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Lenore D’Anzieri is an independent travel and transportation consultant and former executive vice president of Luxury Worldwide Transportation in Brooklyn, N.Y., a 120-vehicle operation in the New York City region. D’Anzieri, a certified travel expert (CTE) in corporate travel management, recently became the managing partner of her new firm, the Driving Results global travel and transportation consulting group in New York.
MALVERN, Penn. — On a golden, crisp afternoon last fall in the semi-rural rolling countryside near Philadelphia, operator Dennis Adams was in the kind of optimistic mood that reflected the picturesque day. His company, Celebrity Worldwide Chauffeured Transportation, was handling about 100 client runs that weekday, about 30 more than on an average weekday and far more than the 30 runs Celebrity averaged per day during the depths of the Great Recession.
Such an upswing in business travel comes at a cost, however, as operators like Adams are finding out. At the same time as its number of runs rose, Celebrity Worldwide went through two RFP processes with prospective clients and lost on both. While chauffeured providers have been seeing more business in 2011, prospective corporate clients are shopping around for lower rates.
“It’s just so competitive,” says Adams, who runs a 50-plus vehicle luxury fleet and a charter jet service. “My opinion is that among industry operators you have two groups: Those in business for a while who are the backbone of the industry, the operators who really know the cost of doing business. And then you have smaller operators trying to grow the business and willing to take smaller profits and who don’t know the true cost of operations. So they undercut you on RFPs.”
That tension affects both sides of the chauffeured transportation industry’s revenue coin: pricing and procurement. A combination of post-recession pickiness on price among clients and advancing efficient technologies are keeping rates flat or low while intensifying competition among operators. The challenges going forward for operators are how to maintain price integrity, minimize operating costs, and preserve gainful profit margins.
“Everyone is trying to get market share like in any business, and the corporations are benefiting from us having such a wide swing in our [industry’s] pricing,” says Adams, citing hourly rates for a Lincoln Town Car that can vary from $40 to $70 nationwide. “Everything has changed since the recession. Everything is a deal. Everything is a negotiation.”
State of market
The chauffeured transportation industry overall is not ready to respond to corporate America with a sales approach because the industry has not been corporatized long enough, says Lenore D’Anzieri, an independent travel and transportation consultant and former executive vice president of Luxury Worldwide Transportation in Brooklyn, N.Y., a 120-vehicle operation in the New York City region. D’Anzieri, also a certified travel expert (CTE) in corporate travel management, draws upon a vast array of professional experiences in customer service, sales, account management, operations, business travel analysis, business development, and marketing at major companies.
“There has been a dramatic change,” says D’Anzieri, managing partner of Driving Results global travel and transportation consulting group in New York. “We’ve seen many companies respond to the needs of corporate America by generically lowering prices. We’ve seen companies want to buy — and operators comply.”
D’Anzieri emphasizes an approach that echoes among many advanced chauffeured operations: Don’t lower base prices.
“The approach we took with [Luxury Worldwide Transportation] was we did not lower our prices,” D’Anzieri says. “We created thresholds and rebated X amount to a corporation for usage of our company. Creative pricing strategies allowed us to give a competitive offer to our clients and at the same time we did maintain our integrity and profitability.”
Rebates averaged about 3% but never exceeded 5%, she says. In most negotiable situations, the clients preferred to have money back as part of the overall deal. “We have never negotiated on base prices, regardless of the state of the economy. There are other ways to do it.”
D’Anzieri advises companies to add or take away line-items, or charges, such as administration fees, credit card fees, wait fees and surcharges. “If you have all-in rates, then you are compromising on pricing. If you have separate line-items, at least the perception from the prospect is the rate stays the same, and it’s great that you can take away a fee.”
Overall, the market is trending in the direction of “more for less,” says Evan Blanchette, manager of global alliances for Coastal Car Worldwide in Ft. Lauderdale, Fla. Coastal only offers one-time discounts on a case-by-case basis. “We don’t fluctuate much. We might do a one-off to help get the bid. We’re priced competitively already, not premium. We’re priced to grow so it’s hard for me to discount.”
Like Adams and Blanchette, Los Angeles operator Chris Hundley shuns across-the-board discounting. He chose to drop out of some nationwide markets during the recession instead of racing to the price bottom. “We knew we weren’t going to be the top guy in a RFP. We stepped aside for a while and have gotten back in in the last six months. I find everyone is far more stressed out and under the gun. Pricing has loosened up a little bit, whereas 18 months or two years ago it was all about the price.”
Hundley’s 33-year-old company, Limousine Connection, handles its pricing by city: A level is for major markets; B level for outlying cities; and C-level for what Hundley calls “oddball cities,” such as Fargo, N.D. The pricing levels have different mark-ups, allowing for higher margins in some areas to make up for lower margins in others.
“You make money on some cities and lose money on some cities,” Hundley says. “We have level A, B, and C. When people are shopping for a national contract, they want one rate for all cities. They don’t want to hear that cities are different amounts. I have found that to be a good tool to use for nationwide pricing instead of having 57 rates. But some might be losers.”
Hundley advises that in chauffeured transportation, higher volume rarely makes up for lower rates. “You lose more money in the volume. It’s generally not a good idea.”
The rise of more economical vehicles such as the Toyota Camry, along with the efficiencies of electronic booking via such online sites as Limos.com, are leveling prices, says Dan Goff, general manager of A. Goff Transportation, which operates in all major Virginia cities. “If 10 consumers are willing to forgo human interactions for everyone who wants high-touch, then we make more gross [revenue] per car which pays our bills.”
The trends in competitive and optional pricing levels among hotel and airline travel websites is extending to ground transportation, he says. Electronic distribution systems (i.e. websites and smart-phone apps) result in fewer people involved in the process of getting a ride, such as reservationists, billing staff, and dispatchers. “As difficult as it is for the industry to accept, we are becoming much more like taxis and black cars,” Goff says.