CHICAGO — Tourist railroads continue to see strong summer demand despite record inflation and high fuel prices. The railways note, however, that the tide could turn, as growing economic uncertainty could alter consumer purchasing decisions.
According to the US Travel Association, US consumers hit a new pandemic high of $101 billion in travel spending in May, surpassing April’s peak by $1 billion. The American Automobile Association predicted that about 48 million Americans would travel during the July 4 holiday, up 4% from a year ago and nearly on par with pre-pandemic 2019. But despite strong consumer travel behavior, AAA notes that more than 40% of US travelers are now concerned that rising fuel prices will affect their decision to travel in the next six months.
“We continued to see strong measured visits compared to 2019 on our trains currently in service in Chattanooga and also on the Hiwassee,” said Tim Andrews, president of the Tennessee Valley Railroad Museum.
He says the region’s visitor bureau, the Chattanooga Tourism Co., and other local attractions believe the momentum could be the result of short-haul travel from areas like Atlanta, Nashville and Huntsville, Ala.
“Hotel-motel tax recoveries continue to be significant, likely due to both room rates and volume,” he says. “Obviously, if fuel drove people away, we would see a double whammy as prices go down due to a lack of demand and room inventory goes up as well.”
“I suspect the percentage of runners in the 150-mile radius will increase,” Andrews predicts.
The Cincinnati Scenic Railway and the Lebanon Mason & Monroe Railroad in Ohio are also seeing a subtle shift in consumer behavior.
“So far in 2023, we are seeing ticket sales trending slightly lower for the basic weekday train ride experience,” says Ray Kammer Jr., president of the company that operates the two tourist lines. and the Cincinnati Railway Co., which offers private car rides. “I attribute this to fewer out-of-town people traveling during the week due to higher fuel and accommodation costs.”
Kammer says the company’s special event-themed train rides continue to sell at the same rate as in 2022 and that most of those sales are generated locally, within a day’s drive.
While railroad tourist traffic remains high, perhaps thanks to more local trips, the railroads have been able to manage their own fuel bills with minor operational changes or fare price adjustments.
High diesel prices “have a minor impact on us in this first half because we only operate a few days a week,” says Kammer. “We will really start to feel the impact of rising fuel costs in the fourth quarter as we operate at increased volume.”
To combat the cost of fuel, Kammer says the company is implementing cost-cutting measures, such as reducing locomotive idle time and installing electrified locomotives with hot start. A hot start allows diesel locomotives to be stopped at any time, while retaining the ability to restart immediately, reducing unnecessary downtime.
TVRM raised ticket prices slightly to help combat inflationary pressure and fuel costs.
“Our fuel bills for diesel are double those of last year, but they still represent a relatively small percentage of our overall operating costs, so they have been covered by a slight increase in ticket price,” explains Andrews.
Food and gift supplies are also more expensive — whether it’s product cost, postage or extras, he notes. “We have increased our selling prices slightly to try to compensate for this.”
Andrew says the for-profit rail freight and track repair business has added a fuel surcharge to cover higher fuel prices where such a clause is not already included in a contract.
“A pleasant surprise is that the price of coal is basically the same per tonne, even with an increase in fuel prices for delivery by truck,” he notes.
To put fuel costs into context, a first-generation EMD F7 has a fuel capacity of 1,200 gallons. Last summer, it would have cost a tourist railroad about $4,160 to refuel an F7, compared to $6,972 today, a 67% increase. Similarly, the current average price of regular gasoline means that the average vehicle in the United States costs $65 to fill up, compared to $44 a year ago. The current national average for regular gasoline is $4.68 today compared to $3.14 a year ago.
Tourist railways are likely to continue to closely assess inflation and consumer behavior by monitoring advance ticket bookings, late summer occupations and general interest around popular excursions. autumn and holidays. If inflation problems persist, the railways may need to do more to reduce costs and weather the uncertainty ahead.