Industry Research

Friends with Benefits: Charter Bus Companies and Limousine Services

Posted on April 1, 2009 by LCT Staff - Also by this author

About 10 years ago, I began working with Orange Belt Stages, a central California charter bus company. My initial reason for calling was that I had a client who said he wanted to take about 40 people to a wine tasting. In order to do that, we would have used five limousines or four 15-passenger vans. This would not only split the group up, but the cost of five limousines for a 10-hour day would be pushing the price up to the $4,000 range. Most companies won’t pay that for a day outing. Even if we used the vans, the price was in the $1,600 range. My first instinct was to tell the client to call a charter bus company who could better serve their needs. Then I thought about why they called a limousine company.

Upgrading the Charter Bus

The client obviously wanted an upscale type of trip. If I rented the bus myself for the day, I could put one of my employees on the bus, serve wine, cheese, and sandwiches during the trip, and upgrade the standard charter bus with luxury service. I could command a higher price than what a charter bus company normally charges.

I knew the client had a transportation budget of $1,500. I had never rented a bus before and I imagined that if we chartered eight-passenger limousines for $65 an hour in 1998, a bus must cost an arm and a leg along with your first born child. I was shocked to learn I could get a 47-passenger coach for $500 for the entire day.

It is easy to see that I now had $1,000 left in the budget to pay for food and beverage, and the cost of the employee. I bought gourmet boxed lunches for about $7 each, spent another $50 on paper-serving products, and the biggest expense, the employee/host who earned $75. After paying the bus company, our employee and supplies we were able to net about $500 profit.

Developing the Relationship

After earning $500 for a single day, I realized that this could be a whole new market for us if I regularly chartered buses. I could surely manage to get some type of discount. I have learned that it is always best to do business with one single person at a company whenever possible.

By obtaining quotes and placing orders with one single person, you develop a friendship with each person who knows exactly how often you place orders because they take the orders from you. Even if they don’t have decision-making authority, they will go to their bosses and ask for special rates because you are considered a friend and a business partner once you start booking charters regularly. I knew that upper management would realize we were a regular client in due time because they see accounting reports, and realize someone has become a “regular” just the same way we in the livery industry do.

In the beginning, I was asked to pay a deposit with each order and my balance one week before the charter date. Sound familiar? Then, one day, I placed my order and was told I no longer needed a deposit with my orders. My reputation for always coming through with the job was established.

Eventually, I was invoiced for my trips after the trip was completed and no longer had to pay in advance.

Finally, my account representative called me in advance to say the owner of Orange Belt would be stopping by to see me. I was rewarded with a crate of oranges at Christmas time. The crates of oranges are a trademark Christmas gift from Orange Belt Stages delivered each year to their regular clients. I knew I was “in.”

Working Together During a visit with the marketing manager of Orange Belt, I learned that many people call on charter bus companies to move large groups of people but have less people than practical for a charter coach.

The charter buses operated by most charter companies come in two sizes: 47-passenger or 55-passenger coaches. Obviously, if a group of 20 wants to go on a trip, a 47-passenger bus is a bit large. By informing Orange Belt Stages that we had a fleet of 15-passenger vans and 20-passenger buses, we are able to supplement the charter bus company fleet with smaller vehicles just as they supplement ours with big buses. As we discussed working together to meet the needs of our mutual clients, a discount rate was established using the livery industry standard of 20% discount to each other.

We had to change some of our pricing to be competitive in the charter bus market. This is a hard change for most limousine companies because we are used to charging a premium price for luxury, and place great value on the fact that our vehicles are operated by professional chauffeurs that enable us to command higher prices.

However, if the client originally calls a charter bus company for a quote to move 18 people for a 10-hour day, the rate for a 47-passenger bus is about $700 in my market, and the charter company will quote that to the client. Using normal livery industry rates in our market, a 15-passenger van would cost the client $800. So to use two vans, it would be $1,600, and obviously that would not make good business sense to the client.

Instead, we take the chauffeur out of the business suit and put him in a polo shirt instead. We eliminate beverage service as charter companies don’t offer that as a standard service, and we drop our price down to $350 for the day. The client now has a choice of one bus or two vans for the same price, or we could use our limo bus but still command a higher price because it is a limousine and not a standard charter bus. But most passengers calling upon a charter bus company are not looking for luxury and don’t have a budget or desire for luxury.

Brokering Tours

Since forming this relationship, I have put together many group tours that are designed by us for corporate outings and retreats including such trips as, “Going Hollywood,” where we tour Hollywood for the day including Warner Brothers Studio, the Hollywood Museum, and Farmers Market in Los Angeles, and conclude with dinner at the famed Pig and Whistle restaurant on Hollywood Boulevard.

I ask for and receive group discounts from the studio and the museum, and we mark up every portion of the trip to make money on each stop of the tour. Each stop on the tour is considered a “component,” and is listed as an invoice line item such as, “Warner Brother Behind the Scene Tour — $35 per person.” This allows the client to accept this component or decline it to adjust to their budget. The Pig and Whistle stop includes a one-hour open bar and costs about $2,500, so some groups skip dinner and come home while others want to experience a Hollywood legend.

The entire tour for 55 passengers is $6,350 with a cost of about $4,500. Brokering tours such as this can be very lucrative and the type of tours is limited only by the imagination. Tours can include wine tasting, theatrical plays, concerts, gambling trips, golf trips and sports events. All can be nicely packaged with tickets to the event, gambling “fun” books, and tasting fees all included in the price of the charter depending on the type of tour.

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