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[Note to Readers: Below is an extended website version of the Q&A published in the July issue of LCT Magazine. The digital edition is out today].
Cover shot: Scott Solombrino at the SLS South Beach Hotel, Miami Beach, Fla., Tuesday, May 24, 2016. Click to enlarge. (Cover photo by Sergey Yusin for LCT)
On labor, technology, corporate travel and leadership within the Industry, LCT Publisher Sara Eastwood-Richardson’s exclusive interview with Scott Solombrino, CEO of Dav El/ BostonCoach Chauffeured Transportation Network and longtime National Limousine Association board director, gleans valuable insights to our industry's next big move.
Sara: The gig economy is the latest term being used to define a class of workers either freelancing (an independent contractor who works on projects for multiple companies) or as independent contractors (typically refers to a person who does freelance work for just one company). What's our next big move with respect to labor and this growing gig economy?
Scott: Companies wanting to cash in with big profits on the backs of unsuspecting and unprotected workers will only create a bigger problem on our government's tax base as tens of millions of people aren’t accounted for. None of these gig economy companies are contributing to the country’s infrastructure bills including social
security, FUTA, FICA, Medicare or sales tax. They don't pay any local taxes. Additionally, these companies are all incorporated offshore. So the bigger problem for the U.S. is if you take all those tax revenues out of the system, how do you run the country? And that's why this is going reverse. I believe the government
is catching up to this nonsense that the gig economy is any different than the traditional economy.
The government passed laws that required corporations to insure their employees to have healthcare. The gig economy does none of that, so you have more uninsured people who are in the gig economy. It's time to wake up and say, "Wait a minute. You are still an employee. You have rights. You have entitlements. You're entitled to get overtime. You're entitled to be covered by workman's compensation if you get injured. Otherwise, who’s going to cover you if you get into an accident and can't work anymore? Who's going to pay your insurance? You don't have a pension option. You can't unionize."
All of these basic labor rights were the basis of the labor movement for the last 50 years in the U.S. It has all been eroded and so when regulators are looking at this, they're now saying, "You're not different. You're still driving people for money. Or you're still booking a hotel as if it's a hotel. You have to comply with the same rules as everybody else."
That has been the position we have taken at the NLA to try to get the government to focus and say, "It's not different. You are breaking the rules." And we think there's traction out there at the state level and the federal level and we think it's going to reverse itself. We think ultimately, we'll prevail.
Sara: Employee retention continues to be an industry concern. However, with all the bad press surrounding TNC labor issues, do you see this as a temporary problem for us?
Scott: Well, here's what's going on with Uber in the chauffeured car industry. Three years ago, we all lost people to Uber and Lyft. And three years later, they've all come back. Nobody's leaving traditional companies today to go drive for Uber. And there's a couple of reasons why. Number one, nobody wants to ruin their
personal car. They put on so much mileage in a year, and the chauffeurs’ car becomes worthless. Most car leases are three or four years. You put on 100,000 miles in one year and you still owe three years' worth of lease payments. What do you do? So, the first thing is people destroyed their personal car. The second thing is people had no health insurance and of course under Obamacare everybody's required to have health insurance.
The third thing I'm hearing from drivers that come back is they hated working with the client base they were driving. Nobody wants to drive 20-year-old drunken girls on Friday and Saturday nights at 3:00 in the morning who are throwing up in the back of the car.
And ultimately, people came back saying, "I made no money. My expenses exceeded what I was making in revenue. My car is destroyed. And I owe all kinds of expenses I'm never getting reimbursed for. Why would I want to keep doing that? My average pay was $4 an hour."
Dav El/BostonCoach has a couple of hundred former Uber drivers with a new appreciation for our company.
Now, here's the good news for the chauffeured car sector. Uber and Lyft have created a whole new class of people who like driving people. Your entry-level chauffeur now might be a former Uber driver. They actually have experience, they know their way around town and they like to interact with people. So Uber and Lyft have created a new workforce class for us.
Sara: Do you see any reason why owners of chauffeured services allow their inventory and their drivers to be used for Uber?
Scott: No. I think anyone who does business with these companies is absolutely killing their own business by distraction. Stay focused on building up your own client books and perfecting your service levels. Ultimately, the Ubers and Lyfts of the world do not need us. They will “use” our inventory if their workforce
depletes and that’s it.
Remember, there are 95 million Americans not working because they choose not work. The Uber and Lyft driving staff is in that number because the Bureau of Labor Statistics only reports people that are W2 employed who are working real jobs in their statistics. So the 1099 category doesn't come up in the unemployment rate; it
doesn't exist. Helping them is not helping anybody but Uber and Lyft. I think it's a mistake.
Sara: The truth about tech. What's our next big move as an industry? The why, when, who and hows?
Scott: It's very simple. There are three companies that produce $600 million in revenue a year and are the primary drivers of our industry commerce. They are DavEl/Boston Coach, Carey International and Empire CLS Worldwide Chauffeur Services. Those companies must decide on what platform is going be “the” platform.
Sara: So you're suggesting it be one network?
Scott: Oh, I think you're going to see coalescing with regards to on-demand. Absolutely, positively. In my opinion, the big companies have no choice but to get together. The TNCs are eating away at our client base and what we have to get to ultimately is on-demand. I will concede here that many of our customers don’t ask for on-demand and don’t care about that component. They just want booking ease. However, things are trending and changing every day towards on-demand and to ignore it and pretend it's impacting our business is simply a fool's game.
Sara: Well, you have to get the technology first.
Scott: We believe we have the technology. I think in the coming months, there's going to be an announcement where the industry will have two choices. If you want to survive, you're going get on the platform the big three have adopted. And if you don't want to survive, if you're on your own, good luck. You might be able to run a nice, five-car business for a few years and live happily ever after, but you're
never going to have any opportunity to participate, I think, in the global corporate market.