Will Vanpools Drive a New Path?

Posted on December 1, 2008 by LCT Staff - Also by this author

Amid high gas prices, a growing market for smaller cars, and a suffering economy, a comfortable carpool to work seems like a desirable option. Chauffeured transportation companies, with their fleets of luxury limousine buses and vans, appear to be a logical fit for this market. After all, commuter vanpools spread after the energy crisis of the 1970s prompted by legislation incentivizing them.

So far, the demand for vanpools is predominantly met by corporations, public transit agencies, and private van services that match up commuters. Most vanpools are organized among commuters and require only the use of a designated driver, as opposed to a professional chauffeur.

So what is the vanpooling potential for the typical luxury chauffeured operator? Would commuters opt for a “business class” version of commuter vans that provide captains chairs and laptop connections?

One certainty, however, remains: Running a vanpool service with an assigned commuter-designated driver technically would not qualify as traditional chauffeured transportation. This industry is based on trained, vetted, professional chauffeurs schooled in the art of safe luxury customer service.

“Typically, vanpooling appeals to people looking to get out of vehicles because of rising fuel costs,” says Randy O’Neill, senior vice president of the Lancer Insurance Company, a major national insurer of chauffeured transportation vehicles.

“Vanpooling doesn’t require special training like a commercial driver’s license. We saw the spike when the national fuel average burst through $4 per gallon and people started looking for options.”

Vanpools can be promoted on websites for transportation management agencies that act as clearinghouses to connect commuters. Meeting points typically include freeway locations, parking lots, or common neighborhood areas. The most practical vehicles for vanpooling have three or four rows of bench seats in an oversized van that can accommodate up to 15 passengers. “It’s basically pretty Spartan with three or four per bench,” O’Neill says. That runs counter to the comforts of chauffeured transportation, which means operators need to offer vanpools with higher overhead and fewer seats to retain standards.

“If the economics work, it could happen depending on the demographics of the riders,” O’Neill says. “If people are willing to pay more for creature comforts, it would work, but I haven’t seen it yet in the commuter world.”

O’Neill says a probable market for vanpools may be airline travelers who prefer a luxury van at much less cost than a 200-mile commuter flight. With higher fuel costs overall, shorter commuter flights have become cost prohibitive. Ground transportation companies can fill the void of service cutbacks with luxury vehicles on well-traveled routes. That enables travelers to save money and control their schedules.

“If there was an option for an upscale van with laptop and Internet access, then that would be more of an opportunity for luxury people in the limousine world,” O’Neill says. “If it’s on a regular commute, I’m not sure it would fly.”

For owner-operators, a marketing advantage would be to tell riders they can reduce their vehicle insurance costs because they are not driving to and from work anymore, O’Neill says.

Operator Chris Hundley, who owns Limousine Connection of Los Angeles, once tried vanpooling and found it minimally profitable.

“Once the rental car companies got into it, the profit disappeared,” Hundley says. “From an operator’s standpoint, you can’t compete with their numbers.”

Hundley has operated limousines and livery vehicles for three decades in the greater Los Angeles region, comprised of disparate cities and towns connected by a labyrinth of freeways. He has found the most success with short-term job-related vanpooling contracts.

In October, Limousine Connection was providing a daily vanpool for construction workers who needed to be picked up in West Los Angeles and brought to a work site in Beverly Hills. Another client, on a renewed three-month contract, has Limousine Connection take employees back and forth between a workplace and a new company headquarters three miles away.

Hundley believes a luxury commuting service has value and potential, but may be a hard sell at this point. “Everyone is reviewing costs,” he says. “One pitch we use is ‘What is an executive’s time worth? Is he better off in a back seat or driving a rental car?’”

Vanpooling is definitely on the horizon, and more companies will be putting together requests for proposals, Hundley says. “If you can crunch out the numbers and make it work, then it can happen.”

Case Study: A Private Vanpool Service

JIM KRANDA OWNS AND OPERATES A private vanpool service in the commuter-heavy region of Northern Virginia, a rolling prairie of suburban cities and towns west of Washington, D.C.

Kranda’s company, Kava, Inc. of Warrenton, Va. (, has been handling vanpools since 1985, and daily operates four 15-passenger Ford vans. He owns a total of five vans. Kava Inc. takes advantage of a regional Council of Governments program called Commuter Connection, a ridematching service.

“As a vanpool operator, I can get names of people who are going from locales I serve into the greater D.C. area,” says Kranda, whose transportation company operates only in the vanpool market. He also was president of the now-defunct Virginia Vanpool Association.

Each van has an assigned driver to take paying passengers to and from work, Kranda says. “The driver has to come out of the community that has the van,” he says, adding they are not chauffeurs or livery drivers. Usually one of the commuters volunteers to drive and gets a comped monthly pass or one funded by the other commuters. Federal legislation passed in 1975 exempts passenger vans from licensing and inspection requirements, he says.

Each passenger pays a standard rate of $190 per month for weekday commuter service. Employers can subsidize that with a tax-free transit grant up to $115 per commuter. Most of Kava’s commuters all live within about five blocks of each other and commute to a company or office park where all work within five blocks.

Kranda has reservations about whether his vanpooling model would be feasible for luxury chauffeured transportation operators. “It has to do with how much you will be able to charge,” he says. “There is a degree of cost sensitivity. Obviously, people would appreciate the comfort of a limousine type operation, but the question is, is it economically viable?”

An operator who offers chauffeured commuter vanpooling may need to do separate runs with the vehicle during the day to make the effort cost-effective, Kranda says. But, he warns, “Riders can be unforgiving if they are not picked up within a few minutes of the pick-up time.”

Case Study: Public Transit Vanpooling

IN THE KANSAS CITY REGION, 27 vanpools of commuters traverse the metro area each weekday, creating 288 unlinked passenger trips. That’s 288 people not driving their vehicles. The program is run by the planning and special services department of the Kansas City Area Transit Authority (ATA).

Special services manager Donna Brown says the main obstacles to growing the 10-year-old program are the ability to replace old vans and secure enough federal grant money. In fact, the number of daily vanpools is down from its peak of 34 in 2006. Demand has increased with commuters parked on waiting lists.

The transit authority offers three types of vanpool vehicles: 7-, 8-, and 11-12-passenger vans made by Chevrolet, Ford or Toyota. Routes run mostly from the suburbs to either downtown Kansas City or the international airport and back. Fares are based on the number of commuters and distance. A fare never falls below $100 per person per month.

The ATA, which owns the vans, covers driver fares, gas, and insurance. Volunteer drivers are not employees. Funding for the program comes through the Congestion Mitigation and Air Quality Act, and there is a lot of competition for grants at both the federal and local level, Brown says.

Lots of Liability

WHEN AN OPERATOR TAKES ON VANPOOLS, the ensuing growth in fleets and clients resembles the creation of a small business. Lancer Insurance offers two big tips before venturing into vanpools:

1) Do not keep vans on a private insurance policy and then run them as a business. Because vanpools can carry up to 15 breadwinners, a recommended policy includes $500,000 to $1 million limits per vehicle, per incident. “You should be buying limits that reflect that you are in the commercial transportation business,” says Randy O’Neill, senior vice president of Lancer Insurance. “If you make the commitment, you have to treat it as a business and buy the proper coverage, and the proper limits for your passengers.”

2) Operators also should incorporate commuter vanpooling services as separate business entities to isolate them from other business or personal assets. “You want to make sure that someone who may have gotten injured is going after your corporate insurance policy, not going after your personal bank accounts,” O’Neill says.

Three Types of Vanpools

1) OWNER/OPERATOR: A private vanpool company buys equipment and advertises through commuter forums and transportation agencies. The company recruits drivers and lines up commuters who live and work in the same areas. The commuters meet in ride share lots or an agreed-upon destination, and use the van on a weekly or monthly basis. The concept is similar to a school bus contractor.

2) EMPLOYER-SPONSORED: Generally, larger corporations either directly subsidize or recruit drivers and riders to and from work. It’s a bit simpler in that everyone is going to and from the same location. A company that doesn’t directly own and provide vans can either subsidize operators to form vanpools or they can help recruit riders for operators looking to expand vanpools. They may encourage employees to buy equipment in exchange for promoting it internally if an employee is willing to provide the service. An employer can serve as a matchmaker so employees can get involved depending on their work schedules and home locations.

3) GOVERNMENT-SPONSORED: A government agency, either local or regional, such as a transit agency, sponsors or subsidizes vanpools for commuters.

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