(We originally posted this in December 2020. You can read more of our original ideas in our archive.)
Problem: There is no comprehensive consumer/commuter high-speed rail network across the United States. Where is the American version of the EuroPass?
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Solution: This business would attempt to develop a comprehensive rail system to span across all of America. As described by Rob McGregor on Twitter, there is probably appeal for “those that ‘want to see America’ and/or are afraid of flying…” Especially in the era of COVID (and probably at least a year after COVID), trains could potentially see a rebirth as a travel option.
The current market leader in this space is Amtrak. I read through their 2018 annual report and learned quite a few interesting tid-bits of information:
Amtrak was created by Congress in 1970 to take over the majority of the intercity passenger rail services previously operated by private railroad companies in the United States. Those companies showed they had operated these services at a huge net loss for many years. National operations began on May 1, 1971
In all of 2018, only 36 million people rode on the top 25 Amtrack stations
Amtrak posted record GAAP (Generally Accepted Accounting Principles) revenue of $3.4 billion, an increase of 2.5 percent over FY 2017; adjusted operating earnings of ($170.6 million) were the best to date and an 11.9 percent improvement over the prior year. Capital investment of $1.46 billion was the highest in recent Amtrak history.
During FY 2018, Amtrak customers took 31.7 million trips. On an average day, customers made nearly 87,000 trips on more than 300 Amtrak trains.
$8.1 billion is the amount of money Amtrak received from the federal government between 2016 and 2020. (source)
What’s interesting, however, is that on average 4+ million people visit the Amtrak website every month. However, for some reason, these visits do not translate to nearly as many trips (given that only 87,000 trips are taken per day). I truly believe that there is a large gap that could be addressed by a private corporation buying defunct or debt-ridden rail-lines and repurposing them as an effort to promote Ameri-tourism.
So how would this make money? Let’s look again at Amtrak (thanks to Investopedia)
76% of Amtrak’s revenues in 2019 came from ticket sales and roughly 80% of that came from short-distance trips. This means that ticket sales from short-distance lines are the bread and butter of Amtrak’s business.
Could there potentially be a business about long-distance lines? Perhaps this business!
One of these lines in particular, the Northeast Corridor (NEC), which runs from Washington D.C. to Boston, is vitally important to Amtrak’s financial survival. In 2019, this line accounted for 38% of Amtrak’s passengers, 56% of its total revenues and almost all of its operating profits. 6 of its 10 busiest stations are along the NEC.
The business would innovate against Amtrak by focused on the high-speed, long-distance trip market outside of the NEC.
Overall, the market is extremely large but declining. IBISWorld reports that “the market size, measured by revenue, of the Rail Transportation industry is $68.1bn in 2020”; unfortunately, however, “the market size of the Rail Transportation industry is expected to decline -14.1% in 2020.” While some are bearish on trains (instead favoring cars), I am extremely bullish on rail (and especially high-speed rail) as a solution area that is beyond the slow speed of cars.
Monetization: S
Contributed by: Michael Bervell (Billion Dollar Startup Ideas)