By Bridget Gourlay
Think about the best holiday of your life. The things most vividly etched into your memory probably defy time. Years later you can easily recall the frenetic pulse of a big city, the eerie starkness of a once great empire now lying in ruins, or the simple bliss of waves lapping at your feet as the stress of work, deadlines, traffic and early morning alarms ebb away. What you won’t tend to remember is how you got there, unless it was memorably bad.
It is where you were and what you did, not the getting there that matters. And this is a philosophy Hamish Nuttall has seized upon. “People want to buy destinations. They want to get somewhere and stay with their family and friends. They don’t want expensive fares,” he says.
In October 2006, Nuttall’s brainchild, the Naked Bus, was born, opening for service in Auckland. Four months later, South Island services started.
The company is so-named because all unnecessary costs have been stripped out. Based on the no frills internet model of budget aeroplane carriers EasyJet and RyanAir, costs such as call centres, tickets and ticket collectors are gone. Customers book online and a ticket is emailed to them. And the earlier the booking, the cheaper it is.
This cuts costs drastically, allowing Naked Bus to sell tickets for half of other companies’ prices — including a $1 seat on every bus. Bargain basement prices, such as a few dollars to get from Auckland to Taupo, are commonplace.
The no frills model works so well it has been expanded already. In December last year, the Naked Sleep was launched. Working with a number of hostels across the country, the Naked Sleep’s brand sells their capacity at low prices — right down to $5 a night.
“We’ve built a scalable infrastructure in terms of our staff and our processes, so we can take the brand to new markets and the logical extension is to take it to different geographical markets.
“We haven’t made any firm plans but obviously there are countries that would be good candidates for the Naked Bus or Sleep model.”
No frills appeal
When asked how difficult it was, back in 2006 as a small start-up, to take on a long established industry dominated by a few key players, Nuttall laughs.
“It was surprisingly easy,” he says with a touch of embarrassment. “Traditionally, public transport in this country has been sparse and expensive. I’ve always been aware of the traditional model and I’ve always thought there are a lot of costs in just getting the ticket and when I looked at the internet model, I realised it could be done for a few cents per ticket.”
And, as Hamish Nuttall suspected, the no frills model, when it came to buses, was exactly what the public wanted.
“People don’t want to spend money on fares. So our propositions fitted exactly what people wanted to do. In the early days we were growing at five percent a week. People were finding out about us and telling their friends. People were subscribing to our email.”
Word of mouth
Naked Bus didn’t have the money for expensive mainstream marketing, so used Google ad words and let word of mouth do the rest.
Five years on from the company’s launch, Naked Bus is the way to get around New Zealand. Originally, other bus companies contracted spare seats to Naked Bus, who sold them through their brand. Today the company has its own fleet. Like low cost airlines, Naked Bus uses yield management; selling higher prices from Friday to Monday and its bargain basement fares from Tuesday to Thursday. The aim is simple — it tries to fill each bus everyday.
Customer connections
Born and raised in England, Nuttall’s first job after finishing his degree at Oxford in the 80s was as a management trainee for the British National Bus Company. There, he was exposed to every aspect of the business — from scheduling buses to marketing and planning, to crawling under buses with a spanner and fixing them — and he developed an understanding of every part of the business.
“That’s probably the thing that’s stood me in best stead,” he reflects. At Naked Bus, there’s a similar ethos. When someone joins the company, regardless of whether they’re going to work in IT or marketing, they spend the first few months on the job answering emails and phone calls.
After all, to answer everything a customer may ask means you have to understand the whole business. Then when an employee is building software or designing a marketing plan, they have a really good hands-on understanding of what the customer wants.
Peak oil positioning
Despite cheap as chips fares, running costs still have to be covered. Economists vary on when peak oil will hit — some say it has probably already happened, while others say it could be as far as 15 years away. Whenever it hits, there’s no doubt that the price of oil will start to soar. So how sustainable does that make Naked Bus?
“Very,” says Nuttall. He doesn’t see peak oil as a problem for his company. In fact, quite the opposite. “Our buses use diesel and diesel is only a small proportion of the cost of running a bus, but with running a car (using petrol) it’s nearly 100 percent. When petrol prices double, the cost of travelling by car nearly doubles. But when diesel doubles, the costs of running a bus only go up by about 15 percent.”
This makes Naked Bus a strong contender for favoured alternative status when petrol prices skyrocket out of reality.
In addition, Nuttall says he’d like to use bio-diesel to power his fleet, as long as it was a recycled resource like fish and chip oil.
Congested arteries
Getting people from A to B effectively is what Nuttall has spent his life working on. And he thinks New Zealand needs to seriously rethink its approach to urban design.
“The biggest problem is the emphasis on building roads,” he says. “When you build a road, to begin with it tends to reduce travel time, but what happens in the long term is that people change their travel behaviours so the travel times get back to where they were.
“In Auckland people are travelling longer and longer to work because they’re living further and further away. Communities that are very dispersed are hard to serve in an environmentally friendly way. Public transport tends to work when you have densely populated areas.
“New Zealand doesn’t have this experience of building roads and then clogging them up,” Nuttall says. He left England as a 25-year-old to take a three-year contract in New Zealand, met a local, had a child and never left. But he doesn’t want his homeland’s experiences replicated here.
“If you look at the UK, the M25 was designed to alleviate congestion and it’s now the world’s biggest parking lot — because many times a day the traffic just doesn’t move. It was designed to relieve all those problems but all it did was generate a whole bunch of new trips.”
Bus lanes are another bugbear. Cities have limited road space so it is important to use it well. “Although buses use road space very effectively, they tend not to get priority. There are some bus lanes. If we look at the North Shore bus way, that has been very attractive at getting people out of cars. It’s a frequent service but the main thing is it is reliable because it doesn’t get caught in congestion.”
It’s catch-22. Without bus lanes, buses get caught in traffic when pulled over to let people off. Then journey times become unreliable, leading to people prefer to take their cars.
Since the northern bus way opened in 2008, Naked Bus has been using it to get to Whangarei and has noticed arrival times have been much more reliable.
Nuttall says Singapore is an example of a country that does public transport well. The city-state has an efficient and cheap metro for the high density areas and a good bus network that connects other places on the island.
“One of the key things they’ve done is recognised they have limited road space in the CBD and they have road pricing so they charge you to enter that area in a car. You can’t keep continually building roads.”
Building better businesses
Nuttall’s advice for those wanting to start a business is to do something they’re passionate about but also to make sure it can grow.
“If you want to have a business that grows you need to think about scalability early on. You need to continually reinvent yourself because the competition will catch up with you. You need to be thinking ahead the whole time.
“In today’s world, it’s a fast changing environment. And if you’re not changing you’re actually going backwards.”
While in New Zealand there isn’t a lot of red tape holding people back from business, there is a strange mentality, he says. “A lot of people are satisfied with getting to a certain level and stopping. There’s the whole ‘the beach, the boat and the bach’ syndrome. A lot of people are happy with just that and not a lot of people want to keep on growing once they get to a certain level.
“There’s a mindset about being able to put your arms around a business, metaphorically, in terms of staying in control.”
Naked Bus has enjoyed phenomenal success in its five-year history. Hamish Nuttall says part of his philosophy is to not worry too much about trying to change the external environment. In short, he doesn’t sweat the small stuff.
“I guess I’ve taken the attitude that if a problem is unsolvable then it’s not a problem, it’s a fact of life.
“I try not to worry about the economic environment or what other people are doing or government policy. I look at all that and think, ‘what’s the angle in that for me?’ I just get on with making the best business I can in the environment I find myself in.”
