People

Limo Service Strategies That Will Last

Martin Romjue
Posted on November 17, 2014
Former Carey CEO Vince Wolfington now serves as chairman and senior managing director of Global Alliance Advisors, based in Washington, D.C.

Former Carey CEO Vince Wolfington now serves as chairman and senior managing director of Global Alliance Advisors, based in Washington, D.C.

Former Carey CEO Vince Wolfington now serves as chairman and senior managing director of Global Alliance Advisors, based in Washington, D.C.
Former Carey CEO Vince Wolfington now serves as chairman and senior managing director of Global Alliance Advisors, based in Washington, D.C.
Global Alliance Advisors Chairman Vince Wolfington appeared on an industry consolidation trends panel on May 20, 2014 during the LCT Leadership Summit in Miami Beach, Fla, where he spoke about service and commodity trends.
Global Alliance Advisors Chairman Vince Wolfington appeared on an industry consolidation trends panel on May 20, 2014 during the LCT Leadership Summit in Miami Beach, Fla, where he spoke about service and commodity trends.
Wolfington traveled to China 40 times during a five-year period to help establish travel service-related businesses.
Wolfington traveled to China 40 times during a five-year period to help establish travel service-related businesses.

Q: Given the business challenges during the last decade of the largest chauffeured transportation companies, what is the outlook for small and medium sized chauffeured companies versus the large national companies and networks?

A: When you talk consolidation, you have to talk geography. Geography is number one, and economies of scale, number two. Those are drivers of consolidation. If you are in the local market, and you want to max your profit potential, you need scale. The benefit of consolidating in a local market is two companies merged together can do better as one instead of separate companies. They can operate more efficiently and profitably together than they can alone.

If you are in a regional market and want to control market share, the benefit of consolidation is higher market penetration which can give you some leverage in pricing and invest in higher quality drivers. You can increase market share and efficiency. Consolidation works nationally if you want to control quality of service in multiple cities and be a major player. With Carey, we would acquire and consolidate local markets first, and then consolidate the national market. We owned the cities that were the backbones of the network.

There are a lot of legitimate reasons for companies to merge with others. Consolidation can be driven by larger players in the market, economies of scale, and complementary talents. When you look at the limousine industry today, the ones who ought to be consolidating are the smaller companies to gain larger market share and be competitive against the networks. But you don’t have to consolidate if you bring a technology platform to the party.

In travel services, the industry that consolidated was the airlines, and the more they commoditized, the more price-sensitive they became. If you consolidate and increase capacity, it helps the consumer. If they consolidate and decrease capacity, with fewer planes and seats, it becomes a seller’s market. When you consolidate and shrink capacity, it’s not good for the consumer.

Consolidation works where the objective is increased market penetration, economies of scale, complementary management and pricing options. When you have a high-value business, you can take on discount business and not kill yourself in the interest of customer relationships.

The challenge with acquisitions, with two companies with independent owners, is it’s very difficult to reach common ground in the following areas: common interest and reasons to stick together, dealing with the biggest players in the marketplace, and committing mindsets to a common interest.

The second thing you need is mutual trust. Give the other guy the benefit of the doubt. And you have to have a common end or goal of a business relationship. There should be clear dialogue on priorities and the ability to talk directly and frankly without taking it personally. You have to be able to disagree on an approach while recognizing the difference of opinion. Most consolidations don’t work. Look at the history books. But ones that do work have those characteristics.

• • • • •

Q: What is the bottom line outlook for the future of the small operator, ones who run 1-10 fleet vehicles?

A: Who am I and what do I want to be? Do I want to be a small business to make a living? Then 10 cars meet that objective. Others want to build a medium-sized business. The metric should be the owners of a company: What do they want to be? There are many guys in the industry who have a comfort zone, 10 cars, 15 chauffeurs, etc. Many don’t expand because they are in that comfort zone, which are driven by expectations of the living they want to make. Many operators have one or two customers who support them. It’s good business, it’s easy. I don’t think size should mandate whether you merge or not. Small companies can survive in local markets where they have a few customers they’ve developed relationships with. If they go out of business and lose traditional customer bases, then they have to think of an alternative approach, which is combining business with someone else.

The limo industry is highly fragmented. The reason why is that in each market you have companies of different sizes. Some clients prefer to use smaller operations and want to support the community. Others look for economies of scale and prefer networks that can offer good rates.  

• • • • •

Industry future
Q: What trends could potentially disrupt or blindside the chauffeured transportation industry?

A: What’s happened in most industries is specialization, as in the medical and hospitality industries. The question is whether the limo industry, with so many different vehicles and contracts and big buses, will move to specialization. Is a diversified fleet as manageable and profitable as having a niche fleet that caters to a niche market? I think what could change is the demands of the marketplace, which would favor or disfavor a higher level of specialization. Travel service is a people-to-people business, about people helping people in their travel with a higher level of convenience and less hassle. There will be opportunity to do business wherever that demand is being met.

• • • • •

Q: What do you see as the future role of chauffeured transportation?

A: In the high-end service business, it’s people-to-people, high-touch service. Conventions and meetings were supposed to shrink because of teleconferencing networks. It hasn’t. Certain markets are growing, and the reason is because globalization boosts them through user access to import and export. I think as long as the economy grows, the industry has a future. People use cars and drivers as a tool; time convenience is important to them. As long as there is a demand for those tools, there is demand for the limo industry. It has a future, but it will be broad based, with single passenger vehicles and mini-buses. International travel will grow and demand will grow. The question is, who will be there to meet it?

• • • • •

Q: What components and attributes of chauffeured transportation will always endure?

A: A high level of communication between you and your customer about service offerings, and within the industry. That is what Uber brought to the party; it’s easier to communicate with a service provider for smoother access, payment and tracking. In terms of fundamentals, you need clear communication on all sides or it won’t work. But you must have a service culture; your employees have to like doing things for other people.

Related Topics: building your clientele, business opportunities, business strategies, business travel, Carey International, corporate travel, customer service, industry leaders, international business, LCT Leadership Summit, leadership, marketing to corporate travelers, operator profiles, staying competitive, TNCs, Vince Wolfington, VIP service

Martin Romjue Editor
Comments ( 2 )
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  • Derek J Dambrosio

     | about 3 years ago

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