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Posted on June 11, 2008 by LCT Staff - Also by this author - About the author

BOSTON – As fuel prices continue to rise, chauffeured transportation companies are looking toward alternative fuel vehicles, increased fuel surcharges, and driver education to maximize fuel efficiency. They also are seeing the economic situation cause companies to think twice about using chauffeured transportation.

Dav El Chauffeured Transportation Network is working on achieving higher fuel efficiency with its fleet by not idling vehicles, ensuring tires are inflated properly, and making sure cars are operating efficiently.

"We're trying to change the behavioral patterns of our driving staff around the world to make them understand the necessity of what they need to do to use less fuel," said Scott Solombrino, president and CEO of Chelsea, Mass.-based Dav El. "We're monitoring the gas consumption every day and we're making sure we're seeing end results."

Boston, Mass.-based BostonCoach is educating chauffeurs to increase the company's fuel efficiency.

"We spend a lot of time training our chauffeurs on driving techniques that limit the use of gas," said BostonCoach COO Mark Munoz. "We have pretty strict rules about when they are parked or waiting for passengers, idling time, making sure that's reduced as much as possible."

Norwood, N.J.-based EmpireCLS Worldwide Chauffeured Services also is looking at increasing the efficiency of its fleet, and hired a third-party company to educate its drivers about idling and fuel conservation, said David Seelinger, chairman and CEO of EmpireCLS. The company recently introduced an initiative to use nitrogen tanks to inflate the tires of their vehicles instead of air.

"Some of the initiatives that we have, in terms of the nitrogen tanks replacing air in the tires and some of the training with the chauffeurs, will help reduce the amount of fuel consumption we have on an annual basis, which inevitably is going to help our customers, because then we don't have to look to pass on more fuel surcharges as fuel prices rise through the summer," Seelinger said.

However, rising fuel prices have sparked increases in surcharges. BostonCoach maintained its fuel matrix, which bases surcharge amounts on the price of gas listed by the U.S. Department of Energy. Both Carey International and EmpireCLS raised their fuel surcharges to $9. EmpireCLS' had previously been $7, while Carey's had varied between $7 and $9 based on location. Dav El increased its surcharge from 10% of the base price of a transaction to 12%, with an additional $5 fee per transaction.

Another way chauffeured companies are looking to cut fuel costs is by bringing in hybrid and alternative fuel vehicles. Carey has been working with manufacturers to replace some vehicles in its fleet with such hybrid models as the Mercedes R-Class biodiesel vehicle. "We started purchasing those rather than the Lincoln Town Car," said Gary Kessler, president and CEO of Washington, D.C.-based Carey.

Dav El is looking to increase its fleet of hybrids with the General Motors hybrid sport utility vehicle, but is going to phase out its ethanol fleet by year-end.

"We think ethanol was a very bad choice by the U.S. car manufacturers," Solombrino said, adding the influx of hybrid vehicles would mean increased costs for customers.

"Fleet costs are off the wall. The reason is because the costs of these hybrids is much different than of a traditional car, because the technology's still limited and the availability is still limited," he said. "That's not going to level off for another couple of years."

Customers will have to pay approximately 10% to 15% more for hybrid models than traditional vehicles, Solombrino said.

Increasing fuel costs are not the only chauffeured transportation industry concern. The U.S. economic situation has resulted in an increasingly cautious stance from corporate buyers.

"They're a lot more sensitive about pricing than in the last year or two," said Seelinger, adding that in the first quarter of 2008, a growing number of EmpireCLS' established customers had asked about pricing.

"Certainly we're not immune to what's going on in the greater economy," said Carey's Kessler. "All of our clients are managing their travel spend ever more closely."

BostonCoach's Munoz added, "We're seeing a general softening of demand. It's not anything I would term as dramatic, but certainly you can see people are being more aware of and conscious of spend."

Dav El's Solombrino noted a "definite slowdown in how companies are spending," and that companies are taking a closer look at which of employees are even allowed chauffeured transportation as a travel option.

"People who are normally authorized to use chauffeured car are now being told that they're in that category no longer, and they have to give up those privileges," he said.

Even with the talk of fuel costs and the economy recently, the chauffeured transportation industry made several strides in extending its reach. Last October, car rental company Avis Budget Group announced it had bought an interest in Carey. While the company initially invested $60 million and gained ownership of 45% of Carey's common stock, the company had an opportunity to increase the interest to 80% before this October, which Avis Budget chairman and CEO Ronald Nelson told Business Travel News earlier this year the company plans to do.

Partnering with Avis Budget fit into Carey's strategic plans last year, Kessler said. "Over the last couple of years, Carey's seen a tremendous amount of emphasis by our clients on enhanced chauffeured transportation," he said. "We thought that our partnership with ABG would give us an opportunity to leverage their strong customer relations as well as their technological capabilities. We think we're building a tremendous partnership and platform with them to deliver long-term value to our clients."

"We are working closely with the Avis sales team at this point to talk about how we will approach offering joint services to our clients, but that's still in development," he said.

Carey last fall rolled out a fully integrated reservation, dispatch, and billing system throughout every company-owned franchise. The Carey Enterprise System offers a single view of client profile information from a single database, accessible from anywhere business is being transacted.

"It will ultimately be the platform on which we have every Carey franchise globally," Kessler said. "Clients want to know more about what they spend, what services they're purchasing from their chauffeured transportation providers. They want to understand where they're traveling. They want to understand the consistency and background of the service providers."

EmpireCLS now has a service that alerts travelers when their car is 15 minutes away from picking them up, and shows the car's progress online once a traveler is picked up.

Meanwhile, suppliers continue to assess the growing prevalence of procurement philosophies in chauffeured sourcing. "You're seeing a lot more strategic sourcing and procurement departments than I've seen in my 31 years in the industry," Solombrino added. "It's helped consolidate the business because procurement seems to be able to get policies enforced."

More companies also are going through a request for proposals process to determine vendors.

"Companies that in the past didn't go through a formal RFP process are now doing so, and the companies that have been doing it for a while are continuing to raise the level of sophistication as to how the RFP process works," said BostonCoach's Munoz.

EmpireCLS' Seelinger said he has seen RFPs up 25% in the first quarter of this year over last year. "There's more RFP activity than I've ever seen," he said. "There's a lot more questions today than there have ever been. I see a lot more of these RFPs digging into that issue, how we charge a customer, and what all the fees mean."

However, Solombrino said some companies are looking to skip the RFP process and extend an existing contract because they know they will not find a better deal.

Source: Business Travel News

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