With 23 million people mostly living in a handful of coastal cities that make up 60% of the vast continental inhabitants, Australia’s limousine industry is comparatively small but growing more global in stature as it gains international affiliate business.
In business for 11 years, Kris Korkian, CEO of Sydney-based Penguin Cars and Limousines, realized the main stumbling block to growing his affiliate business with his U.S. counterparts was his fleet, specifically, the Holden Caprice sedan.
“The U.S. operators were concerned that we used the Holden Caprice, which they viewed as basically a Chevy — and didn’t want their clients riding in a Chevy,” Korkian says. “What they didn’t understand is that the Holden is the country’s workhorse sedan and made up 50% of my fleet.”
The Caprice (equivalent to the American Chevrolet SS) is built by GM Holden, an Australian General Motors subsidiary. News accounts signal Holden will close domestic manufacturing by 2016.
Australian operator Kris Korkian juggles the challenges of growing international affiliate business while adjusting to a changing chauffeured vehicle market as GM retires the Holden Caprice sedan.
He realized the only way to partner with his American and global counterparts was to upgrade his fleet. “I added luxury vehicles including the Audi A8, Mercedes-Benz S-Class, GL, Viano, Sprinters, and the Chrysler 300 which is acceptable,” he adds. Today, that move has paid off, resulting in 40% of his business coming through international affiliate work. Today, he has 35 sedans, SUVs, Sprinters and vans in his fleet.
Although his business is up about 20% this year, Korkian points out that it is not from growth in bookings, but from two acquisitions of small operators. “If we didn’t do that, we’d be down 20%, which he attributes to the emergence of Transportation Network Companies, such as Uber.”
It’s not so much Australian operators facing direct competition from TNCs taking away their corporate business, but more indirectly due to idle TNC drivers poaching business illegally at airports. Before the TNC boom in Sydney, there were about 800 licensed livery cars. “Now there are about 1,200 cars out there and not enough business to support them, so these guys go to the airport and solicit business, which is illegal,” Korkian says. That business includes airline passengers who may have called a livery service for transportation but instead used a TNC.
Kris Korkian, CEO of Sydney-based Penguin Cars
, with one of his Audi A8 fleet vehicles,
The country’s Department of Transport has cracked down and issued fines for TNC illegal activity, but on the other hand, Korkian notes that just about anybody can get a legitimate license. “For $8,500 a year anyone can apply and get limousine plates — you can even charge it to a credit card and pay monthly, so with little money and an old car you’re in business,” he says.
Regarding commercial insurance, Korkian says, “Nobody checks. What’s the worst thing that can happen to them? They get caught and leave the industry rather than pay the fine.”
Unlike the U.S. where operators join associations to work together to enhance the industry and fight for common interests, such is not the case in Australia.
“We don’t have associations or work together, let alone owners even talking to one another here. It’s very competitive,” Korkian says. “It’s really stupid because if we were united, we could have worked to challenge Uber when they came in. It makes me jealous of the U.S. operators because they work together.”
Korkian was given the 2014 Global Operator of the Year Award on Feb. 18 at the International LCT Show
in Las Vegas, presented by Ty Bobit (L) CEO of Bobit Business Media
, and Sara Eastwood-McLean, LCT Publisher and Show Chair. The award recognizes operational excellence.
Regardless of the competitive climate and lack of a cohesive industry, Korkian focuses on what he can do to improve his operation to maintain a high level of service and grow his affiliate work.
“We do think a little differently and I have learned a lot visiting the U.S. and the industry shows,” he notes. “When I meet people, I try to understand what their needs are.” The main thing Korkian understands as well as any successful operator is a commitment to client service.
For example, the company provides free WiFi in all vehicles and chauffeurs use iPads for signage. Clients can use a mobile app for reservations. Korkian maintains a modern fleet and guarantees on-time pickups, and advertises that if a chauffeur is five minutes late, the ride is free.
“My competition thought I was crazy and going to go bankrupt guaranteeing on-time service,” Korkian says. “But I thought, are they OK with being late? I’m not. We have had people use us just to see if they could get a free ride if we were late. But we strive to be early for pickups, and if we are late once or twice a month, I’m happy to give a free ride — that sets us apart.”
The End of Australian Auto Manufacturing
Kris Korkian in front of the world famous Sydney Opera House.
After more than a century of manufacturing cars, the Australian auto industry is winding down and will be out of business by 2017, according to various reports. High manufacturing costs, limited vehicle choice, and the global recession all contributed to the demise of Ford, Toyota and Holden domestic operations.
Yes, there is concern about higher costs due to importing vehicles, but the upside is that manufactures will not be limited to offering select vehicles produced in Australia, and more competition could keep prices stable.
Holden, for example, will now have a wider choice of new GM vehicles to import into the country to meet consumer and business demand, as well as more offerings from Ford, Toyota and other manufacturers.
According to the CarsGuide.com, which tracks the country’s auto industry, Australia is the most competitive market in the world, with 64 vehicle brands offered, although about 1.1 million new cars are sold annually. In comparison, the U.S. has about 50 brands selling to about 15.6 million buyers annually.
Industry Snapshot: Australia Sees Slow Growth
According to a report by market research firm, IBIS World, taxi and limousine industry revenue during the five years period (2008-2012) is estimated to have grown at an annual 1.7% rate. In 2012-13, revenue is expected to grow by 0.3% compared to the previous year to reach almost five billion.
Poor global economic conditions in 2008-09 caused Australian business confidence to plummet, taking budgets for business travel with it, according to IBIS World analyst Ricky Willianto. “A shift to remote communication technologies such as videoconferencing accelerated, substituting in-person communication. The same poor economic conditions resulted in decreased demand from households as they cut back on spending and outings.”
Tourism fell sharply in 2008-09, driving industry demand even lower. Revenue fell 0.8% as a result. However, industry revenue picked up through 2009-10 and 2010-11, as business travelers returned and consumer demand stabilized. In 2012-13, industry revenue is expected to grow 0.3%. As government-determined supply lags well behind demand, population growth and demographic changes will see revenue increase strongly in the next five years.
One growth area for business is Perth, the capital of the province of Western Australia, situated along the Indian Ocean. With significant mining investment of foreign countries into the regions vast treasure of mineral deposits, the population is projected to grow from 1.9 million today to as high as 5.4 million by 2050.