Competition in the UK express coach market 25 years after deregulation : the arrival of Megabus.com

摘要

Express coach services compete for longer distance, predominantly inter-city travel, with car and rail and largely cater for the leisure, tourism and VFR market. They hold a relatively small market share and until recently, the sector had suffered many years of stagnation in terms of passengers carried and also product development and innovation. However over the last 3 years there has been an important new entrant to the market. Express coach services in the UK were deregulated in October 1980. Following a short period of intense competition on some routes, virtually all the competitors had withdrawn their services by the mid 1980s to leave National Express with a near monopoly. Research established there were significant barriers to market entry which had severely impeded the new market entrants and favoured National Express. Now privatised, National Express retained its virtual monopoly until 2003 when the launch of Megabus.com represented the first significant competition since the mid 1980s. It operates on 40 routes. This paper compares the impact of this new round of competition and contrasts both the operational and the marketing strategies adopted by Megabus.com with those that had been used by new market entrants in the 1980s. It identifies significant cultural, social and technical differences between the 1980s and 2000s which have changed the operating environment and explores the degree to which the barriers to entry identified in the 1980s remain and the strategies employed to overcome them. The study includes a survey of both National Express and Megabus.com passengers conducted on one route in December 2005 and January 2006 and presents a profile of express coach users in the 21st century including details on price paid, motives to travel by coach, general travel habits and a demographic and socio-economic breakdown. It establishes there are significant differences in the consumers attracted by the two operators highlighting Megabus.com’s success at targeting specific segments of the express coach market. The paper concludes that express coach users are motivated primarily by the low cost of service. The internet and the low cost airline business model including yield management techniques have proven an essential component in Megabus.com’s entry to and continued survival in the express coach market.