Who may not survive?

By June 14, 2020Features

By Aaron Isaacs, HRA editor

Covid-19 shut down every tourist railroad and railway museum in North America. Although the pandemic appears to be declining in the east, it’s increasing elsewhere with periodic hot spots. Because businesses can’t afford to stay closed forever, they are reopening at least partially with appropriate social distancing measures that restrict attendance. We’re seeing the first of the railroad museums and tourist railroads among them.

Predictions are risky, since no one knows how long the pandemic will last, how severe it will remain and when or whether a vaccine will be developed. Against that background, one has to wonder if all the tourist railroads and railway museums will survive.

Hibernation
Let’s first consider hibernation, closing for as long as necessary with no income from the public. Non-profits are better able to sustain hibernation than for-profits. They don’t pay taxes. They’re less likely to carry debt that must be repaid. They have access to alternate income through grants and donations from their members.

Within the non-profit community, the small segment of government-owned museums is unlikely to be eliminated because the government generally doesn’t do that. Operations are curtailed and employees furloughed, but government owned museums won’t disappear.

Independent museums that occupy government land rent free or own their own sites have the advantage of no land costs. That’s big.

Most places have to pay for insurance and utilities no matter what.

A big variable is labor. Can payroll be reduced enough to survive without income? There’s no question that all-volunteer institutions can ride it out more successfully than places that must keep employees on the payroll. It’s probably true that the more employees are required, the greater the risk, especially if volunteers haven’t been used much. Museums that were once all-volunteer and later hired minimal staff are probably better able to return to all-volunteer.

Hibernation puts for-profit tourist railroads more at risk than non-profits. They’re less likely to have volunteers to fall back on if the paid staff are furloughed. They’re more likely to be carrying debt than a non-profit, and they have to pay taxes.

It’s critical to have other income sources. Do they haul freight, do contract shop work or store out of service freight cars?

There’s a stage between total hibernation and opening for the public, reopening behind the scenes work such as rolling stock maintenance and restoration. Even if the work is all-volunteer, there are supplies to buy and often outside contractors to pay. This is where grants and member donations can make the difference for non-profits.

Is it still profitable to run trains?
Static display museums with outdoor displays are the safest and incur minimal cost to reopen, especially if they do so with volunteers. Indoor displays are more problematic, with capacity having to be rationed, but at least they’re cheap to operate.

Railroading has always been a business where fixed costs are a bigger factor than variable costs. Once the physical plant, rolling stock and crew are in place, hauling few passengers or many passengers costs about the same. Once the fixed costs are covered by fares, almost all additional revenue is pure profit.

That’s the big reason why special events have become increasingly important. Polar Express, Thomas the Tank Engine, Easter Bunny trains, pumpkin patches and Halloween scare-a-thons pack them in. Except for fall colors, which could be considered a special event, plain old train rides are less likely to attract big loads and ridership on them has been in long term gradual decline.

We know that reopening doesn’t permit capacity loads or anything near it. Somewhere between 25 and 50 percent capacity appears to be the new normal. Even where that is permitted, it’s unclear if the public is ready to ride. Licensed special events with high fixed costs may not be profitable at the lower occupancy.

It doesn’t help that gift shops may have to stay closed, further reducing revenue.

Social distancing requirements will make it even harder to justify the cost of steam locomotives. Everyone loves steam, but it’s much more expensive to operate and repair. There has been an endless debate over whether steam attracts enough additional riders to justify the higher expense. The virus changes the math and not in a good way.

The X factor
Unlike most businesses, railway museums and tourist railroads are run by people who are passionately committed to their survival. It’s about more than money, and that gives me hope.

 

 

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