The ‘basic economics’ of sleeper trains is really simple. All that follows is based on sleepers, ie trains with beds.
Costs:
1) A carriage with beds in it can carry, at best, a third of the number of people in it than a similarly sized carriage with seats in it.
2) a carriage with beds in it can only be used once a day, and spends, at best, half of its time unused
3) carriages with beds in need a much higher level of on board staffing, servicing and maintenance than regular carriages.
Taken together, this makes the cost of running a sleeper train per passenger around 5-6 times that of a similar long distance day train. (Actual figures are around £300 pp for the sleeper, £50pp for Avanti, £60pp for LNER).
Revenues:
1) unusually, sleepers have competition on three fronts: other transport providers (day trains, airlines, coaches, private car); hotels for the overnight stay element; and now the ‘experience’ market. Pricing therefore have to be carefully positioned to take account of all three, but see more below. As a result income per passenger is roughly double that of the long distance operators, and, interestingly, a little more than the airlines on the same route, but rather less than Eurostar.
2) the sleeper market is highly seasonal, and demand varies through the week.
3) the long distance travel market fundamentally changed in this country in the mid 90s: Stelios founded Easyjet in March 95 and Virgin took over ICWC and ICXC 2 years later. Easyjet made low cost domestic flying a reality (which other airlines, notably BA, have now emulated); Virgin brought airline style yield management to the railway (and others swiftly followed). The net effect is that relatively speaking it is now cheaper, much cheaper, to fly to Scotland than get the train, except at the busiest times or at very short notice when rail fares are capped through regulation, partly to cover the public service element of the operation.
4) the hotel market has changed in the same period - Premier Inn, Travelodge and a host of others have entered the ‘low cost overnight stay’ market.
Taken together, in reality, this means that sleeper trains find it difficult to compete for custom with air (either directly or as a + hotel) - they can’t get close on price, except at the busiest times when they are price capped. They can compete more easily with day trains, but, and this is the crux of it, for the lowland destinations the sleeper is a once a day fixed time option; whilst there are over 50 day trains each way between London and the Central belt, including some that will get you into London in the morning not much later than the sleeper. It is only a very small minority of passengers who *need* to leave London or Scotland after 7pm. Most will make their arrangements such that they can travel during the day.
The experience market is interesting. This is the concept that using the sleeper is either a ‘luxury’ part of a wider trip, or simply an experience in itself. (I’m willing to bet that a number of people reading this will have used the Caledonian Sleeper not for travel purposes but simply for the sleeper experience.) This is an increasing segment of the market, and is building on the success of similar experience trains elsewhere, notably Australia. Many of these customers are relatively wealthy tourists from abroad. They are less price sensitive, but will usually make the trip as part of a much wider itinerary between tourist locations. Clearly, London, Edinburgh and the Highlands are big international tourist draws. (And, notably, Plymouth and Cardiff aren’t).
So, how do you make it more economically viable? Obviously, reduce costs or increase revenue.
The only way I can see to reduce costs is to reintegrate the operation to either Scotrail, or one of the long distance operators to share crew and management overhead. This could feasibly save a million or two a year, but would come at the risk of a potential loss of focus as it would only ever be a sideshow to the main operation.
Well there is another option, but then I don’t suppose everyone wants a 50% pay cut.
To increase revenue, you can only sell more tickets by filling those empty berths in mid week in winter, or sell tickets at busy times at a higher price. The latter is troublesome because of fares regulation - given how regularly the Highland sleeper sells out at £200-£300 a room one way, it’s probable that they could charge at least 50% more on these services. This would be no different to (economically unregulated) airlines charging astronomical prices to ski destinations at February half term - it’s where they make their profit.
Here endeth the sermon.