NY Times Reports Chauffeured Transportation is Thriving

Posted on December 5, 2007 by LCT Staff - Also by this author - About the author

NEW YORK CITY — A recent feature article in the New York Times about the future of the chauffeured transportation industry shows business is booming, especially among the corporate sector and overseas markets.

The New York Times contacted some of the largest and most successful operations in the country to find out why the industry is in growth mode.

Full story below:

Bright Prospects for a Comfortable Ride

By Paul Burnham Finney

Those plump Lincoln Town Cars that provide a ride as soft as a pillow are clogging city streets and airport access roads these days — a sign that the $2.4 billion chauffeured transportation business in the United States is doing well, particularly with corporate customers.

“Chauffeured cars are no longer considered such a luxury,” said Scott A. Solombrino, chief executive and owner of Dav El, the second-biggest limousine company. “They’re an efficiency tool mostly for highly paid executives who often don’t have time to rent a car.”

Perhaps the biggest indication of the bright long-term prospects for chauffeuring services is the Avis Budget Group’s recent $60 million investment in Carey International, the industry leader with 2006 revenue of about $250 million.

Part of the lure was Carey’s stake in the corporate market, which, according to Gary L. Kessler, Carey’s chief executive, represents more than 80% of its business. The Avis purchase was definitely noticed on both sides of the street: the rental-car companies searching for new ways to grow and chauffeured entrepreneurs who envy the marketing prowess and deep pockets of the big rental car brands.

“We’re entering a huge period of consolidation,” Mr. Solombrino said.

The strong market in the United States comes at a time when the major growth is overseas, according to Camella Lobo, a senior editor at Limousine & Chauffeured Transportation magazine, which tracks the industry. As American companies go global, their managements look for the same services abroad as they get at home, she said.

Typical of this trend is the expansion overseas of BostonCoach. The private company grew out of Fidelity Investment’s own fleet of sedans and limousines in 1985. Today, BostonCoach, like Carey and Dav El, caters to business clients in more than 450 cities worldwide — with affiliates from Bangalore, India, to Zurich.

“New York City is still the epicenter of the chauffeured vehicle industry,” said Mr. Kessler of Carey, whose 200 or so cars and vans are busy largely delivering Wall Street and Midtown Manhattan executives to airports, meetings and — frequently — suburban homes. New York alone has an estimated 12,000 chauffeur cars owned by drivers, many of them franchisees of Carey and other transportation companies.

In a survey by Limousine & Chauffeured Transportation of 100 travel managers who are members of the National Business Travel Association, New York was first in use of chauffeured vehicles. Chicago came in second and then Washington, Boston, San Francisco, Los Angeles, Atlanta, Philadelphia, Miami and Orlando, Fla.

One reason New York is first is that it has three major airports (a car costs about $33 to La Guardia and $48 to Kennedy or Newark, not including tolls, tips and a $5 rush-hour surcharge). With air travel relentlessly expanding and airport routes jammed, business travelers more and more are opting for limousines. New Yorkers, confronted with a taxi meter clicking away when stuck in traffic, think the flat fees are a reasonable trade-off, the limousine owners say.

The easy-entry aspect of the business, coupled with ambition, has turned chauffeured operations into a United Nations of drivers. By pooling family funds, they buy a sedan, file for a license and usually work far longer than an eight-hour day.

Under the watchful eyes of the New York City Taxi and Limousine Commission, which licenses most limousine operators, drivers for upstanding companies take their role seriously. Depending on how many hours worked, a solo operator can take in anywhere from $50,000 to $150,000 or more a year.

The chauffeured-car population is impressive. Coast to coast, there are 131,600 vehicles, according to the limousine magazine, with services ranging from black cars to stretch limousines like the 20-passenger, 30-foot-long Hummer 2.

“Showy stretch limousines aren’t what executives now want,” Mr. Kessler said. “They want a mobile office.” But long limos, some even have hot tubs, do command a high price — $50 to $200 an hour — and work on weekends for weddings, proms and celebrities when business travel downshifts.

With cars generally smaller overseas, personal privacy highly prized, and company cars a popular way to greet guests at airports, foreign countries are just beginning to respond to the demand for quality chauffeured cars with a brand name.

Carey now operates in some 550 cities around the world. “It’s a robust market overseas,” Mr. Kessler said, adding, “especially in London, France, India, Hong Kong and Shanghai.” In China and some other business hot spots, Mr. Kessler said, the chauffeured car of choice is a Mercedes.

With global operations accelerating, limousine operators joust with one another for corporate contracts, usually offering discounts of 5% to 15%. Carey, for instance, has corporate customers who use its web of partners to provide chauffeur service for “roadshows” of new products or financial packages.

Companies, it turns out, spend wildly different amounts for chauffeured services each year — with 21% of the limousine magazine survey participants saying they spend $101,000 to $250,000 annually and 19% saying they pay as much as $1 million to $5 million a year.

How do customers rate chauffeured services?

Participants in the magazine survey said their greatest concern was on-time pickup, clean interiors and professional driving (keep off the cellphone and stop chatting with your passengers). With their own BlackBerrys, laptops and other business tools, they told the magazine, there is no need to crowd the car with digital accessories.

They said that Internet access and satellite radio were two desirables, though secondary. And it might be nice to have bottled water, a newspaper and interior temperature controls. Carey says it provides Wi-Fi service on some cars.

In short, the survey found, corporate customers care mostly about basics, including efficient luggage handling and knowing the best routes. In other travel businesses, it’s called good concierge service.

SOURCE: New York Times

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