Backer of new long-distance bus services says price and consistency will fuel demand

Thursday 30th October 2014

Brian Souter, the Scottish transport entrepreneur who today launched a new long-distance bus service in the North Island, says the number of seats available at lower prices and consistency of product will drive demand.

Prices for the new online bus service, ManaBus.com, which plans to operate five new express routes between eight North Island destinations from Nov. 21, will start from $1 plus a $1 booking fee. That’s similar to the lowest fees charged by major competitors, the InterCity Group and Naked Bus.

The Auckland-based company is owned by Souter Holdings, which also runs Fullers Ferries, Howick & Eastern buses and the Wellington-based bus service, Mana Coach Services.

Souter, a fundamentalist Christian who sparked controversy in the UK when granted a knighthood in 2011 because of the donations he’d made to the Scottish National Party, said his company had invested $100 million in its New Zealand bus and ferry services over the past seven years. That included a $5 million investment in the six-bus fleet for ManaBus.com and a new boat being launched tomorrow for Fullers Ferries.

Souter Holdings is part of the global transport company Highland Global Transport and the Souter Investments portfolio of companies. Souter and his sister, Ann Gloag, co-founded the Stagecoach Group, starting in Scotland with two buses in 1980.

The online booking bus concept was first started by the parent company in Scotland 10 years ago. Souter said it had already succeeded in the UK, North America, Poland and Finland, mainly by growing the market rather than taking share off competitors. He said in the US, 55 percent of customers previously used cars.

The yield management model the company used was “quite unique”, he said, and was based on the concept used by cut-price airlines like Ryan Air and Jetstar to deliver cheaper prices through algorithms related to capital and fuel costs per seat. While the company followed the yield management model “quite religiously”, where it differentiated from the airlines was ignoring when the algorithms said you could charge three times the regular highest price on specific occasions, Souter said.

“We don’t do that with our bus companies. In our view if you do that, the person that pays that excessive exorbitant price on a holiday weekend will resent that and they don’t come back the rest of the time,” he said.

While the company wouldn’t say how many $1 fares would be available on each of the 16 daily city-to-city trips, it would be more than one, Souter said. He cited the Polish example where discounts were given for early bookings online, fares ranged over eight different price points, fares were dearer at the weekend than during the week, and some 60 percent of seats available were sold at discounted prices.

Customers were attracted to the affordable prices, faster trip times which rivalled that of a motor car, and the lower carbon footprint the company achieved, he said. The new buses, built by Tauranga-based KiwiBus, had a lower capital cost and fuel burn rate per kilometre than any other public transport vehicle in the country, he said.

Souter said the frequency of trips and number of buses would be expanded if ManaBus.com, which has created 70 new jobs in the North Island, also proves successful.

At today’s launch, Souter said he was at the Stagecoach annual meeting a few weeks ago and when he went to the toilet he overhead a couple of Glaswegian women talking about him.

“They said ‘there goes wee Brian Souter, living proof that Snow White and Dopey had a child’. It’s good to get out of Scotland from time to time,” he joked.

The Stagecoach Group has had close ties with New Zealand infrastructure investor Infratil over the years. In 2005 it sold all of its NZ operations, including the Fullers Group, to Infratil. Four years later Infratil, in turn, sold Fullers to Souter Holdings, which also bought ferry operator 360 Discovery Ltd the same year.

Fullers is now facing competition from newcomer Explore Group on the Auckland to Waiheke ferry sailings. Souter Holdings owns 74 percent of Mana Coach Services, with the remainder held by Infratil.

BusinessDesk.co.nz

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