Airlines Do It, Hotels Do It. Should Limo Companies?

Posted on September 18, 2015 by - Also by this author

In looking at the pricing scenarios of the hotel and airlines, two trends emerge: Overall, lower room rates and airfares compared to decades ago, but more optional charges and add-on fees. Hotels are borrowing the add-on concept from airlines:

In the last few years, travelers have protested loudly against airlines that have increasingly relied on passenger fees to boost profits. The hotel industry has also turned increasingly to extra fees and charges, but with a lot less customer pushback. Since 2008, the combined revenues collected by hotels in fees has jumped 41%, according to Hanson's annual studies. From Los Angeles Times article here

So how would extra fees play in the world of chauffeured transportation? Especially with pricing pressures coming from Transportation Network Companies such as Uber? Are fees for extra services and amenities warranted beyond a base rate? If TNCs can surge prices, why can't other ground transportation services layer add-ons when needed? 

  • For example, a chauffeured airport transfer of $124 each way could be raised to $128 each way, but a pre-booked, non-refundable round trip airport transfer could be set at $230, all-in.
  • Or if a chauffeur must walk with you to baggage claim to wait and retrieve a checked bag, then that costs an additional $10-$15, versus the client who arrives with carry-on bags only and can go straight to the vehicle. 
  • Or an extra fee to guarantee a specific make or model of chauffeured vehicle. If a limousine service runs MKSs, MKTs, and 300s, then a client who prefers a specific one may be charged a "guarantee fee."

Operators could likely work up all types of pricing configurations for individual markets, vehicles, routes, and levels of service. 

Such options may make sense in markets where clients and consumers look for the best deal. Base rates could remain competitive, or moderate to low, but the extras bring the flexibility of additional charges, and hence, profits. Flexible rates and optional add-ons could work in a certain tier of service or vehicle, or even in the on-demand market versus reservation market.

There are no longer right or wrong ways to set prices, rates and fees in the era of mobile Internet and price comparison websites. Every transportation entrepreneur has to figure it out. 

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