Don’t Miss The Revenue Bus

Posted on April 1, 2011 by LCT Staff - Also by this author

Operator Robert Vaughan of Best Chauffeured Worldwide in Huntington Beach, Calif. started his motorcoach division after getting repeat requests for runs and trips that he at first farmed out to other operators. Vaughan operates two motorcoaches as part of his chauffeured transportation and charter and tour service.
Operator Robert Vaughan of Best Chauffeured Worldwide in Huntington  Beach, Calif. started his motorcoach division after getting repeat  requests for runs and trips that he at first farmed out to other  operators. Vaughan operates two motorcoaches as part of his chauffeured  transportation and charter and tour service.

LAS VEGAS, Nev. — The motorcoach industry sees steady growth each year, especially since the U.S. relies heavily on the bus as the main mode of mass transportation, but it comes with a unique set of challenges.

“It is the best of times, it is the worst of times,” says Eron Shosteck about the motorcoach industry, quoting the famous line by Charles Dickens. Shosteck, president and CEO of the Media Consultant Group, most recently served for four years as senior vice president of communications, marketing and media relations for the American Bus Association.

He spoke on a panel about the motorcoach business during the recent International LCT Show in February. He was joined by operator Dan Goff of A Goff Transportation in Charlottesville, Va., and Robert Vaughan of Best Chauffeured Worldwide in Huntington Beach, Calif. There has been an unprecedented shift from other travel modes to motorcoach travel; nationwide ridership surged 23% in the last four years.

Motorcoach traveler and tourist demand creates one million U.S. jobs, generates $40 billion in wages, and accounts for $112 billion in total economic effects annually. By virtue of its passenger loads, motorcoaches are the greenest mode of travel. Since young people view having a lower carbon footprint as a badge of honor, it is now cooler to take a bus than a car.

Motorcoaches can provide 206.6 mpg on a per-passenger basis, and they compete with airlines for 200-400 mile trips. “[Buses] move about the same numbers as domestic [air] carriers each year,” says Shosteck, “and more people in two weeks than Amtrak moves in a year.” A report from the DePaul University Chaddick School for Metropolitan Development released in December 2010 notes that passengers who opt for the bus instead of driving their cars have helped America slash its total fuel consumption by 11 million gallons annually, which equals the benefit of removing 23,818 vehicles from the road.

Straight-arrow operation

The surging ridership and impressive numbers have brought much attention to the industry. Congress is working on legislation that will significantly add to the cost of buying a motorcoach. Insurance is much higher than other vehicles and more safety regulations are being implemented because of the major risks involved, which are due to a higher number of passengers who also may sometimes be kids. “Don’t get into this if you’re not ready to run a straight-arrow operation, and not ready to responsibly transport large amounts of passengers,” Goff says.

Goff forecasted aggressive regulations for the future, especially since buses are governed by the DOT and state, but passenger safety always should be an operator’s top concern. People care about safety, and compliance with regulations will result in certificates that allow operators to differentiate themselves from what Goff calls “illegal bus pirates.”

“Getting accredited shows your clients that you care and are putting their best interests first,” Goff says.

A Good bet

Economic uncertainty and recent spikes in fuel prices make getting into the motorcoach industry a gamble, but the experts agree that now is the best time to do it. Adding motorcoaches to your fleet can capture more business for the rest of your fleet by turning your operation into a one-stop shop where clients looking to book sedans may consider your motorcoaches in the future and vice versa. The chauffeured transportation industry is changing and companies must either adapt or risk losing customers.

One way to test the industry waters in spite of economic turbulence is to start promoting and marketing the larger vehicles but farm out the work to affiliates who have motorcoaches, Vaughan says. If you notice a growing demand or steady revenue stream, then it may be time to invest in owning the vehicles. Vaughan began with limousines and slowly incorporated buses, finding a niche in the business conference market of Orange County.

Because every market is different, it’s important to research trends and regulations. It’s just as important to be prudent and pay close attention to the economy. Operators wishing to expand into the motorcoach business should be prepared to have a 60-year plan that will require hard work and perseverance, Goff says. If an operator sets the correct pieces in place and finds the right niche — or a combination of niches — it won’t be hard to make money.

One of the most essential pieces to the motorcoach puzzle is the driver, or “bus chauffeur,” as some providers call them. Drivers must be ambassadors of the company just as much as the owners because they are often the only face the passengers will see. They are the first impression clients will get of the company, and you want to ensure that it is positive. Hiring kind, responsible, and safe drivers is important because of the many lives entrusted to them. Customers will be willing to pay a premium price for superlative customer service and safety.

Keep your eyes open

On the topic of price, Goff emphasizes that cost-based pricing is key in this industry, especially with fuel prices being a major concern. “It is irrelevant what everyone else is charging,” he says. “Know what your costs are, know your price.”

It’s also important to have fuel protection on your contracts that reserve your right to put an energy surcharge on the invoice if fuel prices spike too high.

The contracts are out there and will come to you as long as you keep your eyes and mind open. If you are overwhelmed by requests, don’t be afraid to farm out work to provide consistent service. When farming out, check websites such as safersys.org for safety records and information.

As far as amenities go, Wi-Fi Internet access always should come standard in the motorcoaches.

SIDEBAR: The Tour Biz

Revenue from the tour business easily can support a $500,000 motorcoach, Goff says. When getting into the tour industry, establish solid relationships with destinations and attractions such as hotels, theme parks, and museums. They will often provide incentives or discounts in exchange for bringing large groups of people to their attractions.

SIDEBAR: Niche Markets

“Like weeds, we grow wherever the sunshine is,” Goff says. Explore different avenues because business can come from anywhere.

• Tug-boat contracts.

• School shows.

• Athletic runs.

• Charter and tour (Goff says most long-distance bus riders are professional women in their 40s and 50s).

• Scheduled-service runs (demand for city-center to city-center service is growing).

• Service to daycare centers for children of nurses and doctors.

• Military contracts through Department of Defense.

SIDEBAR: Things To Consider

It’s important to be able to answer these questions before stepping into the industry:

• How are the market conditions?

• Is there a niche you can fill?

• Is there a strong base of business?

• Who is the competition?

• Can you create a competitive advantage and charge the premium price?

• What are current providers charging for larger equipment?

• What are the permits required in your state?

• Do you have a relationship with a dealership or mechanic for motorcoach maintenance?

• Where will you store the vehicles?

SIDEBAR: Four Things to Do During Growth

Dan Goff of A Goff Transportation offers these tips for operators new to the motorcoach industry.

1. Hire a great manager.

2. Hire great mechanics, and pay them what they’re worth — Goff’s lead shop foreman’s annual salary is $96,000.

3. Find a place to dump your bus.

4. Focus only on your operation — Hall of Fame basketball coach John Wooden never watched videotape of his competition, he focused solely on improving his team.



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