#24: The case for rail cruises (and other tourism-oriented trains)
Trains are a growing niche of the travel industry. What makes a successful tourist train business? And where is the opportunity?
For the past few years, I’ve been obsessed with trains as tourism products.
You may think train + business = money loser, but it’s important to distinguish between public transport and tourism. Usually, public transport is better left to governments, which account for positive externalities (they offer more service than is profitable, since transportation has societal benefits).
Tourist trains—which provide leisure experiences, not transportation from A to B—are different. They are profitable businesses, and there’s increasing investment in the space.
Trains are having a moment
In Europe, there’s renewed interest in shifting passengers from polluting planes to climate-friendly trains, including investments in night service. In the US, Brightline opened its Orlando-Miami route, the first dedicated passenger rail track built in decades. There are credible plans for a new Brightline service between Los Angeles and Las Vegas, in addition to other projects—the agonizingly slow California High Speed Rail project and a collection of Amtrak investments. These are transportation, but they demonstrate growing enthusiasm for trains in the zeitgeist.
On the tourism side, a new luxury train is announced every few months—from Golden Eagle’s Silk Road Express to the Belmond’s Brittanic Explorer. Travel publications feature clickbait articles like “12 stunning train rides you should take before you die” or “6 of the best luxury trains around the world.” There’s clearly interest in the romance of the rails, and investment is matching that interest.
How should we think about this growth? And where is there more opportunity?
A taxonomy of tourism-related trains
Three types of trains (rail cruises, multiday train tours, and day trains) make decent businesses. Three others (scheduled long-distance trains, scheduled day trains, and night trains) are primarily for public transport, which drags down their profitability despite tourism appeal.
Here’s a bit more detail…
1. Rail Cruises
Rail cruises are multi-day journeys where passengers sleep, eat, and lounge on the train. In most cases, the train makes stops (like a cruise ship) and passengers tour the destination. In a few cases (like Belmond’s Venice-Simplon Orient Express), the train journey is the sole purpose of the experience - there are no stops.
Trips typically last 2-5 days, but some are as long as two weeks. Paradigmatic examples are:
Southern Africa’s Rovos Rail
Golden Eagle in Central Asia, China, and Europe
Australia’s Ghan
Successful rail cruises have a few commonalities:
They’re expensive. Trips are usually more than $1,000/person/day, exceeding most ocean and river cruises (the Ghan is priced lower, starting at ~$650/person/day).
They use the same distribution playbook as luxury cruises. That means omni-channel selling through luxury travel agents, high-end tour operators, and direct consumer marketing.
There are many operators in this category (this list is the best I’ve found), and I suspect there’s opportunity for many more.
2. Multi-day train tours
The second profitable tourist train model is multi-day train tours, which take passengers for a scenic journey over two or more days. At night, the train stops and passengers transfer to local hotels. Scenery is the primary motivation for these journeys, so passengers typically spend their whole days onboard the train instead of stopping to go on tours.
I’m aware of two examples, both successful:
Rocky Mountaineer operates four routes in North America. Most tours include two or more days on a train, with hotels and activities bundled on either side.
Alaska Railroad offers various combinations of tours along their track (Seward/Whittier - Fairbanks). Trips are usually bundled as extensions of cruises. Tourists travel on the Alaska RR’s own railcars or on equipment owned by the cruise companies (Holland America, Princess, and Royal Caribbean have private cars). Most trips include one or two days on a train, with stops in Talkeetna, Anchorage, or Denali National Park.
The multi-day train tour model is lucrative for a few reasons:
They’re space efficient, and passengers still pay high prices. A “Gold Leaf” dome car fits 72 passengers seated while the ultra-luxury Royal Scotsman fits 8-10 people on (admittedly smaller) railcars. Sleeper trains can certainly be built in more dense configurations, but they’ll never match the density of seats. See chart below.
Seasonal operations mean they only run when there is demand (unlike scheduled service with transport obligations).
They package with other vacation components like hotels, tours, and cruises through their own distribution and through tour operators. Most customers buy an easy all-in vacation with a train trip as the differentiator.
The major disadvantage of multi-day train tours: they’re a schlep. Trains are more comfortable than buses, but the logistics of these trips make them feel like high-end bus tours. Passengers wake up early, put their luggage outside their rooms, then transfer bleary-eyed to their train. It’s a far cry from the “wake up and you’re in Nice!” convenience of a cruise.
3. Tourist Day Trains
The last succesful tourist business is what I call the “Tourist Day Train.” They operate rides from a few hours to a full day. The primary motivation is a combination of scenery and the novelty of being on a train (often a historic one).
Tourist day trains operate at all levels of luxury, from the entry-level Grand Canyon Railway (they also have higher tiers) to the pricey Napa Valley Wine Train and British Pullman.
What makes something a “tourist” day train and not a “scheduled” day train? Tourist day trains are exclusively for tourists. In fact, many operate journeys roundtrip. The point of the experience is the ride itself.
Successful day trains have a few commonalities:
They tend to use historic railcars and appeal to nostalgia, adding an element of novelty beyond scenery.
They tend to be niche one-offs, with unique history, routes, and equipment. Some are run by non-profits for the purpose of preserving a certain train or route.
4-6. Scheduled long-distance trains, scheduled day-trains, and night trains
Some routes are so beautiful or the journeys are so iconic - “coast to coast by train!” - that they transcend utility. While locals may use them for transportation, tourists take them as well. All three of these train types appeal to tourists, but they also serve transport purposes (and make lousy businesses).
Long-distance trains, like VIA’s Canadian, make lists of best train trips in the world. Usually government-run, the service onboard range from basic to decent, but the journeys are iconic. The trains usually make short stops, long enough for crew changes, refueling, and for you to stretch your legs. Passengers are a mix of locals taking the train for transportation and tourists there to enjoy the journey.1
Similarly, some scheduled day trains operate on routes so beautiful that they appeal to tourists. A good example is the Bergen-Oslo line, which is popular with tourists but also connects the two largest cities in Norway.
Lastly, night trains primarily serve a transportation purpose, though tourists take them for novelty or convenience. Night trains generally have no public areas (like dining cars) since they travel overnight. This distinguishes them from rail cruises (1) and scheduled long-distance trains (4), which travel for longer periods of time.
These trains generally don’t make money.2. To serve their transport purpose, they must operate frequently and year-round, including the tourism low season. Via Rail’s Canadian is extremely popular, for example, and peak pricing is high. Nevertheless, the iconic train only covered half of its C$124 million operating costs in 2023.
Where are the opportunities?
Generally speaking, it’s clear that private train businesses need to appeal to wealthier tourists. Lots of the recent growth has been in rail cruises, though I think there’s opportunity in all three tourist-oriented categories.
Let’s get more specific on where those opportunities are…
1. More Geographies & Capacity
The most obvious opportunity is to copy successful business models.
Rail cruises exist in Europe, Africa, Asia, and Latin America. Why is nobody trying this in North America?
Similarly, the major multi-day train tours are in North America. I’d bet this model would do well in other places too.
I suspect there’s also room for growth on successful existing products. One recent bet: Accor is introducing its own Orient Express even though Belmond’s Venice Simplon-Orient-Express has been around for a few decades (the similar names are a long story).
2. Reduce operating costs through economies of scale
This one is particularly relevant to rail cruises. The Royal Scotsman costs $8,600/person for a 3-night trip while the Ghan costs $2,700/person USD. How? The Royal Scotsman carries 36 passengers while the Ghan swells to 300 passengers in its high season. Should rail cruises go even bigger?
Bringing costs down enables lower prices, which would allow rail cruises to appeal to a broader market. High end ocean cruises start at $500-700/day, significantly more than most rail cruises.
Fundamentally, economies of scale can be achieved in two ways:
More density - a Ghan sleeper car has twice the number of cabins as Royal Scotsman.
Longer trains - The Ghan is typically ~1,000 meters long, almost 40 train cars. Royal Scotsman is ~10 cars long.
There are challenges with increasing train length, especially in Europe. In the US and Australia, track easily accommodates long freight trains - maximum train length is well over 1,000 meters. In Europe, maximum train length is supposedly 740 meters, but it’s less in many places.3
A side note: platform length often gets brought up as a limitation, but it can be mitigated. People on a “cruise” don’t need to step right off their carriage like they do on commuter train - they can walk a few carriages down. Two other solutions: the train could move to embark/disembark in a few sections and, in larger stations, cars can be split onto multiple platforms.
3. Scaled distribution and consistent branding
Beyond improving operational economics, there are significant opportunities on the commercial side.
Almost all tourist-oriented trains are one-off, niche products. A brand with a consistent experience and many products would benefit from the same distribution scale as cruise companies. With more inventory, suddenly you can justify a sales force, direct mail, and the myriad of other tools that high-end cruise companies use to fill their ships.
Additionally, travel customers tend to be loyal, coming back for more than one trip on a brand. Most high-end trains don’t benefit from this, since they only have one experience to sell. Imagine a “Viking Cruises” for rail cruises or multi-day train tours, with consistent experiences around the world.
4. Luxury cars attached to scheduled trains
Private, luxury operators could attach to regular scheduled trains. This is actually a version of an old model: Pullman did this in the US and CIWL in Europe.
A few examples of where this might work today:
The Adirondack (New York - Montreal) regularly makes lists of most beautiful routes in the North America, but Amtrak runs mediocre equipment and doesn’t allow seat reservations. A private operator could attach luxury coaches with panoramic windows and high-end dining.
Night trains in Europe offer relatively basic service. A private operator could attach a few luxury sleepers on tourist-centric routes.
Long-distance Amtrak routes, like the California Zephyr, are beautiful and offer decent sleeper service. Luxury sleeper service would appeal to a high-end customer base.
Day trains in Europe are not well set up for high-end tourists. Premium (usually older) tourists have lots of luggage, need help moving that luggage, want to reserve a year or more in advance (many European trains are bookable a few month out), and they’ll pay for comfort. On the most popular routes, I suspect there’s opportunity for a tourist-focused offering.
There are two advantages to the “attach a private car to an existing train” approach:
Less scale required. Instead of filling a full train, private operators only need to fill one rail car if they attach to an existing train.
Expand addressable market by offering a higher-end, tourist-focused product. Additionally, private operators can go to market in a different way, selling through luxury travel distribution channels (think of the Rocky Mountaineer vs Amtrak).
The main limitation: you’re stuck following the schedule of a regular train.
5. Yachts on rails
Another old idea that could be revived… train “yachts.”
Private railcars were the equivalent of private jets in the 19th and early 20th century.4
Today, the better analogy would be to private yachts. Wealthy people could travel around for leisure on private trains. In fact, superyacht designer Thierry Gaugain released just such a concept in 2021.
Final thoughts
Demand for tourism, especially at the premium and luxury levels, is growing. Trains are uniquely positioned to capture this demand.
Trains open up entirely new tourism experiences. The ocean cruise industry demonstrates the appeal of bundled travel products, especially when you can offer the convenience of unpacking once and seeing many places. Delivering this kind of vacation by train opens up so many geographies that have been unavailable to “cruise” tourists.
Climate change will, I think, strengthen the case for rail-based tourist products. Unlike long-distance planes and ships, which are extremely difficult to decarbonize, trains have relatively few emissions. In many countries, they’re electrified meaning they’re already zero-emission. In a world of flight shame and increasing carbon taxes, it seems logical that people would shift to trains from flying, yachts, and cruise ships. The vulnerability of river cruises to varying water levels is also eliminated.
What do you think? Am I an obsessed train nerd or is there something here?
Jarret Walker describes Amtrak’s long-distance service this way:
Long-haul trains have two roles: they are marketed as a scenic and relaxing way to travel between cities if you’re not in a hurry, but people also use them for access to towns along the way.[…] These services do as well as they do only because they combine both markets, so each kind of user depends on the other for the total package to make sense.
There are exceptions to the rule that public transport trains don’t make money. OBB’s Nightjet service supposedly make a small profit.
If you want to go deep on maximum train lengths (and learn about the complexity of the European rail network), check out this great article from UIRR.
Enjoyed this!!
Interesting article! KiwiRail in New Zealand have recently added first class carriages to their trains (Plus Class), this includes all meals and drinks - aiming at passengers prepared to pay more for enhanced service.