Skip to main content

So you want to start a tourist railroad…

By December 25, 2015January 4th, 2016Features

By Aaron Isaacs, TRRM editor

Many a tourist railroad started simply because people who love trains wanted it. The assumption was “If you build it, they will come.” Very seat of the pants. Often they came, sometimes they didn’t. 

Worcester County, Maryland, on the Delmarva peninsula, saw an opportunity to open a tourist railroad, but decided to do a feasibility study first. They hired ATRRM member Stone Engineering (see their ad at left). The result, stripped of the usual romance and optimism, is an objective look at what it takes to launch a tourist railroad and hopefully make it a financial success.

The railroad in question is an active 23.5-mile piece of the short line Maryland & Delaware, extending from Bishop, MD to Snow Hill, MD. The railroad, which will probably run the train if it happens, was an active partner in the study. The line already has freight service, which dramatically lowers the capital cost. The passenger service has to pay for the incremental capital improvements of improved track, rolling stock, stations, parking and runaround tracks. But it’s much better than running a railroad on passenger revenue alone, which is a much steeper hill to climb.

The shore, especially Ocean City, is a big tourist destination, but the area around the railroad is not.  The only towns of any size are Berlin (4500) and Snow Hill (2100). The railroad is basically flat, straight and rural. There are no unusual scenic attractions. It parallels the Atlantic shore, 4-6 miles inland (see map). However, over a million visitors each year pass through and stay a few miles away, so the challenge is to divert them.

Where to run?
The Stone study took many factors into account. Which part of the railroad was best suited to a tourist train? How much would it cost to upgrade the track, supply the rolling stock, and create the stations and runarounds? What was the potential market for traditional excursion trains, dinner trains and special event runs? How would the railroad best be marketed?

Given the availability of 23 miles of railroad, all of it offering roughly the same scenery, how long should the ride be? Here the report makes an astute point, “Is a longer railroad actually “better”? By itself, distance has shown itself to be of no advantage unless it increases the actual attraction feature. If the additional distance shows new scenery, or develops a destination, or another point of interest, it can result in additional visitors and revenue. The basic attraction of a train ride is more time related than distance related, and can best be compared to the time factor allowed for a similar family-based activity.

Indeed, in this case it concludes that longer is not better and identifies five route options, and their construction cost.

The candidate locations for the tourist railroad are along the line at right near the coast, extending from the state line down to Snow Hill.

The candidate locations for the tourist railroad are along the line at right near the coast, extending from the state line down to Snow Hill.

8.8 miles   $1.4 mil    Berlin-Bishop (north from Berlin)
14.9 miles  $3.0 mil   Berlin-Snow Hill (south from Berlin)
7.7 miles     $2.0 mil  Berlin-Newark (south from Berlin)
8.1 miles     $1.7 mil   Newark-Snow Hill
4.5 miles     $1.2 mil  Central Site Lane-Snow Hill

There are tradeoffs. Snow Hill has a beautiful restored depot, but reaching it requires more track work. Berlin has more population but needs a depot. There is one runaround track in place at Bishop, but four of the five route options would require building two runarounds. There is a single-stall engine house at the north end of the line in Selbyville, distant from four of the route options. Costs were estimated to bring all of it up to FRA Class 2, although passengers can operate at 15 mph on Cl;ass 1 track. Each option was assumed to need a minimal shop/storage facility ($180,000), a new depot or rehab of an existing depot ($450,000) and a runaround track at each end ($225,000 per track).

In the end, the report recommends basing the railroad in Berlin, with the option to run both north or south. Because of track conditions, operations out of Snow Hill will probably be restricted to special events.

A mix of services
To maximize profits, a tourist railroad must offer a variety of services, including conventional excursions, themed special events, food trains and local celebration shuttles. The Stone report examines each in turn and their impact on the bottom line. The experience of real life, comparable tourist railroads is instructive, so in the report Stone examined the Wilmington & Western, Maryland & Delaware’s special event shuttles in Hurlock, MD, and the now-defunct Queen Anne Railroad up the coast in Lewes, DE. 

Local celebration shuttles
There are quite a few local celebrations up and down the line, and they offer good opportunities for short shuttle runs.

Spring Celebration April 2,500 One-day event 
Jazz & Blues May 3,000 One-day event 
Spring Cruisers May 1,000 One-day event 
May Day/Play Day May 1,500 One-day event 
July 4 – Independence Day, Snow Hill July 1,500-2,000 One-day event
Bath Tub Races July 1,500 One-day event 
Peach Festival August 3,000 One-day event 
16th Annual Blessing of the Combines, Snow Hill August 1,500-2,000 One-day event 
Fiddler’s Convention September 6,000 Long Weekend – major portion from outside area 
Bridal Show September 1,000 One-day event 
Fall Cruisers October 1,000 One-day event 
Oktoberfest October 3,000 One-day event 
Holiday Arts Night November 2,500 One-night event 
Berlin Christmas Parade December 6,000 Two-hour event 
Victorian Christmas December 6,000 Month-long event 
Second Friday Monthly 2,500 Average event turnout 
New Year’s Ball Drop December 3,200 One-night event 
TOTAL 46,700

The report says: Maryland and Delaware’s experience over the last decade on running excursion trains from scheduled festivals and special events has been one of the primary reasons for sustained interest in the excursion train project within Worcester County. Reported ridership from MDDE has been limited to such activities over the last few years which include locations outside of Worcester County on MDDE-operated trackage such as the Hurlock Chicken Festival. 

One of the primary natural limitations for ridership on such events is the duration and ability to provide multiple departures at prime festival times. At Hurlock, for example, the two-day festival is performed with only two passenger cars and multiple short trips. Despite that, reported ridership has been near-capacity at the 800-mark for the last several years. 

Short “out and back” train ride experiences at festivals, likely at a relatively low ticket price (can) also serve as an entry-level experience that can lead to subsequent dinner train rides, special events, and longer excursions.

Conventional excursions
Although special events are an ever more important segment of the business, there is still a place for the traditional out-and-back train ride. 1.3 million people live in the Delmarva counties within an easy drive of the railroad. In 2012, the eastern shore counties attracted 3.7 million visitors. If somewhere between one and two percent rode the railroad, that would amount to over 76,000 annual riders.

Of course it’s more complex than that, as this excerpt from the report states.

1) The ridership is highly seasonal, but not necessarily restricted to one season. The operation must be able to recognize severe swings in likely demand as any tourist-oriented business does. Rail demand no longer parallels summer vacation season. 

2) The overall market is simply not interested in a single-product ‘out and back’ train ride as the exclusive ride opportunity. There are distinct market segments within the total demand that have their own seasonal components, and more importantly, different revenue and cost factors that will develop into the business plan. No previous or current rail operation on the Delmarva has ever effectively addressed all available markets. 

3) Seasonal factors can be predicted from the start because visitor and traffic patterns for these individual markets are already known. Issues with capacity, scheduling and cash flow can also be anticipated as a result. 

The most difficult market (and results) to predict for this railroad remain the primary summer beach and vacation season. While the overall population and visitor market are relatively huge in comparison to resident totals, effectively putting them in coach seats with a satisfying experience remains the essential challenge.

The report also makes the point that even if the railroad is located near a high-traffic attraction, the station site itself is crucially important. It needs to be located on the main highway.  Many highways now bypass town centers, yet the historic depots and boarding sites are often in those very town centers. High-visibility guide signs are essential.

Dinner trains
Dinner trains require specialized equipment and have a limited revenue potential, which is why it seldom makes sense to base a railroad purely on dinner trains. However, it’s a niche market that can add to the bottom line if done properly. For example, the report recommends contracting food service to a third party professional restauranteur or caterer. It also makes these observations.

A conventional vintage dining car (with “full size” kitchen) only seats 44 persons. Most operations actually focusing on dinner train experiences combine each conventional vintage diner with a “table car”, which is typically a coach with seating removed and 4-seat tables and movable chairs in it, without a kitchen. For a diner and paired table car, typical seating rises to 100. Going beyond that per-train 100-seat capacity either requires significantly more equipment, or using attached conventional coaches to attempt to provide two dinner seatings for the same 100-seat table service on a longer ride. Dining cars are expensive to construct, operate and maintain, and building capacity to handle maximum demand is generally unwise. 

During its years of operation at Lewes, the Queen Anne managed to produce an average of 7,000 riders per year directly in competition with a beach market on an operation that evolved strictly to a dinner train, rather than a conventional train excursion, format. 

Our ridership forecast includes this as a separate segment of ridership of 8,000 riders, with peak summer demand factors of 1,800 per month in the July-August timeframe.

Themed special events
Nowadays, any tourist railroad that wants to maximize its revenue will attempt to bring in the two big ones, Day Out With Thomas and Polar Express. Assuming the railroad can muster the staff and infrastructure each event requires, the question is whether HIT Entertainment or Rail Events will sanction it. The issue is competition, and that depends on whether the railroad’s location will cannibalize others nearby. In the Worcester County case, the answer is unclear, because the B&O Museum and the Strasburg Rail Road both currently do DOWT and are not far away. For that reason, no DOWT was assumed, but a Polar Express was.

Ridership projection summary
Add up the projected ridership from all the potential markets and it looks like this.

38,500   Fall and Christmas special events
24,500   Conventional excursions (assuming four 60-seat coaches and an open car)
8000      Dinner trains (assuming a 2-car train with 144 seats)
1650       Local festival shuttles
72,650

Ridership projection by time of year
.6%        January-March
4.3%     April-May
39.8%  June-September
55.2%   October-December

To put it in other terms, the railroad would operate excursions on 148 days and dinner trains on 95 days, totaling 7600 train miles. Those days would take place in 41 of the 52 weeks each year. They would require 121 full-day crews and 42 half-day crews. 

Viability
So, will the railroad be viable? Stone Consulting’s analysis says yes. Annual revenue was estimated to be just short of $2 million, against annual expenses of $1.7 million, which includes debt service for the capital improvement costs. However, the report points out that a plain vanilla, out-and-back excursion service would not survive.

At the 72,650 ridership level – with a focus on special events, the passenger excursion operation shows a relatively healthy projected “bottom line”. …The feasibility of such an operation at a sustainable ridership basis is possible, but only if such premium-fare and event-based programs are incorporated. The railroad must become a regionally-based destination instead of a conventional excursion train focusing on a limited, and competitive, summer excursion market. 

A big variable is the percentage of paid versus volunteer labor. Stone believes that actual train operation subject to federal regulation requires paid employees, with volunteers restricted to these duties:

• On-board car hosts 
• “Conductors” that may take tickets, but do not have actual train conductor responsibility 
• Gift/retail shop employees 
• Food service, on-board or off-board 
• Music and entertainment 
• Equipment cleaning, restoration and maintenance 

Economic impact
For Worcester County officials, the issue wasn’t whether the railroad would be economically viable–they wanted to know its economic impact. Stone Consulting, which has done several of these economic impact analyses, saw these areas of benefit.

• Capital budget for track, equipment, and structures 
• Railroad operating budget to determine payrolls, purchasing, and local spending 
• Visitor non-rail spending statistics, including overnight stay impacts from specific programs such as Polar Express 

Once these numbers are known, there are two levels of economic impact.

• Direct economic impact of the operating and capital budgets of the railroad. 
• Secondary economic impact of the customers of the railroad.

Third-level impacts, such as the service industries that supply the suppliers, were not included. 

The first and second year capital expenditures were estimated to total $2.3 million. The secondary impact was estimated to be about double, for a total of $4.7 million.

The projected annual operating budget is $1.8 million. Once again, the secondary impact almost doubles that to $3.3 million.

Visitor spending for non-rail activities like lodging, food, gas and other sales are estimated at $4.7 million. They also double when the secondary impact is estimated, to $9.1 million.

The economic impact bottom line is $17.6 million annually, and 472 jobs created.

Thanks to Randy Gustafson of Stone Consulting and Meredith Mears of Worcester County Economic Development.