Industry Pricing Problem Apparent On Airport Runs

Posted on July 6, 2016 by - Also by this author

As I’m inclined to do, I stay informed about chauffeured service by using it for personal trips, trying to be a mystery rider as much as possible, although I’m often exposed as editor of LCT Magazine.

Last month, my wife and I took a vacation involving air travel. As usual, I’m the one to set up our airport transportation, given my line of work. My wife never needs to worry about it.

I decided to compare Blacklane versus a premium Los Angeles limousine service. We took Blacklane from our house to LAX, and one week later, got picked up by the limo service at LAX to return home.

I’ll admit upfront Blacklane incurred, um, a black mark. They were 15 minutes late. I had received a text 90 minutes before our pick-up time with the chauffeur’s name and contact info. About 45 minutes later, I received another text with the name of another chauffeur and contact info.

When the new chauffeur was 10 minutes late, I called him. In more than eight years at LCT, a chauffeured car has never been late taking me to the airport. The chauffeur assured me he was just a few minutes away.

When he arrived, I immediately noticed the BMW 7 series sedan as opposed to the more standard service tier vehicle I had requested. Upgrades are always nice. The chauffeur profusely apologized, explaining our first chauffeur got delayed at LAX and he was called to fulfill our ride. I realize these things happen, but an app-based service that can rely on ample independent contractor drivers should operate on time margins that maintain scheduled pick-ups in an urban area when things go wrong.

Nevertheless, I tend to be an early bird when catching flights, so despite the 15 minute delay, it made no difference in getting to our gate well before boarding time. The total cost of the ride including tip was $73. The chauffeur’s professionalism, quality of the vehicle, and impeccable service matched those of a limousine service. Bottled water included. He told us he worked for a limousine company in Los Angeles, one I hadn’t heard of, that takes Blacklane runs.

One week later, we were met by a chauffeur in the baggage claim area at LAX who works for a limousine company I can vouch for as premium level. Our return flight had been delayed six hours, so it was a relief to have a friendly, helpful chauffeur waiting with a baggage cart at 12:30 a.m. in a crowded arrival area.

Once again, the service, ride and chauffeur conduct were flawless, bottled water included. Our vehicle was a Lincoln MKT Town Car. Total cost including tip: $126.

So here’s the rub: Had Blacklane been on time, like it had for some of my previous non-airport pick-ups, the troubling conclusion would be we got a high-quality chauffeured ride for $73 in a BMW 7 series sedan versus a $126 ride in a Lincoln MKT Town Car. Given the equality in service levels, Blacklane clearly would be preferable to the average consumer who doesn't see all the nuances in limo services, versus chauffeured apps, versus TNC apps, versus taxi-cabs.

And therein lies an industry pricing problem: Technology, efficiencies and market dynamics are making it possible to deliver chauffeured rides at lower costs. That’s the reality of just about every consumer product and service segment. I know of limousine services still charging two-hour minimums of $160 for airport transfers. While I appreciate customer loyalty, why would anyone, even a top 1%-er, pay such high rates when so many less expensive options are available?

It’s like wine. While looking at wine bottles during a recent trip to a grocery store, I saw ones listed for $20-$30 (Clos Du Bois, Mondavi, etc.) that you could get at Costco for 50% cheaper or more. Why would any sane shopper buy a bottle of wine in that grocery store? Costco has figured out the logistics and economies of scale to bring bottles of wine to the public at a fraction of previous costs.

If you as an operator can get people to pay high prices for chauffeured service, then fine. Do it. It’s a free market, and prices are ultimately little bits of economic information communicating what people are willing to pay at a point in time.

But technology is making it possible for Americans of most middle class segments and up to enjoy all kinds of products and services that were considered luxury items available to only a few, decades ago. (Those of us who were kids in the stagflationary 1970s remember the contrast).

Like overpriced wine bottles, stubbornly high limo rates are not the smartest, long-term business plan. Reality will catch up, as it already does, with ride apps making use of legal, legitimate chauffeured cars at prices somewhere between an Uber ride and a traditional limo run. You can sell clients on the value behind higher rates up to a point, but pricing still needs to be made as practical as possible from the back-end.

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