why are business class fares sometimes cheaper than coach fares?

[DennyM]

why are business class fares sometimes cheaper than coach fares?

I have seen this happen a lot recently on East Coast trains...

Just the other day, I was pricing a short trip out of Albany, NY. Coach fare was around $110. Business class fare was $89.

Am I missing something? Of course I ended up purchasing business class for $89.

 

[OlympianHiawatha]

Enough Coach tickets were sold to push that fare into a Bucket higher than Business Class which for some reason has been selling slow for that particular run.

 

[zephyr17]

Short answer: Buckets.

Business class and coach are separate inventories and if coach is selling well and business class still has a lot of space, the coach inventory will will move into the next bucket, while the business class still has inventory in the lower bucket.

Business class and sleepers are handled differently. With sleepers, the rail portion of the fare will always be low bucket, and the accomodation charge moves through the buckets. Business class, the accomodation charge stays the same, and the rail portion moves between buckets.

 

[the_traveler]

It's the same reason that you can sometimes find an Acela for lower than a Regional. More tickets may have been sold on the Regional than on the Acela, thus the Acela is a lower bucket. Some people think "the Acela costs more, so I'm going to only check the Regional"!

 

[DennyM]

correct me if I'm wrong, how does Amtrak manage to make money with a pricing strategy like this?

it just doesn't seem logical to me.

 

[NW cannonball]

If I remember rightly from my IOPP (that's "industrial organization and pricing policy") class decades ago -

The product is in the mind of the punter. The money is the only reality for the seller. But the seller can't figure out how to charge each buyer the absolute max the buyer might be willing to pay.

So Amtrak, and the airlines, use a "yield management" system - higher prices for the last available seats. This maximizes (practically speaking) revenue.

When the train, or plane, departs -- empty seats are a dead loss - whether "first class" or BC or whatever - so sell those unsold seats for whatever Amtrak can.

It's not rocket surgery - just what happens, and has happened, in marketplaces worldwide for millennia.

If you have two tomatoes left to sell, and most of the customers have left already, you'll take whatever you can get.

Totally logical.

 

[Anderson]

True, but there's always the risk of "dead loss" versus the risk of cheapening the product. For example, if an airline, in a desperate attempt to fill seats, cuts prices to nearly $0 too often (i.e. not part of a promotional sale) it risks passengers waiting until the price enters freefall to buy tickets, particularly if it is clear that there will be open seats on a given flight.

 

[NW cannonball]

Indeed. Us predatory seat-buyers can over-do our free-market function. And wind up on a repossessed airplane in whatsit-stan with a worthless ticket.

I'm a long-term seat-buyer myself -- and I really want Amtrak (and most airlines) to at least break even, on some basis or other, subsidized or not.

Because I really really like being able to get almost anywhere, almost anytime. Thinking most of us like that freedom.

 

[crescent2]

It's the same reason that you can sometimes find an Acela for lower than a Regional. More tickets may have been sold on the Regional than on the Acela, thus the Acela is a lower bucket. Some people think "the Acela costs more, so I'm going to only check the Regional"!

And likewise, on the Crescent bedrooms are sometimes cheaper than roommettes, at least south of ATL, even though there are few bedrooms in a Viewliner. I suppose people just assume they will be much more expensive and don't ask about them.

 

[zephyr17]

correct me if I'm wrong, how does Amtrak manage to make money with a pricing strategy like this?

it just doesn't seem logical to me.

It is yield management, much like the airlines, and Amtrak has gotten much better at it of late.

A seat that goes empty is a dead loss. Yield management is an attempt to get the most butts in seats at the highest possible price. If someone doesn't do their homework and buys a coach seat at a high price, that's a win. If they do do their homework and snag the business class seat that would otherwise go empty, that's a win, too (and would likely consume the last inventory in business class' low bucket).

 

[FriskyFL]

One would think that Amtrak's pricing models would preclude such anomalies, by ensuring that the business class is always priced at a premium to coach, until the coach inventory is exhausted.

 

[Silver Star rider]

I remember years ago, a airline (probably bankrupt and gone now) advertised that if one of their airplanes were full, they would pull out another one and place in service. Perhaps on a shuttle route.

I know the limitations, equipment and probably platform space, but instead of jacking up the price over 100%, why not just add on another coach or sleeper car??

Bruce-SSR

 

[DennyM]

I remember years ago, a airline (probably bankrupt and gone now) advertised that if one of their airplanes were full, they would pull out another one and place in service. Perhaps on a shuttle route.

I know the limitations, equipment and probably platform space, but instead of jacking up the price over 100%, why not just add on another coach or sleeper car??

Bruce-SSR

It was the Pan Am Shuttle. I used to take it twice a week in the late 1980's and early 1990's(just before Pan Am went out of business)

If a shuttle flight was full, they sent the extra passengers a couple gates down to an empty 727. On more than three flights, I was the *ONLY* passenger on the 727. Even Donald Trump never flew alone on his private 727.

 

[Paulus]

I remember years ago, a airline (probably bankrupt and gone now) advertised that if one of their airplanes were full, they would pull out another one and place in service. Perhaps on a shuttle route.

I know the limitations, equipment and probably platform space, but instead of jacking up the price over 100%, why not just add on another coach or sleeper car??

They don't have any cars to spare, simple as that.

 

[Silver Star rider]

I remember years ago, a airline (probably bankrupt and gone now) advertised that if one of their airplanes were full, they would pull out another one and place in service. Perhaps on a shuttle route.

I know the limitations, equipment and probably platform space, but instead of jacking up the price over 100%, why not just add on another coach or sleeper car??

They don't have any cars to spare, simple as that.

There was a episode, think it was MASH. The surgeons needed some medical equipment, think it was a incubator or something. They find a supply sergeant has two, so they ask for one. He goes no. They ask, you have two, why cant we have one, your not using them. the supply sergeant goes, if I give you one, then I only have one.

I know Amtrak does have spare equipment, but I guess they need it for emergencies, changing out a car for a train that is in service. But you have to wonder, would they have too many cars labeled as spare or not?

Like I said, I know having enough equipment is the issue.

Bruce-SSR

 

[Guest]

The Business seat may have only been available for that short distance you purchased, so they fare was low so someone would buy it. On the other hand, the Coach seat may have been priced higher for that segment since it was the only seat available for a longer distance and they preferred to sell it for a higher fare (higher than the one you saw for the short distance) to increase revenue. If this was the scenario, this pricing tactic worked for Amtrak -- you left the higher potential value seat alone which may have several potential buyers and purchased the seat for which there was less demand.

Since you can't see all of the information that Amtrak is using to make these decisions, you may not see the logic in their actions.

 

[seat38a]

correct me if I'm wrong, how does Amtrak manage to make money with a pricing strategy like this?

it just doesn't seem logical to me.

It is yield management, much like the airlines, and Amtrak has gotten much better at it of late.

A seat that goes empty is a dead loss. Yield management is an attempt to get the most butts in seats at the highest possible price. If someone doesn't do their homework and buys a coach seat at a high price, that's a win. If they do do their homework and snag the business class seat that would otherwise go empty, that's a win, too (and would likely consume the last inventory in business class' low bucket).

Yes but the airline yield management system will not sell the business class seat for less than coach. If it does it is a fluke, at Amtrak, the system just sucks.

 

[seat38a]

correct me if I'm wrong, how does Amtrak manage to make money with a pricing strategy like this?

it just doesn't seem logical to me.

One of their many problems that leads to losses. Not getting the correct price for the seat is a shame.

 

[neroden]

One would think that Amtrak's pricing models would preclude such anomalies, by ensuring that the business class is always priced at a premium to coach, until the coach inventory is exhausted.

Amtrak's pricing system runs on a computer program from the 1970s. It's.... not very flexible. Amtrak has been trying to get a new system for a few years, but replacing major computer software is expensive and easy to screw up horribly.

 

[neroden]

They don't have any cars to spare, simple as that.

There was a episode, think it was MASH. The surgeons needed some medical equipment, think it was a incubator or something. They find a supply sergeant has two, so they ask for one. He goes no. They ask, you have two, why cant we have one, your not using them. the supply sergeant goes, if I give you one, then I only have one.

It is not like that. Amtrak REALLY has no spare equipment of certain classes, including all the single-level long-distance equipment.

I know Amtrak does have spare equipment, but I guess they need it for emergencies, changing out a car for a train that is in service. But you have to wonder, would they have too many cars labeled as spare or not?

Amtrak has, if I remember correctly, one spare single-level (Viewliner) sleeping car at NY, one at Chicago, and one at Miami. Zero at Boston, zero at New Orleans. This is actually *less* than the desirable number.
Intermittently a train will go out short a sleeping car and the people in sleepers will be put in coach and compensated, which is really bad from a marketing POV, and needs to be avoided.

The situation is equally bad with the Amfleet IIs used for long-distance coach; there are basically no spares at all, so they are occasionally replaced with tighter-seat-spacing Amfleet Is, which is an unpleasant experience overnight, the sort which drives away customers.

The situation is even worse with the Heritage dining cars, which are occasionally replaced with an Amfleet II cafe car.

Like I said, I know having enough equipment is the issue.

Amtrak really, really does not have enough single-level sleeping cars or long-distance configuration coach cars for the Eastern routes. Period. Adding more cars is *not* an option in the short term; Amtrak manages it on Thanksgiving by arranging to do maintenance at other times of year, but maintenance has to be done at some time of year.

There's a reason Amtrak is currently ordering more single-level sleeping cars. The first one is now in testing -- yay! (See the "Viewliner II" threads.)

 

[William W.]

One would think that Amtrak's pricing models would preclude such anomalies, by ensuring that the business class is always priced at a premium to coach, until the coach inventory is exhausted.

Amtrak's pricing system runs on a computer program from the 1970s. It's.... not very flexible. Amtrak has been trying to get a new system for a few years, but replacing major computer software is expensive and easy to screw up horribly.

Wow, when your equipment is older than the VA's (their's is from 1985), you know you have a serious problem.

 

[neroden]

Actually it's pretty common for major computer systems at big companies to have really old back ends. If you know COBOL well you'll have well-paid work for decades.