Increases in business travel and troublesome regulations for operators loom large for 2011.
ATLANTIC CITY, N.J. — Business travel appears to be bouncing back for chauffeured operators, but still well below peak levels prior to 2008, an industry panel concluded Tuesday.
Operators are seeing a mini-resurgence of meetings and corporate travel, with overall business travel up about 4% in 2010, compared to 2009, said Mark Shrayber, president of 360 Limo in Dallas. Increases for 2011 and 2012 should average about 7%, he added, citing statistics.
Shrayber appeared on a State of the Industry panel at the 2010 Limousine Digest Show in Atlantic City, N.J. [NOTE: A more statistical and thorough state of industry trend analysis is offered each year at the 2011 INTERNATIONAL LCT SHOW in Las Vegas, the industry’s much larger and more active global trade show and networking venue].
Other panelists included Kristina Bouweiri, CEO of Reston Limousine near Washington, D.C. and Eddie McCoy, president of FASTTRAK Technologies. Hosting the panel was chauffeured transportation industry consultant and former LCT editor Tom Mazza.
Overall, business travel in the chauffeured sector is still about 20% below where it was in 2007, Shrayber said. Operators must contend with either flat or downward pricing pressure from more frugal clients and flexible competitors.
Bouweiri, who runs one of the largest chauffeured and charter operations in the Washington, D.C. metro region, said she has seen business climb across all sectors of her services, including corporate, wine tours, weddings, and employee shuttles. Her revenue in 2010 has been up 30% overall compared to 2009.
One variable factoring prominently in the business travel market is technology; it is making business travel clients more cost-conscious but also helping operators save money by running more efficiently, said McCoy, a former Arizona operator who now runs a reservation and management software company for ground transportation. “Travel planners are watching every dollar and looking at return on investment (ROI), which is being audited,” McCoy said.
Virtual meetings also have become more prominent in corporate America since the recession accelerated in 2008, which McCoy predicts will drag on business travel numbers during the next two years.
Bouweiri warned that the pricing pressure on operators also stems from rate wars that lower prices overall. “People want to pay less for more service,” she said. “It gets hard to win contracts because some competitors are lowering rates to ridiculous levels.” To cope with such undercutting, operators should lower rates only where it is feasible, and continuously emphasize value and high quality service, Bouweiri said. For example, Bouweiri said she brings some of her prospective clients to her company’s 24/7 headquarters and fleet facility, where they can see the professionalism and attention to detail.
Panelists warned of increased nickel-and-diming of chauffeured transportations operators among local and state governments and regulating authorities in coming years. Budget squeezes are emboldening the revenue-hungry public sector to raises fees and compliance costs.
Bouweiri cited one ridiculous proposal in Washington, D.C. that would levy a $2.50 for every stop that a shuttle bus makes. That would add outrageous costs for Reston Limousine, she said, since it operators about 80 shuttles per day that make multiple stops.
Mazza advised operators to get involved in local associations, since it remains the most viable way to collectively fight such revenue intrusions. “Don’t all be takers,” Mazza said.
Mazza also touched on the mega-third rail of industry politics by bringing up wage and contractor issues, which have increasingly plagued operators in recent years as the government has become tougher on independent contractor businesses. Those operators running businesses on the independent contractor model are facing more hassles from politically-driven regulators and governments nationwide that are encroaching on what has typically been an efficient and profitable way to do business in the U.S.
“You can’t pay correctly unless they are employees,” said Mazza, referring to the complexity of government rules, audits and wage lawsuits. Added Shrayber: “The only way to sleep at night is to have employees. There’s no way independent operators can meet all the requirements; you will be in violation.”
Bouweiri pointed out she shifted to an employee-model company structure about 15 years ago because of the dangers of wage and labor audits as well as contract requirements from government clients. The additional costs of paying and managing employees can pressure profit margins, Bouweiri said, and makes it more difficult to compete with IO model companies that generally have lower labor costs.
Other tough operational challenges come from advancements in personal technology, resulting in distracted drivers who call and text, and chauffeurs risking fatigue behind the wheel, panelists said. They agreed that accidents resulting from either tired or distracted chauffeurs can incur catastrophic costs for a business. Training programs and shift policies should strictly forbid technology distractions and ensure chauffeurs work no longer than 10 hours per day.
— Martin Romjue, LCT Magazine