Bolt for a Buck. This simple concept has created value—an estimated $85MM* in annual revenues for Peter Pan and Greyhound who partnered to create BoltBus in 2007—in a formerly stagnant bus transportation industry.1
BoltBus’ business model is simple: to transport customers across major metropolitan cities at a low cost. Yet, through its unique operating model, BoltBus has managed to disrupt the urban transit market, growing the market size for bus-goers and even stealing share from premium formats. According to the Chaddick Institute for Metropolitan Development, in 2014, “while bus service grew, Amtrak train-miles held constant, and the number of airline flights diminished by 3.5%.” Conversely, “the number of daily trips [by city-to-city express carriers] was up 3.9% in 2014 vs. 2013, with BoltBus and Megabus accounting for nearly 80% of these operations.”2
The company’s success can be attributed to its distinct value proposition. Offering a marked difference from other providers, BoltBus guarantees passengers a seat on the bus, removing the headache of uncertainty and the frustration of excessive wait times for passengers. Given this, the company is still able to maximize revenue and seat utilization via two methods: 1) Non-refundable tickets secure revenue and reduce the threat of ‘no-shows’ by implementing a “use it or lose it” policy and 2) Walk-up tickets are sold 10 minutes prior to departure with customers lining up on “standby” to fill up any open seats. This approach serves to maximize seat utilization but also, with prices for walk-up tickets costing ~30% higher than the highest advance purchased fare [and only in cash eliminating credit card fees], it also serves as an additional revenue stream.3
Furthermore, its distinct operating features at each point in the value chain enable BoltBus to create and sustain a competitive advantage:
BoltBus reduces overhead costs by eliminating traditional ticketing agents. The company primarily sells tickets online, offering customers who prefer more traditional formats the option to purchase tickets over the phone, albeit, for an additional $3 fee, passing on the additional service cost to the consumer.3
Furthermore, dynamic pricing enables the company to maximize revenue based on demand. Though its slogan, “Bolt for a Buck,” derives from a minimum of one ticket for each trip being priced at a dollar, BoltBus’ pricing strategy is much more than a marketing gimmick. Dynamic pricing encourages price sensitive passengers to buy early, securing a lower price and confirming minimum utilization for each ride as early as four to six weeks in advance. As the bus reaches breakeven, pricing can steadily increase, up-charging last-minute customers who have a high willingness to pay.
2. Passenger pick-up
While competitors such as Greyhound incur the expense of maintaining bus terminals in major metro areas, BoltBus eliminates this cost by doing curbside pickups. This practice enables BoltBus to provide additional convenience to its customers, with pick-up locations often located in central and accessible locations.
3. Bus boarding
Defined processes for boarding based on pre-defined “Groups” (A-C) create an orderly process akin to airline boarding. Whereas traditional competitors use a “first come- first serve” policy to seating, BoltBus’ process allows travelers to be more efficient, guaranteeing not only a seat, but also a place in line. However, unlike airlines, BoltBus give priority seating (A) to all loyalty program members, encouraging frequent passengers to join and providing BoltBus even greater access to customer data.
Despite its low-cost offering, Bolt Bus provides premium amenities such as Wi-Fi access and power plug-ins, all on a new, luxurious fleet of buses. Doing so has allowed it to attract a new, younger segment of consumers while also converting more premium customers.
BoltBus’ unique operating model creates value in an antiquated industry. Doing so has enabled it to revive bus transportation in cities, delivering passenger satisfaction ratings of over 90% over the past three years (as compared to Greyhound’s 67% satisfaction score).3 However, as competitors replicate this model (e.g., MegaBus, Yo! Bus, BestBus, Go Bus, etc.), BoltBus will need to continue to evolve its operating model to sustain its competitive advantage as it expands nationally.4
*Estimated based on 200 daily departures, operating 365 days a year at an average ticket price of $30 and 40 passengers per trip segment.2
- Peter Pan Company History. Retrieved from: http://peterpanbus.com/about-peter-pan/company-history/
- Chaddick Institute for Metropolitan Development. “Adding on Amenities, Broadening the Base 2014 Year-in-Review of Intercity Bus Service in the United States.” Retrieved from: http://las.depaul.edu/centers-and-institutes/chaddick-institute-for-metropolitan-development/research-and-publications/Documents/MotoringIntoTheMainstream.pdf
- Bolt Bus FAQ. Retrieved from: https://www.boltbus.com/faqnw.aspx
- FirstGroup 2015 Annual Report. http://www.firstgroupplc.com/~/media/Files/F/Firstgroup-Plc/indexed-pdfs/2015/firstgroup-annual-report-2015.pdf