Ever wondered how Megabus can sell seats for as little as one pound? We’re sure lots of other bored road users, stuck behind a large megabus with a – slightly weird – character looking down on them will too? How can they charge so little and their competitors not? How do the economics work where they can sell a seat from London to Birmingham for £1.50 and Virgin trains for lots more?
(We wanted to work out a more comparative price but the Virgin website defeated us. To be fair, their lowest priced ticket was £8 so not a huge difference).
Interestingly, lots of other travellers have the same thought and post the same question on various travel forums. The answers range from the frankly wacky to quite informed. The consensus seems to be that they don’t sell that many tickets at that price at all and so most the passengers on-board will have paid a lot more.
Apparently , there’s only a limited number of seats made available at that extra low price and, as the TV advertisement say, ‘once they’re gone, they’re gone’.
And don’t let the relatively few people on-board persuade you that they’re not popular. Megabus tickets are non-refundable. So ‘no shows’ means no money back and as the tickets are so cheap in the first place, most passengers who miss a particular bus will simply buy another ticker for a later trip so effectively paying the company twice over.
As all the tickets must be bought and paid for far in advance, this helps generate cash too. Add the fact that the company’s only costs are a fleet of (slightly old and basic) buses and the drivers and you begin to realise that, far from worrying about them, this could be quite a lucrative business.
Some of the people who took time to answer this question on the forums also pointed out that the ticket prices vary quite dramatically so there’s a good chance that in a bus full of people they will all have paid a different price for their seat. Clearly, what the company doesn’t spend on its buses, it spends on some sophisticated software that works all this out.
Despite this, the company is not that successful. It’s owners are the Scottish company, Stagecoach, who recently sold the retailing part of its Megabus Europe business to German operator FlixBus. It also admitted that trading at its Megabus.com inter-coach division in North America ‘remained challenging’ .Oh, and its UK business was down 10.1% on last year.
But don’t be too downhearted, Stagecoach also owns the Virgin Rail’s West Coast franchise (which grew by 4.7%) and Virgin Trains East Coast. Unless you’re driving to Birmingham, it seems they’ll get your money one way or another.