrows money for new sleepers, it looks like it could pay off the loan from operating profits.
Is Amtrak allowed to do that? What catches am I missing?

We've been over this ground before, at the old list.

At tarriff rates, the cost of sleeper space at least covers the opportunity cost of the car having coach space. When one works with other than tarriff rates (read Julie), then it's harder to evaluate opportunity cost.

Remember that every passenger pays a basic rate for his transportation, while the sleeper charge is "over and above." Thus, the passenger inherently covers his or her seat. After discounting food allowance and a share of the attendant's pay, the rest , to my way of thinking, helps pay the overall operating cost of the train, compensating for an underpriced tarriff.

This is my opinion. Others will have different.

John

Joe G,

I leave it to you to search the laws governing the National Railroad Passenger Corporation.

John

I think quite simply the only reason the private sector extends any vredit to Amtrak is because of its appropriations rather than the expectation of profit from any prospective venture.

Several assumptions could use some explication.

1. 85% occupancy over the whole route. Comparatively few sleeper passengers travel endpoint to endpoint. Peak occupancies of 85% are common, but best to figure an average occupancy 15-20 points lower for the whole route.

2. Labor Base Rate: A sleeper is in service 24 hours a day. It will take more than 1.8 FTE's to staff.

3. Two cars per attendant. That seems like a stretch, too.

4. Insurance. How is this figure derived?

5. Return to the investor, not accounted for here. It's not enough to pay all the vendors and pay off the bank note. Investors don't invest to break even. They invest to make money. They choose the vehicles that will make them the MOST money of all their available options. Your competiton is the S&P 500, for starters.

It's easy to make a good-looking spreadsheet. The hard part is deciding what figures to start with.

Even though I cannot open your proposal, Mr. Payne (not your fault; my "wizard" deliberately set the security settings very high), I presume you have proposed that one attendant be assigned for each of two cars.

Ignoring existing labor agreements, how do you propose to get all those bunks made up?

As I recall, from a recent City of New Orleans trip, a Coach Attendant (likely under pay at higher Sleeper rates) assisted our Attendant in getting the bunks in the sold out car made for an on time CHI arrival.

Trust me, from first hand observation, it was "Charlie Hustle" on the part of both attendants.

I guess, also ignoring existing Agreements, bunks could be made up at the terminals by a cadre of (outside contractor, of course) "housekeepers". That is one thing for the one night out trains. But then, for the two or three night outs? do we stop for 40 minutes somewhere and have a "blitzkreig" of contractors go at it?

In short, one attendant per Sleeper is not, in my estimate, any kind of "featherbedding", the "cadre of Merry Maids" either at terminals or intermediate points is to put mildly "absurd'.

As Mr Norman reminded us at the old board, time and again...

The railroads closed the Pullman Company as an operating entity on Dec 31, 1968. It remained open some more years to close out remaining legal, labor and liability issues.

Prior to its demise, the Pullman Company hemmhoraged red ink, all of which was charged back to the remaining partners of the "owning group" of railroads.

Sleeping cars by their nature are expensive propositions:
18 + hour a day coverage by an attendant (I assume here the work rule is 18/6 on/off)

40 sets of linen for laundry per one way trip. On a two night trip, that number goes up to 60 (assumption: 1/2 the pax are 1 night travellers).

Hygenic consumables for the car.

Once finished with these, then we talk the various First Class amenities.

The supply of sleepers available to Amtrak is less than demand. Assuming Amtrak funds and builds additional sleepers, there will come a point where demand balances supply. Overbuild, and sleeper business will lose money again.

The better thing to do is relook the cost of transportation against historic norms. I did this at the old board; discovered coach was underpriced compared to historic data.

My thoughts only.

John

- 85% occupancy - The summer trains are sold out the winter trains run at say 70% capacity, I have given an average
- My assumption for labor is that they are paid while they are sleeping and awake at the hourly rate and that the company pays an extra percentage to cover health, extra board, lodging, and other costs. So one Chicago to West Coast cross country trip is all the work one would have to do to work 40 hours a week.
- I asked anyone to use it to change the attendants per car to 1 in the thread above, this assumption was there for a labor saving design.
- The insurance figure is base on a cent a mile, which is from a variety of sources run through a reality check of possible losses per mile with a pad, correct me if you can find anything else.
- Return to the investor is 8% using a present sum to future payment conversion factor of (0.102) this is a pretty standard technique for figuring out loans. The term of the loan is 20 years.
- Making up bunks... covered by one attendant per car assumption that I suggested should be changed from my less generous, more coach sleeper like proposal the above spreadsheet goes with.
- Additionally, there is room for profit over 8% by charging a higher fare than the one shown in the spreadsheet. But I know that there are a lot of costs that Amtrak corporate generates that could eat this up if allowed. The question is what is attributal.
Virgil Payne

Getting closer, still not there.

VPayne wrote:85% occupancy - The summer trains are sold out the winter trains run at say 70% capacity

This is still a SWAG. The only way to calculate load is with one figure you can calculate (available compartment-miles) and one you don't have (revenue compartment-miles).

My assumption for labor is that they are paid while they are sleeping and awake at the hourly rate and that the company pays an extra percentage to cover health, extra board, lodging, and other costs. So one Chicago to West Coast cross country trip is all the work one would have to do to work 40 hours a week.

Here's the problem. There are 168 hours in a week. That car heads back to Chicago the same day.

The insurance figure is based on a cent a mile, which is from a variety of sources

Such as?

Return to the investor is 8%

No, that's the interest paid to the bank. The bank is a vendor (of money), not an investor. You must also give a return to the investor. Another point: This spreadsheet assumes 100% financing. Not gonna happen. Why? Because the woods aren't exactly teeming with people who will pay top dollar for a repo'd sleeper. Which would make it unlikely that any bank would extend 100% financing.

Additionally, there is room for profit over 8% by charging a higher fare than the one shown in the spreadsheet.

Shown where?

But I know that there are a lot of costs that Amtrak corporate generates that could eat this up if allowed.

And that, in the end, is why time is better spent at the drafting table. At least for now. Too many assumptions, too many missing pieces.

Theoretically, if one owned a private railcar still set up as a full sleeper (say a 10-6 for the sake of simplicity), and one could get a favorable rate from Amtrak, could one make a profit selling berths on the condition that Amtrak got to sell all its berths first. I'm sure Julie could be set up not to offer berths in the 12 car for sale before the 10 and 11 cars were sold out for the points requested. I'm thinking Silver Meteor in Winter, Lake Shore Limited in Summer, and charter service in between for route assignments. Ideally, one would have three cars so all three trainsets could be protected.

- Yep, I don't have acutal occupancy percentages for all segments, sorry, perhaps someone like the Texas Eagle Marketing guys could help. Until, then you are free to change the spreadsheet percentages to something you feel is more reasonable like 65% to 70%. But suffice to say the cost that I figure is an average cost from which higher and lower actual fares would be generated to equalize demand.
- I don't see any problem in my labor cost assumptions. I have determined a hourly rate for on board staff based on a forty hour week and a percentage over for insurance, etc... and then used that hourly rate when figuring the cost per the amount of time/miles the car is in service. Yes there are 168 hours in a week but what does that have to do with anything?
- Sorry, I don't have the insurance costs bookmarked.
- Good point Matt, there would need to be some adjustment for the downpayment, but that is not a deal killer. Of course if the government would sign the loan, assuming they own the cars, 8% is not unreasonable.
- An fare higher than that shown in " Cost Per Berth - Per Mile " could be charged. This spreadsheet is just to look at incremental costs, not the whole marketing plan.
- I don't know how much Amtrak corporate would decide to charge a new service for their association. Again this is just an incremental cost spreadsheet and I just don't think that there are significant missing pieces.
Virgil Payne