Industry Research

LCT Leadership Summit: Industry Tackles Tough Issues

Posted on December 1, 2003 by LCT Staff - Also by this author

Business Travel Indicators Are Up The business travel industry, after stumbling for the last two years, is returning to its previous long-term trend of gradual, incremental growth, an official with American Express told delegates at the LCT Leadership Summit in Aventura, Fla.

The national and global economies, which have a considerable impact on business travel spending, are continuing to show steady and strong signs of growth, said David Marcus, a manager at American Express Corporate Services.

Concerns about domestic and international terrorism and SARS are no longer keeping business travelers from flying and some of the airlines – in particular the newer low-cost airlines that appeal to both business and leisure travelers – are moving to open routes to new cities and increase flights on existing routes.

Marcus noted that after three years of negative or flat growth in air passenger travel, the International Civil Aviation Organization was projecting a 4.4% year-to-year increase in the number of passengers in 2004. A further 6.3% increase was anticipated in 2005.

Nonetheless, Marcus cautioned that corporate travel managers and purchasing officials are very sensitive to prices and will focus their efforts to steering their travelers to low-cost options. “Customers are not cutting travel like they did two years ago but they are focusing on cost savings,” Marcus told delegates.

Corporate travel and purchasing managers are treating travel-related expenses “more like purchasing pens and pencils” than they have in the past, Marcus added. Other points made by Marcus:

* Corporate travel bookings are expected to continue their migration to the Internet. Forty percent of all corporate travel spending is expected to be made through web-based systems by 2006, compared to 8% in 2000, according to data presented by Marcus. He also cited a finding in the 2003 LCT Operator Survey (September issue) that a third of all limousine operators now offer real-time reservations via the Internet as evidence of the growing impact of technology on travel-related purchases.

* The growing use of technology in the limousine industry, such as online bookings and other electronic links among operators, corporate clients and travel agencies, can help generate savings for operators and improve service to travelers, Marcus noted.

* The airlines’ on-time performance is strong: 84.7% of all U.S. flights were on time in the second quarter 2003. By contrast, on-time performance hovered below 80% in 2000. This has some positive impact on limousine operators because drivers are presumably spending less time waiting on delayed flights.

* Alternative and secondary airports, such as Oakland in the San Francisco Bay area, and Baltimore in the Washington area, are drawing increasing numbers of business travelers because air fares can be significantly lower than at primary airports.

An American Express study of air fares paid by business travelers traveling from New York’s Kennedy Airport to San Francisco and Oakland airports found that fares into Oakland were 200% or lower than similar flights to San Francisco, according to data presented by Marcus.

* The Air Transport Association has calculated that the events of Sept. 11, 2001 have cost the air travel industry an additional $4.2 billion for such security-related expenses as the new security tax, increased insurance costs, new Postal Service and freight restrictions, and other airport-related fees, Marcus noted.

– Eric Lassiter

Saturn Program Provides Link to Travel Systems Small and mid-size operators looking to compete with large operators must forge electronic links with the travel industry’s reservations systems, panelists agreed during a technology think tank at the LCT Summit. Much of the discussion centered around GT3’s Saturn reservations systems, which is current, panelists agreed, the only way to achieve that goal.

Large and mid-size corporate clients and travel agents have been booking an overwhelming percentage of their airline tickets, hotel rooms and rental cars through the travel industry’s four Global Distribution Systems for years. Saturn has enabled corporate clients and agents to add ground transportation to that list.

Corporations and agents use the GDSs to lower the cost of making reservations, noted Gregg Tuccillo, president of GT3’s Travel Services Division, which sells Saturn.

He claimed that it once cost corporations as much as $65 to $85 per transaction in labor and other expenses to book all the components of a business trip. The use of the GDSs, he added, has reduced that to about $15.

“The technology makes it easier for people to book cars in general,” said panelist, Robert Alexander, president of RMA Chauffeured Transportation in Rockville, Md. “We’re now in the business of moving people rather than taking their reservations, which saves money on personnel.”

Panelist David Seelinger, president of Empire International in Norwood, N.J., and audience member Scott Solombrino, president of Dav El Chauffeured Transportation in Chelsea, Mass., said they were initially concerned with the idea that one vendor, in this case Saturn, could be the sole link between the limousine industry and the GDSs.

While they said they continue to have some concerns about the future potential for monopolistic behavior, they agreed that Saturn has become an invaluable tool for the entire limousine industry and that it helps give smaller operators an equal footing with their large competitors. For a relatively modest investment, smaller operators can gain the same electronic links corporate clients and their travel agents that only large operators previously had.

Tuccillo said Saturn charges a set-up fee of $500 to $1,500, with a per-transaction fee ranging from $2.50 to $3.50, based on volume.

During the second portion of the technology think tank, panelists discussed the importance of backing up data.

Panelists, Dennis Adams, president of Livery Coach Software/Celebrity Limousines in Malvern, Pa., and Jeff Greene, president of Atlanta’s Greene Classic Limousines, said they recently had data backup and recovery problems.

A virus shut down Greene’s system while Adams had two of his company’s computer drives simultaneously fail.

Both men were forced to position vehicles near airports while they waited for their information to be recovered.

Adams says losing two drives at the same time was a fluke, but he added that he will be purchasing additional servers as a hedge against any further breakdowns. The servers will be housed offsite, offering a mirror image of all his company’s data.

Greene plans to back up his information on an hourly basis.

Adams also noted the dangers of viruses, saying that they can sometimes enter a company’s computer system through employees surfing the Web or checking their personal e-mail through Web portals while at work.

“No matter how good your firewall is, worms and viruses can get in,” he warned.

Greene noted that operators’ computers should be in a secure location to prevent disgruntled employees from getting to them and destroying files or hardware.

Quota System Used as a Pricing Strategy Leaders of two of the national limousine networks told delegates attending the LCT Leadership Summit in Aventura, Fla., that they have adopted a pricing system that gives them some competitive flexibility while at the same time ensuring that the discounts they do offer fit within their overall business strategy.

Dav El Chauffeured Transportation of Chelsea, Mass., for example, has establishing a quota system, president Scott Solombrino said during a session on pricing strategies. Only a certain percentage of corporate clients will get a 10% discount and only so many will get a 20% discount.

“We look at the numbers and determine if it’s something that we can make work,” he said. “If we don’t have the room in our pricing structure for a certain deal, we walk away from it.”

A second panelist, David Seelinger, said the company he heads, Empire International of Norwood, N.J., has a similar quota system. He said his company recently walked away from three large corporate accounts because a way to work them into Empire’s pricing matrix could not be found.

Other points made by the panelists and audience members included: * Dawson Rutter, president of Commonwealth Limousine of Boston, a mid-size company, said his business strategy involves “trying to make sure our customers understand the value-added benefits we provide for a competitive price.”

* An operator who adopts a low-ball pricing strategy can pull down everyone. “A rising tide lifts all boats,” said Seelinger. “On the other hand, undercutting the competition has a domino affect on everyone.”

* Be honest in all your dealings with clients and others. Misrepresenting your capabilities to potential clients will only come back to haunt you.

* If you want to be competitive, aim to be the best. “Put the best car out there, put the best driver out there, put the best reservations system out there and you will build a very successful business,” said Solombrino.

* Establishing your company as a brand name – working to have your company readily identified for a specific service or product – can provide a big competitive advantage. An example in the limousine industry is the way that many operators and clients have come to refer to a luxury sedan using “town car” in a generic sense. In reality, Lincoln’s Town Car is one company’s product.

* “You have to charge enough to be able to come back the next day and do it again,” Solombrino noted.

* Profit margins among operators are “slimmer than I have ever seen them,” he added.

* Pay your chauffeurs a good wage to help ensure their loyalty. “The last place you want to mess around is with your chauffeurs,” Seelinger said. “An unhappy chauffeur is going to let everybody know about it.”

* Carefully watching expenses is an important aspect of establishing a successful pricing strategy. “When you go through and find everything [wasteful expense] you think you can, you go through it again and find another one.”

* “At the end of the day it doesn’t matter who’s bigger or who’s doing the most runs – all that really matters is the bottom line,” Seelinger said.

- Eric Lassiter

Creative Objectives for Sales Team Operators can mold better salespeople by creating objectives and tracking productivity, a panel told attendees during a seminar about sales strategies at the LCT Summit.

According to panelist Devin Murphy, president of Carey International in Washington, trained and focused salespeople are essential to the growth of every company, regardless of size.

Arthur Chernov, vice president of sales for Turnberry Isle Resort in Aventura, Fla., said he breaks down sales goals into annual, quarterly, monthly and weekly. He pays incentives by individual and group, helping to foster a team atmosphere.

Russ Cooke, president of BostonCoach in Everett, Mass., said he recruits salespeople from other service industries – like airlines and hotels – and puts them through a sales training course. He is more concerned about a salesperson’s track record than limousine industry experience.

Other points made during the session included: * The Web is an invaluable research tool. Use it to find out about potential clients before making an initial sales call.

* The limousine industry is not expanding and operators need to focus their sales efforts on gaining marketing share from their competitors, rather than seeking clients who do not normally use chauffeured transportation.

* Accept the fact that salespeople often burn out or seek management positions after three to five years. Plan for it by keeping them interested in the job by giving them new challenges.

* Use software that tracks the success of salespeople.

* Salespeople must be good listeners. They must determine potential and existing customers’ needs and gear their efforts toward addressing those concerns.

* Spend time with current clients – including smaller ones – to learn more about their needs and to figure out more ways to serve them.

* Understand your competitors and their business strategies, particularly those who have taken business from you or that you admire.

* Salespeople must spend the majority of their time out of the office talking with new and existing clients, not behind a desk.

* Coordinate sales efforts with quarterly direct mail marketing.

* Offer incentives when asking for referrals from customers.

- Neil Weiss

Hold Brokers to High Standards If you’re dissatisfied with the service you’re receiving from your car insurance broker, take your business elsewhere, operators and insurance agents participating in workshop held at the LCT Leadership Summit in Aventura, Fla., advised.

Even now, when operators have fewer options and higher costs than in years past, the brokerage business remains competitive and there is no excuse for poor or unresponsive service, panelists and audience members noted.

Operators charged that brokers were deliberately withholding bad news on rate increases until a day or two before old contracts expire, limiting operators’ options to seek competing bids.

Panelist Tim Delaney of Lancer Insurance acknowledged that the insurance carriers were sometimes to blame for last-minute notice of rate increases. More often than not, though, some brokers deliberately withhold information until shortly before the premiums are due, Delaney and other said.

Delaney and panelist Michelle Silvestro of National Interstate Insurance were both sharply critical of such behavior and urged operators who have problems with brokers selling their insurance to contact them directly.

“If that broker is not adding value, if he’s not guiding you through the maze, it he’s just an order taker – get rid of him,” Delaney said.

Silvestro also said that operators should demand quarterly loss-run statements from their insurance agent or broker. “It’s a management tool; you need that information and you have every right to demand and receive it,” she said.

The names and contact information on brokers can be found at or in LCT’s 2003 Fact Book (September issue) under suppliers.

– Eric Lassiter

H.R. Tips: Use a Good Attorney Employee relations, also known as Human Resources or HR, is an area fraught with many legal perils for operators.

State and federal regulations are always changing – frequently in favor of the employee – and there are murky, unresolved aspects of many issues, such when chauffeurs are eligible for overtime and whether independent contractors are a good option.

If a session on HR issues provided any consensus on how best to deal with HR issues it was that operators should make it a priority to obtain good legal advice.

But it wasn’t just panelist Roberta Pike, an industry attorney based in Bellmore, N.Y., who was saying that.

Operators can avoid many employee-related issues by establishing a relationship with an attorney who has solid HR credentials and by reviewing employment policies every year, audience members and panelists agreed.

The time and money spent on obtaining and following legal advice should be viewed as a necessary and proper business investment, similar to the way operators invest in cars, office equipment and people, participants noted.

Another way to avoid problems, Pike said, is to look at the businesses that have HR-related problems and learn from their mistakes.

She also said it was “incredibly important” to keep excellent records on the hours that employees worked.

- Eric Lassiter

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