Reducing costs while preserving safety - can it be done?

This has been a fascinating thread and a lot of good stuff has been put forward, though I have to say that there have also been a few posts that worry me.
Having been involved in heritage railways and in business generally, including big railways,for (ahem!) more years than I care to remember, I could probably write a thesis on my theories about heritage railway businesses. You may prefer that I don’t do that here so I’ll try to limit my comments to thoughts on the major topics.

To start with, though, this thread started by mentioning safety. One thing should be made quite clear. If a heritage railway cannot operate without compromising safety, then it must pack up immediately. No question.

Heritage railways are businesses, just like any other business, and have to behave like businesses if they want to survive. They also owe it to the other heritage railways not to fail because one failure in the sector will affect all, just as one failing bank impacted on countless others. People often say that railways are different. They’re not; railways produce a product which they sell to the public, just like any other businesses. We have factories; the only difference is that ours are long and thin and our customers consume our products within the factory. We also have machines; indeed, the machinery is the main reason why people buy our products. We have to maintain both our factories and our machines in fit and working order because without them, we have no products to sell.

The problem is that while we are businesses just like any others, as enthusiasts we often want them to behave differently to other businesses. That introduces risk and, as with any risk, we have to mitigate it.

We want to use volunteers to staff our railways. The advantage, it is often said, is that they come without cost, which is untrue. The original idea was that BR couldn’t run these lines with paid staff but maybe we could do so with volunteers. Actually, the idea was only partially right. We could succeed because of a combination of factors: (a) we don’t have to pay people; (b) we can attract more passengers to our railways than BR ever could; and (c) we don’t have to operate the same level of service as BR, indeed, we have a remarkable flexibility over the service we can offer.

As many heritage railways have discovered, there are advantages in employing staff if that means they can offer a better service than if they had to rely on volunteers alone. This might include running a 7-day a week service in summer or getting vital repairs and overhauls done more quickly. Most volunteers are very loyal but, for example, if their real job moves to the other end of the country, they’re lost. It’s relatively easy to replace a paid member of staff, far less easy to find another committed volunteer.

Heritage railways vary in the extent of the service they offer. One (very small) railway near me only operates on high days and holidays. Indeed, its planning permission limits its number of steaming days but doing more would overwhelm its small pool of volunteers anyway. It also wants to stay small, in keeping with its light railway origins. An extension to them is a new track panel!

On the other hand, a railway like the Swanage is expected to run day in, day out during the main part of the season at least. Most people visit the Swanage or the South Devon or the IOWSR as part of their holiday and just want to turn up and visit. They don’t expect any tourist attraction to be closed mid-week in August.

Railways have to tailor the service they operate to suit their markets and that means they have to fully understand their markets. That means not just finding out about their customers and what they want but about people who don’t visit them too. Location is important but not as important as many enthusiasts think. We like to think that our railways serve a useful purpose by connecting towns A and B. Actually, they don’t. The only benefit of serving A and B is that more people are likely to see the railway and decide to travel on it. A rural local can be just as good though if well advertised – easier parking for a start, cheaper land, and room to expand.

As businesses, it is vital that our revenues exceed our costs. It has been suggested here that cash flow is more important than making a profit/surplus but that's nonsense. While it is true that a business can fail because of a shortage of cash even when it is profitable, a business cannot succeed beyond the short term without adequate profits. Even if we are not distributing profits, we need to make enough to put aside for future needs or our equipment will wear out and we won’t have enough in the kitty to replace it.

Cost control is absolutely vital in every business. We can, of course, increase our surplus by increasing revenue but, generally speaking businesses find it easier and a lot quicker to reduce costs than to increase revenue. I have never yet seen a business that could not reduce its costs by 10% or even 20% with minimal impact on its quality of service. No business is ever that efficient. Even so-called fixed costs normally include some scalable element. Every locomotive needs a 10-year overhaul – that’s fixed – but the amount of work that needs doing at that overhaul varies enormously. Track costs are partly fixed – sleepers rot over time whether they’re used or not – but usage also has an effect.

Saving money by such measures as sharing General Managers is fanciful. Heritage railways need managers who can focus on a particular railway. How would the SVR have coped if, when parts of its line were washed away a few years back, their GM was away dealing with a problem on the NYMR at the time? And how would the NYMR have felt if their shared GM felt that he or she had to devote all of their time on the SVR under those circumstances? And would it really make for productive use of a person who had to spend half their working lives travelling up and down the country.

Shared works facilities is another non-starter. Is a local volunteer welder going to travel 100 miles at weekends because that where your shared works are going to be? Besides, a shared works will need to be set up as a separate company with a joint board, with all the overheads and bureaucracy that would involve. It would inevitably end up relying on paid staff too. The savings over contracting the work out would be minimal.

A heritage railway must always cover its normal operating costs out of its ordinary revenue. If you have to resort to appeals to fund things like paying the coal bill then you’re heading for trouble and it’s time to shut up shop or make drastic changes. Special appeals do have their place though. For example, if you want to restore a 125-year old locomotive that’s only going to have limited use on your line, then it’s fine to ask enthusiasts to stump up. Similarly, asking people to remember you in their wills is also fine; use their legacy to do some ‘nice to have’ thing that you couldn’t otherwise afford but not to subsidise next year’s running.

But if a bridge is falling down, that suggests you don’t know the state of your assets. (Ok, Network Rail doesn’t either but it’s big enough that it can assume it’s going to have 5 embankment collapses and 3 bridge collapses each year and budget for them. It can also divert traffic while it’s fixing them. Small railways can’t do either.) Heritage railways need to know their assets intimately and need a forward plan for dealing with their long-term repair or replacement.

Questions such as big engines or small engines, galas and charters, and the like, come back to the issue of us wanting our railways to be something more than just businesses. Many railways do run engines that are far too big. The cost of lighting up a Class 7 or 8 can be more than running a Class 2 the whole day and reboilering a big Pacific can cost more than building a replica Class 2 from scratch. DoG and FS are cases in point where repairs and overhauls simply become unaffordable. On the other hand, flogging a Terrier to death by putting it on the front of a rake of 8 Mk1s isn’t sensible.

I side with those who say that the majority of the general public can’t tell the difference between one engine and another, so use one that’s big enough for the job but not wasteful. The same goes for rolling stock. Above all, the public wants a train that is clean and in good condition, inside and out, and it’s amazing how many railways fall down on that. The engines are glamorous, the coaches disgusting. Vintage, Mk1 or even Mk2 – it probably doesn’t matter really, as long as they don’t have sliding doors and aren’t air-conditioned.

Most enthusiast galas probably don’t wash their hands financially but sadly few railways know whether they do or don’t. (As has been said, do we know if enthusiasts might visit anyway and simply time their visit to coincide with the gala?) Sound financial management is essential here. Events that attract people to the railway who wouldn’t normally come are usually much more worthwhile. That is not to say that galas and visiting engines should be off the agenda. There is a case for saying that railways should spend out on events that encourage and please their volunteers but it needs to be budgeted. How many railways have a budget for ‘fun things’? They should both have one and they should stick to it. Similarly, railways should be aware of the costs of maintaining an 'authentic' environment if that's what they want to do. It's mostly being done for the volunteers and the enthusiast fraternity and that must be recognised. Most public visitors can't tell the difference - it's just the general atmosphere they're after. As long as it's clean, tidy and well-managed, they'll be happy.

Sorry to go on but I hope these thoughts are useful.

Btw: HMRI might no longer exist but HMRIs do.

 

You missed one important item out of your last sentence W14, polite and friendly staff. One surly, ignorant or rude volunteer/staff member can ruin the day no matter how clean, tidy and well-managed any commercial visitor attraction is.

 

W14's summary of this thread is a masterpiece. It should be required reading for every heritage railway manager and anyone with a serious interest or involvement in heritage railways.

 

Accepted, although I think that 'well-managed' probably covers that. To be honest, there will always be potentially-useful volunteers who are simply not public-friendly. The job of a good heritage railway manager is to find them a slot where they can be useful out of the public eye, not in the booking office or on the platform.

 

Thank you - that's encouraging.

 

How many railways are in the position of being able to use historically accurate locos and rolling stock to maintain their services to the exclusion of all else? The South Devon, with a 14XX and an autocoach, pejhaps? Maybe the SVR and Bluebell, possibly the GCR but in all these cases there would be a wholesale clearout of inappropriate stock and there wouldn't be a lot left - and what there was would representative of only a short period of history that everyone would soon get tired of. But why just pick on locos and carriages, in most cases we'd have to get rid of all the infrastructure that has been built to support them and increasing passenger numbers. The fact is that we can't accurately recreate the past, it has gone. All we can do is give an impression, and even then most, if not all lines have to compromise.

 

EXACTLY my point, Spamcan! And those compromises are the key to the whole thing. As I said in a previous post, give the public what it wants (a cost-effective, approximate facsimile of the past*) to generate the most revenue, then charge extra for those that want precisely the right loco on precisely the right stock in precisely the right-looking location!
* Whether the public is visiting a preserved railway or watching Downton Abbey

The same goes for things like the 'wrong ' loco on the 'wrong' stock, which enthusiasts (they who contribute far less to the costs of a railway than Joe Public) whinge about.

Exactly. Maintaining the ambience, not trying to precisely recreate the past - which, as I have illustrated in my previous posts, is impossible to any meaningful degree.

A perfect summary, 61624. Bravo!

 

Preserved railways have changed and grown from their early days, stations enlarged, depots built, and along with change comes new presures, without exemption we all have to be more professional these days, hi vis clothing, stricter rules and regulations,, for instance, the days of rollling out of the pub at 3am, signing on at 6 to steam the loco are gone, and good thing to, we in todays preserved railway industry, because thats what it is, an heritage industry , have to give the public an first class impression, otherwise they go elsewhere, tidy stations, in good order, clean resturant,if you have one, coaches that dont look like they have not had a brush put through since the left the national network, its all necessary things that have to be done, but it all has to be paid for, thats where the choice is, then, can you justify additional cost when margins are already tight? that is the question that every railway is asking its self, for example you only have a limited ammount of money availible, how do you decide your priorities, for example the railway i work at would like to put another RU into service, so that we can replace the present life expired one, but have been told we do not have the £30.000 it would cost to allow us to do it this year, so will have to hope we dont have anything major go wrong with the coach we use now, that goes, the whole caterering side goes down, no welden pulmans, etc, cost to railway in the region of 1m over the 2 years it would take before we can find the budget, if the coach has to be withdrawn ,but the station forecort got re tarmaced this year, is that wise use of priorities, its got to be a common problem, everywhere, what do you do, attend to the problems that you have right now, and hope that nothing goes wrong, or be proactive, and plan ahead, get it wrong you could very well cost the railway very dear, i am sure its not just us, that every railway has to try and balance the calls from every department . and as cash gets scarcer, then its going to get worce, i would hate to make that decision.

 

Yes that's very true, but it's still surprising how many railways overlook this fact!

I do agree with flaman also, it was an excellent summary and well worth reading.

 

Your absolutely right, the ambience of a steam railway is all that we can hope to achieve. If we successfully re-created sleepy branch line scene of a train carrying more crew than passengers we wouldn't last long. But there is no reason why we all have to try to create the same ambience. The Swanage, for example, perfectly recreates the holiday branch line, the GCR the main line scene. Sometimes it might be better to go for a much more generic scene than try to re-create the impossible.

 

This concerns me. Clean carriages and tidy stations are non-negotiable. If a railway has reached the stage at which it cannot offer those then either it has got its priorities completely wrong or it should shut up shop now, rather than wait until all the customers have drifted away.

As for the RU, you say that £500,000 a year revenue is at risk if the current vehicle fails. That is not sustainable - if there is a good chance of a failure then a £30,000 investment to secure that revenue seems to be a no-brainer to me. Obviously, I don't know where the money is going on your line but the last time I looked at your accounts it was clear that catering keeps your railway going. Lose that and you lose everything else. That should determine the priorities. Sometimes hard choices have to be made; sometimes the glamour projects have to be deferred in favour of keeping the show on the road but it takes a brave GM to push that through and a lot of people are going to get very upset.

Incidentally, don't dismiss the value of replacing tarmac in areas that the public uses. A few claims for cars damaged by potholes will soon make a dent in the profits.

 

One sure way to get Mrs ilV mad is to get her to wade through muddy pot-holed filled car parks or fields of uncut grass hiding cow pats.. Thankfully they are getting fewer but there are still some around.

 

To answer my last question myself the HRA Annual Report gives the statistics for paid and volunteer staff for the period 2002-2011 in graphical form. It does actually show an increasing number of volunteers over that period with a quoted 4% growth in the last year of the graph. The 'full time' equivalent of volunteers at 3,713 is, however, only up 1%, indicating that we have more volunteers but they are actually doing less hours each. Paid staff are similarly increasing in numbers, again at 4% although the number of part time paid staff is increasing at a higher rate. (2,200 in total.) The statistics don't include last year but I don't think there is any indication that they have peaked.
Looking at the statistics for passenger/visitor numbers and turnover over the same period they do generally show a continued upward climb over the whole movement. In 2002 turnover was less than £40m and had risen to about £90m in 2011, representing well over 100% growth before inflation is factored in. One significant statistic missing from the survey, though, is the costs.

 

That is worrying if it is part of a trend. Worrying because the effort that has to be put into recruiting and training volunteers is increasing all the time, effort which has to be provided by existing staff. (When I turned up on the X railway in the 1960s I was out on the track within 5 minutes. The next day I was given a trolley and a big hammer to go and play work with.)

 

If you mean that it is possible to be long term successful by running from Nowhere to Nowhere - Toddington to Cheltenham Racecourse comes to mind, but there are lots of others - then you are just wrong.

 

Who had heard of Sheffield Park before 1960?

 

Dont forget that it costs money for volunteers to come to their railway, many can not afford to do the amount they once did, many paid staff also do far more hours than they get paid for, the other paid staff in my department alone often doextra hours because C&W is working 7 days aweek, and not all volunteers can be allowed to take on the PIC role. so in effect on our line there is no difference between volunteers and paid staff, we all do voluntry hours above what we get paid for.

 

Or Horsted Keynes, come to that. The Bluebell put them on the map, perhaps it will do the same for East Grinstead, wherever that is!

There are a few heritage railways that go from somewhere to somewhere, more that go from somewhere to nowhere and more still that go from nowhere to nowhere. There are more and less successful examples in each of those categories, though I will admit that there are probably more successful ones in the first category and less in the last. However, I suspect that this has more to do with how long they have been operating and how well they are established, than whether they begin or end in a recognised place. From my own experience, most passengers, whether enthusiasts or not, neither know nor care about the destination. They are there for the ride, to get a taste of the ambiance, possibly to see something "interesting". The exceptions are the "seaside" lines who, alone, enjoy a captive audience. So long as they start in a resort, it matters not a jot where they end.

 

No railway has a "captive audience" - no-one has to pay to travel on a heritage railway, and to suggest otherwise is very arrogant.

 

Captive, as you have taken it, may have been the wrong choice of word. The implication was probably that a large seaside, town with a constant turnover of population gives the railway concerned more than a fair chance of increasing its business. If it is unable to attract a significant number of customers from this market, it would be both disappointing and little surprising.