Friday, July 22, 2005
Copyright © Las Vegas Review-Journal

Monorail enters Year 2 short of goals

Proponents still bullish on ridership outlook

A BankWest of Nevada-themed Las Vegas Monorail train is rolled into service for the first time Tuesday. Such sponsorships have helped buoy monorail finances while ridership has fallen short of hopes so far this year. Observers disagree on whether ridership has room to grow. Photo by Clint Karlsen.

There was no need to reserve a spot on the Las Vegas Monorail for its first birthday last week. There were plenty of empty seats to go around as the $650 million train line entered its second year seeking new riders and elusive profits.

During the first six months of this year, the monorail averaged slightly fewer than 30,000 daily riders and a little more than $81,000 in daily farebox revenues, short of the 50,000 riders and $85,000 in fares once touted by system officials.

Proponents say the system still can reach its passenger and revenue goals, given time for the once-balky system to gain the confidence of visitors looking for ways to access the Strip.

"I think the right number is higher than 30,000 and lower than 60,000. How much higher than 30, I don't know," said Curtis Myles, president and chief executive of the Las Vegas Monorail Co. "It'll be higher than the 30s, into the 40s, maybe the 50s."

"Where else is there a system that operates in a corridor where, annually, 40 million people a year are coming and going?" Myles said. "I just have to believe you can get more than 30,000 of those people a day."

But critics say the rider interest seen now is all there will be.

"From a ridership point of view, it will be very unrealistic to get up to 50,000 a day," said Jon Twichell, transportation planning manager for the Alameda-Contra Costa Transit District in California. He was a consultant for monorail opponents in the 1990s.

"It is fair to say it was oversold the first time around. The claim was made that there would be sufficient revenue to pay for operations, maintenance and debt service," Twichell said. "There hasn't been a transit operation in the U.S. that's made that sort of money since World War II."

In the first half of 2005, the monorail averaged 27,877 riders each day, with a high of 32,342 riders in March and a March-June average of 30,592. Ridership has appeared to stabilize after a glitch-plagued 2004 that included three instances of metal parts falling from moving trains.

In 2005, the system has suffered major breakdowns or was shut down on only three of 201 days through Wednesday, compared to 113 of 162 days last year after its public opening July 15, 2004.

"The trends are good," said Tom Stone, president of the Transmax Group, a Las Vegas firm that consulted on the monorail's development. "On the times there were big conventions in town, they demonstrated the system can carry the 50,000 per day it was designed to carry, and did it reliably."

That assessment has been the case in recent months: The line carried as many as 50,000 daily riders during January's Consumer Electronics Show and on New Year's Eve. But one of the system's biggest pratfalls came during the Men's Apparel Guild in California's MAGIC show in August, when the system broke down, forcing many conventioneers to scramble for alternate transportation.

"Once people find out where this system is, realize it's really reliable, it becomes really well-known, the ridership steadily increases. A lot of that increase will come from awareness by the passengers," Stone said.

But Twichell said the $650 million monorail's 4-mile course behind the east side of the Strip is too limited to draw new riders. "In terms of where the riders want to go, the monorail serves a very limited segment. Because of that, you don't have enough destinations to attract a lot more people," Twichell said.

Building system extensions to downtown Las Vegas or McCarran International Airport, as has been proposed, probably would draw more riders and boost revenues. But new links also would increase costs, moving the break-even bar higher.

"The ridership will never get up to the levels that were proposed. This is essentially a shuttle back and forth to the Convention Center," Twichell said. "If people want to stay on the Strip and go to the Convention Center, this is what they'll use."

Stone said the Convention Center might be enough to stimulate ridership. "Putting it into perspective, it's just four miles, carrying 30,000 per day, carrying more people than new-start light rail systems when they opened" in other parts of the country, he said. "They're all 15 or 20 miles long."

Stone said the monorail needs to focus on attracting more riders through increased marketing with hotels, travel agents, travel magazines and in-flight publications, and with conventions, possibly through pre-sold tickets distributed to conventioneers.

Twichell said the best way to push the monorail toward profitability is to sell more ad packages of the type purchased by BankWest of Nevada this week.

That pact gives the Las Vegas-based bank an ad-wrapped train and exclusive station ATM rights, for which the monorail gets an estimated $1 million per year and a share of ATM fees.

"It depends on the advertising. They'll never make it on the fare revenue," Twichell said. "To be fair to Las Vegas, even though the ridership isn't there, there's a lot of advertising revenue sloshing around. They can push toward picking up money."

Farebox revenues averaged $81,633 a day in the first half of this year, peaking at $95,257 a day in March.

According to figures provided by Moody's Investors Service, a credit rating firm that dropped the monorail's underlying bond rating to "junk" status earlier this tear, the monorail this year is expected to bring in more than $93,000 in farebox revenues and slightly more than $16,000 in ad receipts each day.

That's about $30,000 short of covering the monorail's expenses, which includes more than $57,000 in daily operating costs and more than $82,000 to repay construction costs with interest, according to Moody's figures.

Monorail officials are counting on a significant boost in ad revenues to push the private, non-profit monorail toward the break-even point.

The BankWest deal, along with proposed station-train theming rights now being negotiated with an automaker and a car rental company, would make up that gap with no new riders, if base sponsorship rates are charged.

For the riders now using the system, the average fare paid in the first half of 2005 was $2.93, well above the $2.50 once projected. The base one-way fare is $3, but riders can lower that cost by buying multi-ride passes.

The revenue gap has led Moody's to suggest that a fare hike might be needed in 2006, something the monorail company said it would consider at year's end.

Long-term, Twichell said the monorail will be hard-pressed to stay viable financially without help from the Regional Transportation Commission.

"Because the project has been built, the issue becomes whether the RTC believes it's a valuable thing to maintain, even if the revenue isn't there. Then the question becomes whether the RTC takes over the service, which is what everyone said would happen," Twichell said.

"These are examples of what happens with public transit. These things get oversold. A lot of money gets spent. The thing gets built. Ridership falls short," Twichell said.

"He's flat-out wrong," Stone said. "It's counter to what the history has been in this country in recent years, with prolonged increased ridership with rapid transit systems."

Myles, the commission's deputy general manager before he joined the monorail company this month, dismisses comparisons to other systems and insists the system is viable over the long haul. "I don't think public ownership is the long-term answer for this system. This system isn't like any other system anywhere in the world," he said.

"When people know it's operating every day and we get enough time under our belt, we'll be fine," Myles said. "These things don't happen overnight."