Industry Research

Tectonic Shifts In Luxury Transportation?

Posted on June 24, 2009 by LCT Staff - Also by this author - About the author

BOSTON — “What was normal before and standard operating procedure before is now broken,” said Scott Solombrino, owner/CEO of Dav El Chauffeured Transportation Network in Boston, during a Tuesday interview. “Everyone in your organization needs to understand your clients. You can’t just do something for a client as you would before and expect it to be acceptable.”

Solombrino is describing the “new normal” in the limousine industry. “Take for example upgrades,” Solombrino said. “There was a time that you wouldn’t hesitate sending an SUV at the same price as a sedan when you didn’t have a sedan available. You just did it. Not anymore. We would never automatically upgrade a corporate client. It is getting worse than that. Clients want specific vehicle types. We won’t even upgrade a Mercedes for a Cadillac sedan. It’s all part of the AIG effect. Clients are very perception conscious. They worry what their peers, bosses, and clients will think if they show up in a luxury vehicle to a meeting.“

Dav EL is one of the top three largest chauffeured operators in the country with about 1,000 company-owned vehicles. Solombrino has other concerns that result from the current economic conditions, but for him, problems are just chances to create opportunities. He describes the ultra rich clients who demand high-end specific vehicles.

“We have clients who are princes who fly into a city and want 10 Mercedes Benzs at their disposal around the clock,” he said. “Depending on the city though, this could be impossible. There was a time when a client would call and we would just make this happen. Now it is truly not an easy task. We may need to try to find something comparable.” He laughs: “Try managing 10 different companies all with one Mercedes each. It’s a disaster waiting to happen.”

Solombrino says that there is a silver lining to this economic drama. He believes that when there finally is a turn around and demand begins to climb, with the depletion of industry, those operators who still have the high luxury vehicles will be able to demand higher prices for them.

Operators should be optimizing their fleets keeping only those vehicles that have a 75% usage rate, he said. Typically, the high-end vehicles like the Mercedes do not have the type of usage that so many operators have divested of them.

Solombrino cautions operators who are looking at fleet optimization. “You may want to get rid of vehicles but the aftermarket is not always available,” he said. “Even if you own a vehicle outright, there is still a cost of carrying an underutilized vehicle. It has a depreciation cost which hits the books every month. You must understand how you are accounting for your fleet and the costs involved in keeping vehicles.”

Solombrino also has seen a drop in demand for hybrid vehicles. “Companies who are involved in high profile events want hybrids but for everyday use they aren’t asking for them,” he said. “This becomes again problematic when those moves do occur and the vehicles are not available.”

Is there light at the end of the tunnel? Solombrino doesn’t know. “Your guess is as good as mine,” he says. “This is the new reality and we need to operate smartly here and now.” Solombrino believes that those who can easily adapt without large capital investments will survive while those who are mired in debt won’t see the light at the end of the tunnel.

Source: Linda Moore, LCT Magazine

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