Earlier this week, serial visionary Elon Musk unveiled the Hyperloop, his highly anticipated and ambitiously futuristic transportation project. In a widely read paper detailing the concept, Musk showed off a system that would send friction-free pods sailing at high speeds through a network of raised tubes. According to Musk's calculations, the technology could enable passengers to travel from Los Angeles to San Francisco in about 30 minutes. The ticket price? Only $20.
As sci-fi as it sounds, if he or others were able to pull it off, the system could prove incredibly disruptive to the transportation industry: faster speeds, safer travel, lower cost. But while most have focused on the disruption it could bring to the flight and rail industries--Musk has been especially critical of Amtrak's outmoded infrastructure and California's bloated high-speed rail project--there's one overlooked mode of transportation that could be most impacted by the advance in technology: the intercity bus industry. Dirt-cheap tickets and no-frills service have made the antiquated service surprisingly resilient. (Often, as anyone who has experienced Amtrak's nightmarishly sluggish northeast corridor can attest, buses prove a faster alternative.) But Musk's technology could some day eliminate the bus industry's dwindling advantages over its rivals.
"If you want to stay relevant, you always have to be looking over your shoulder," says Chris Boult, Greyhound's CIO, when asked about the Hyperloop. "If you're not, someone is going to come up behind you--it can happen in the blink of an eye."
So far, Greyhound has continued to offer a compelling product for customers. An Amtrak trip from Los Angeles to San Francisco can cost $59 and take more than nine hours. Greyhound can deliver you there two hours faster for less than half the price. Flights, while significantly quicker, are usually more expensive, at around $100. The company's leg-up is more apparent on the east coast, where bus tickets from Boston to New York are even cheaper, while Amtrak rides can run upwards of $200 one-way. (By plane, tickets can be equally as expensive, excluding the added headache and cost of getting to and from and into airports.)
The Hyperloop would make such differentiators irrelevant--and it's an issue Greyhound realizes it must start considering, even as far as the technology is from coming to fruition. "Musk said it's probably 15 or 20 years away, but in my role, I've got to be thinking about that, as well as thinking about today and the next 24 months," Boult says. "Now, am I going to give the Hyperloop as much attention as the next 24 months? No. But I have got to be aware of these things. If they become more real or more likely, then I've got to start having those conversations with my executive team, to see if we need to engage."
However, it's unclear what the bus industry could change to avoid long-term extinction on popular intercity routes if the Hyperloop proved viable. Greyhound brought in just $81.5 million in profit on $1.022 billion of revenue last year. It's not as if it has a secret skunkworks team considering how to compete with Elon Musk. That's not unique to the bus industry, of course. Amtrak and many airlines would arguably be just as vulnerable. (Amtrak declined an opportunity to comment on the Hyperloop.)
It's important to note, however, that Greyhound has done an impressive job of remaining fresh in a low-margin business. It has introduced a slew of technology-related services, such as in-vehicle electrical ports, free Wi-Fi, and mobile services, which are making its buses more attractive to customers. The company has partnered with Lufthansa to begin experimenting with onboard entertainment systems. And it initiated a smart branding effort with its Boltbus subsidiary, a higher-end service which has seen its passenger demographics skyrocket. (Greyhound's current U.S. travelers average roughly $35,000 in annual income, whereas the income of Boltbus passengers ranges from $45,000 to $75,000.)
That's not bad, considering that Greyhound has very limited space inside its vehicles--making adding amenities all the more difficult--and it faces ongoing hurdles related to frugal travelers with low expectations, a complicated route network of more than 42,000 city pairs, and an aging bus fleet. "How do we take this forward so we're not just a leader in the bus industry but in transportation overall?" Boult wonders.
Ironically, possibly the greatest potential revolution in the bus industry--producing a national network of electric buses--might also depend on innovations from Musk, whose Tesla Motors is driving much of the technology in the space. "The challenge we see with hybrids and electrically powered buses is that they're mostly designed for cities for short hops, where you have supercharging stations," says Boult, who is optimistic about the potential of solar-powered buses. "The infrastructure is not quite there to support it."
Still, Boult is a fan of Musk, and he's unpersuaded by critics who are weary of the entrepreneur's ambitions, as unrealistic as they may feel at times. "I wouldn't rule out anything Elon Musk puts forward," Boult says. "I don't think anyone believed that Tesla could be created. He has already pushed the envelope [so much]."
If anything, Boult feels it's an exciting time to play in the transportation space. "I don't think we've seen anything revolutionary or transformative in travel in many years. We had the Concorde, but it was a substantial step back when it was retired, and no one thought about the next evolution in travel," Boult says. "I am personally waiting for the next revolution in the industry. Right now, we're at an interesting inflection point."
[Mash Up by Joel Arbaje]