Amtrak Dining Cars as Profit Centers

Written by J. Bruce Richardson, Corridor Rail Development
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One of the great hurrahs of Amtrak dining cars came in the late 1990s, when the transcontinental Sunset Limited diner featured 12 entrees on its dinner menu. Traditional white linen tablecloths draped the tables, along with china plates and stainless-steel cutlery. It was not unusual to have flowers on the table and lit candles at the dinner hour.

In those halcyon days, when the Sunset operated from Los Angeles to Orlando with Dallas and Chicago through cars, the diner would serve 400 dinners per evening west of San Antonio, Tex. Pricing was affordable for coach passengers; sleeping car denizens’ meals were included in their fare. The café in the Sunset’s lounge car also had substantial, profitable sales.

It did not last. Why it did not last epitomizes Amtrak’s continuing struggles. Onboard dining car meal service once defined the rail travel experience, railroad by railroad, and into an earlier Amtrak era. It can again, in a modern expression, becoming a prime attraction to rail travel, but not the way Amtrak approaches it today—not as individual profit centers, but as a service contributing to a train’s overall profitability.

Throughout much of the 20th century, passenger train managers complained that dining cars, viewed in isolation, lost money. Between shared infrastructure expenses with freight operations and a robust U.S. Mail and REA express business, passenger train managers knew they were making money from operations on most main line routes. Because a large proportion of journeys spanned one to several meal periods, railroads provided full-service dining cars along with café or coach lounge car service, selling beverages and bar snacks at a profit, but meals were not included in the price of accommodations. On some long-distance western trains, two diners were provided, one with lower priced meals, and one with a more upscale service aimed at sleeping car passengers.

Santa Fe Super Chief passengers could choose to dine even more exclusively in the Turquoise Room of the adjacent Pleasure Dome, in conjunction with the dining car. It was the definition of fine dining at main line track speed.

Seaboard Coast Line, Northern Pacific and others maintained a high level of dining car service until 1971’s Amtrak Day, understanding the importance of food service to the train’s overall financial health and its ability to attract and retain customers. Not every area had to make an individual profit for the overall operation to be profitable.

Professional Expertise, and a Railroad’s Reputation

Private passenger train operators had professional dining car departments that understood their passengers and how to serve the unique offerings of their railroad. These professionals were held accountable for budgets and understood and reacted to revenue cycles and expenditures. Car miles and commissaries, along with union rules and staffing, all came under their gaze. This was a time before modern packaging, frozen food, today’s level of refrigeration, convection ovens and microwave ovens. Everything was fresh. A chef on Union Pacific’s City of Los Angeles cooked with an iron skillet over a flame on a stove heated by Presto logs. Those long-ago dining car professionals would be astonished at today’s evolved food service industry.

Union Pacific dining car chef, circa 1968.

Passenger trains and diners carried the company reputations of their railroads. Passengers weighed onboard amenities as well as travel time on heavily competitive routes. The railroad dining car departments had a close relationship with their suppliers. Local and national vendors competed on price and quality. It was a good free market system; the next guy was waiting if a vendor failed to meet standards.

The public’s tastes and food desires evolve. Dining car managers of post-World War II America, if they lived outside of a major city, probably had never heard of pizza. In the 1950s and 60s, “Floating Island” was a popular dessert; today, many have never heard of it.

Floating Island dessert.

Dining cars of 1969 were not serving menus from 1949. Dining cars of 2019 should not be serving menus from 1969, but they should be serving menus featuring real meals with a broad appeal. Sleeping car passengers today typically are onboard for 1,200 miles or more, spanning five or more meal periods. Some travelers are onboard for two or three days. Having an attractive dining car offering good food in a social setting is still as essential to attract and retain customers as it ever was. This is the direction cruise ships, long-distance airlines and other travel providers are moving, with markedly enhanced dining services.

Amtrak is going the opposite direction. It has just reduced dining car service on eastern trains to Flexible Dining: limited-choice, reheated, prepackaged food served on disposable plastic plates with plastic cutlery. The car has but one employee. Everything is disposable, including the dining car staff.

The modern day challenges of providing desirable food service on a train are not as daunting as publicly proclaimed. The basics are always the same: Buy supplies low, sell meals high. Keep the food preparation and food service area sanitary. Provide a pleasing atmosphere. Have a well-trained, professional staff.

Amtrak has moved toward everything related to food service being disposable to save labor costs. The idea is a single employee can handle it all, and a public used to being distracted by their electronic devices will just take what is offered.

Amtrak thinks the generation that recycles more than any previous generation will embrace throw-away plastic. In today’s society, any labor savings is offset by the higher cost (both culturally and environmentally) of everything being disposable plastic.

A recent traveler on the Cardinal reports the new Flexible Dining experience for sleeping car passengers means picking up a meal in a paper bag from the food service attendant, and, if choosing to consume the meal in the food service car, has to bus their own table when finished. The attendant said he was not allowed to serve the meal at the table nor clear the table debris after the meal.

Amtrak “Flexible Dining,” complete with unsustainable, non-reusable plastic trays and utensils. Photo by Evelyn Hockstein/Washington Post.

Any capable restaurateur would love to deal with these Amtrak dining car metrics:

• A captive patronage of 31.7 million customers annually, equal to 9.6% of the national population, averaging 86,850 potential patrons a day; some new customers, many repeat customers.

• The food service operation is the only one available to customers, for multiple meal periods over one to several days.

• The demographics of customers range from high-end business travelers to families on vacation and grandmothers visiting grandchildren. Many are onboard over several meal periods.

• All customers are away from home, some on generous business expense accounts, others spending vacation money. Both groups often spend money more freely when traveling.

• In the diner, most customers have pre-paid for their meals in the sleeping car fare, but even there lies an opportunity to upsell very high-margin meal-time alcohol.

• Locations onboard range from a snack bar to a full sit-down restaurant. The snack bars are open for extended hours, requiring one employee. The sit-down restaurants are open select hours, with long breaks between meal periods for prep.

• Facility costs and most labor costs are covered by the pre-sold sleeping car meal plans; no incremental facility costs arise with incremental sales to coach passengers. Menu prices for coach passengers can be reduced substantially and remain profitable at the margin.

• Staff are professional union employees. No daily worry about someone skipping a shift, coming in late or leaving early. Hiring, payroll and benefits administration are handled out of a central location.

• Diners have no cashflow worries; the head office handles all of that, including collecting from credit card companies, making payroll and paying vendors. “No shows” by pre-paid customers are a financial benefit, not a problem.

• Dining cars have no utilities to pay; the power source is either from a locomotive or terminal shore line. They have no telephone or reservation service costs, and no marketing costs, as Amtrak wraps marketing into its national marketing. Dining cars have no local licenses to obtain or maintain. Because they are part of a federal government entity, no state or local sales taxes are paid, and there is no local or state regulatory oversight.

• Diners use central ordering for foodstuffs and all supplies by filling out an order form and then delivery from a commissary. There is very little seasonal variation; predictability is the norm.

• Locations are all built and paid for by the federal government and maintained to a common level. While there are several types of locations, like a national franchise chain, all operate under the same rules and regulations: no local variations, except where regional menu flair adds value to customers.

• Rent comes in the form of car-mile maintenance costs and any amortization of acquisition costs; maintenance is handled by qualified mechanics as needed. Cleaning costs are handled automatically by crews at terminals. Diners have no “common area” costs, no parking worries or upkeep, and no property taxes.

These built-in advantages in the hands of capable managers can make real dining cars again important to a train’s success.

Embrace Modern Technology

First, forget the “but we’ve always done it this way” mentality regarding labor costs. The idea that all savings revolve around a smaller employee roster is false. If revised union rules need to be negotiated, so be it. But it takes skilled staff to provide quality service in a dining car environment.

A crucial missing element is onboard leadership, such as the Onboard Services Chief positions eliminated years ago. Having an always-present leader enforcing service levels was helpful, and much inconsistency was eliminated.

Embrace modern technology. Many ways exist to connect passengers through onboard technology and smart phone apps that drive food and beverage sales. Be innovative; technology can help eliminate deficits.

Next, slash menu pricing. While a captive audience often expects to pay higher prices, incremental sales to coach passengers are strongly deterred by needlessly high prices. At times, dinner in a diner costs more than a transportation fare for a coach passenger. With current prices, dinner for a family of four traveling in coach could amount to $100. When most diner costs are already covered by sleeping car pre-sales, incremental cash sales need only cover the costs of incremental food and accessories, not fully allocated average costs.

Try what other successful travel industry members do and pre-sell meals to coach passengers at the time travel reservations are made and tickets purchased. Travelers are more likely to buy a “package” when planning their rail travel.

Next, understand the full set of passenger demographics. The idea of appealing to only one generational group or fare class proclaims that other groups don’t matter.

One of the reasons café cars, whether on long distance or short distance trains, do well is because they are open the majority of the trip. Dining cars now demand discretionary travelers fit their needs into Amtrak’s regimented schedules.

In a less restricted eating regime, diners can sell more high-margin cocktails, wine, appetizers and desserts than they do today. Extending the time the passengers are in the diner at their leisure usually means a pre-dinner drink or lingering over dessert or a glass of wine from a bottle ordered during dinner. These are high-revenue, high-margin items rarely being pursued now. Allow all passengers to purchase individual items instead of having to purchase a full meal to be a dining car patron. Every order, every dollar of revenue counts, including just a piece of pie.

Few passengers today expect a Santa Fe Super Chief Turquoise Room experience, but they do expect a meal at a level equal with a fast casual restaurant. Today’s modern food service industry offers many crowd-pleasing choices. Amtrak has no reason for few choices, “generic” food, no table service and throw-away plates and utensils.

While it is desirable and possible to make dining cars a profit center, it is unrealistic to expect every diner to be a financial winner on every trip. It’s more important to have consistency across the system for passenger expectations.

Grow the Business to Create Financial Success

What is most important, but lost today, is how much the dining car contributes to the overall success of a train. It provides necessary sustenance, a distraction from staying in an accommodation or seat, a social setting and an opportunity to create revenue. It is a unique and attractive attribute of rail travel. Always, an attempt to grow a business—not shrink it–brings financial success.

It is rarely successful to “cut your way to prosperity” when it comes to providing a transportation or hospitality service. Eliminating services that customers expect rarely enhances profitability or drives growth. The lesson from the cruise, aviation and tourism industries is that the path to growth and success is to add services customers value.

Those who don’t know history are doomed to repeat it. The history of Amtrak dining cars is one of occasional triumph, yet littered with bad concepts at times. What has worked in the past? What has made passengers happy? What changes drove away repeat business? What has made employees happy? Re-introducing the 24-hour dining car makes far more sense than downgrading meal service to the level of an airport concession stand.

The 24-hour dining car experiment on the Sunset Limited 20 years ago provides a template for successful dining cars, from passengers spending more money to employees working under less pressure but also gaining more tips from satisfied passengers. The several experimental runs demonstrated passengers enjoyed access to the diner at nocturnal hours, allowing passengers boarding and detraining at overnight station stops a food option when they wanted it, not when someone else decided when they would be hungry.

The Sunset’s 24-hour dining car experiment 20 years ago set a benchmark for all onboard food service following it, with passengers having a mindset of “No need to rush to eat before we board the train; we can get a good meal in the dining car.”

Through Amtrak’s corporate lifetime, it has gone from traditional white-tablecloth dining cars to all-microwave/economy dining cars, to cafeteria-style dining cars with long lines, back to traditional dining cars, then a dozen variations on that theme, and now the elimination of traditional dining cars east of the Mississippi and a greatly abbreviated meal service.

Yetch!!

Some argue that a government-funded railroad should not offer anything beyond basic transportation; that sleeping cars and diners are an inappropriate use of government resources. This type of class warfare serves no purpose, as it is not wrong to provide a service that passengers are willing to pay handsomely for. Amtrak sleeping car fares rival those of luxury resorts on a dollar-for-dollar basis, and sleeping car revenue contributes immensely to Amtrak’s bottom line. That same class warfare logic should apply equally to Amtrak’s Northeast Corridor Acela operations, which offers only First Class and Business Class seats, with abundant “free” food and alcoholic beverages in first class, plus other amenities.

We are in a society where we expect to be electronically connected every moment of the day and expect access to food and beverages when we want them, not just at the convenience of the seller. To overlook either of these modern day requirements invites the dreaded phrase heard so often after a bad experience on an Amtrak train: “Never again.” Providing a decent dining car experience can go a long way to avoid that and encourage high-revenue repeat sales.

J. Bruce Richardson is Executive Vice President, Passenger Services for Corridor Rail Development Corporation of Chicago, www.corridorrail.com.

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