Operators Dino Javas and Matt McHugh are examples of industry upstarts who see potential in luxury vehicle service.
It’s a shot and a beer. It’s Wrigley Field, Navy Pier and Da Bears. It’s Lake Michigan, Michael Jordan, the “Magnificent Mile’ and Oprah. Frank Sinatra called it ‘my kind of town.”
For hundreds of limousine operators, it’s the exhausting, demanding place they call home. Chicago is the second largest city in the world for the ground transportation industry. LCT’s Top 50 operators list includes Carey Chicago (which includes American Limousine and My Chauffeur), A-1 Airport Limousine, West Suburban Limousine, O’Hare Midway, Amms and Boston Coach in Chicago. Only New York City represents a bigger slice of the estimated $5 billion chauffeured ground transportation industry. The city itself has four of the largest factors that produce demand for limousine service: a large corporate base, significant convention and tourist trade, an identity as a meeting and destination city, and plenty of luxury hotels.
Chicago Boasts a Large Corporate Base
The Chicago area is home to 36 Fortune 500 companies, including McDonald’s, Motorola, Sears Roebuck, Allstate and Walgreens. Not only do these giants buy a ton of transportation services, but the ancillary vendors, suppliers and consultants create an enormous corporate pie.
Chicago Is a Destination City
Chicago is home to the largest convention facility in North America. McCormick Place hosted 25 of the 200 largest conventions in the country in 1999.
Runzheimer International, the Wisconsin-based analyst of business travel costs, says Chicago is the number-one destination in the world for business meetings. Runzheimer cites the city’s central geographic location and facilities. There is no shortage of luxury hotels, either. The Four Seasons and a number of the world’s largest luxury hotel chains are all here. Once thought of as simply a place to do business, Chicago has become a destination city with fine dining, shopping and a booming arts and entertainment scene. But the overwhelming advantages of the Chicago market are tempered by some of the industry’s toughest obstacles.
City Imposes Tight Requirements
The city of Chicago requires all chauffeurs working in the city to obtain a chauffeur’s license. To qualify for the license, a chauffeur candidate must be fingerprinted, pass a background check, be drug tested and take a six-hour class covering defensive driving and getting around the city.
The chauffeur applicant must have a strong command of spoken English. The applicant must then pass a written exam with a score of 80 percent or better.
John Jansen, owner of Town and Country Limousine in Chicago, says the rules are fair. “But the problem is that it takes so long to get a chauffeur eligible to drive that it is impossible to do anything quickly.”
License plates for livery vehicles in the city of Chicago go from 7000 to 8900. Suburban plates are below 7000 or above 10,000. City police and the Department of Consumer Affairs have broad-based power, including the authority to seize vehicles. Chicago has set up cameras that ‘ticket on the fly,’ where moving violations are photographed and mailed directly to the offending driver.
In addition, the actual owner of a vehicle must appear in court to answer for tickets or violations. Large operators in particular are frustrated by the requirement.
If you opened a limousine company in Chicago, you would assume you could get a list of what is necessary to operate legally. Although there are guidelines for the limousine industry listed on the Department of Consumer Services Web site (http://www.ci.chi.il.us), a neophyte who isn’t Web-savvy may be confused. Tracey Hodge, owner of Limousines of Arlington, says, “When I first got into business, I obtained the correct plates for my vehicles and I got set up at the airport. I did not realize that I was liable for the Chicago tax until I was told about it by my fellow operators.”
The various departments do not seem to interface, and a new operator can unwittingly break the law. Fortunately, the Illinois Limousine Association has produced the ‘Legit Kit’(see sidebar).
The city of Chicago charges a yearly $200 fee per company, plus $3.50 per day for any vehicle that puts its nose within the city limits. That is $1,277 per year, per vehicle.
Stuart Rothstein, owner of Smart Cars and Schaumburg Limousine, operates more than 50 vehicles per year in Chicago at a cost topping $60,000.
“It’s a huge number and I don’t really know if we can pass it on to our customers,” Rothstein says. Compare that to the city of Los Angeles, which charges operators between $1.06 (sedan) and $1.50 (six-passenger stretch) per day, per vehicle for each day the vehicle works in the city.
In Boston, the city charges no set per-day fee, but the state charges an excise tax that can be as much as $1,000 per year, per vehicle. That fee, however, is based on the value of the vehicle. For example, a $60,000 limousine would result in a $1,000 tax, but a three-year-old limousine may be assessed only $350 in taxes in Boston.
Competing in the Shared-Ride Arena
The Chicago area is the biggest player in the country in the ‘shared ride’ arena. A consumer can schedule a shared ride to the airport in an executive sedan or limousine for a fraction of the cost of a solo ride. Barbara Simkus, business manager of West Suburban Travelers Limousine of Winfield, IL, explains, “Shared ride is available throughout the Chicagoland area. Depending on where the pickup point is and the number of stops, a consumer can get to O’Hare Airport for between $18 and $40. Usually, it is one or two stops to the airport. Customers are accustomed to this, and they don’t mind spending an extra half-hour in the car when they are saving money. Many times, they make friends with the person they share the ride with.”
The problem with shared ride is that in order to be successful, there must be enough passengers to make the trip cost-effective. A client who arranges a $25 shared-ride trip to the airport cannot be converted to a $50 solo ride simply because you cannot book another passenger.
Hodge explains, “If you own a small limousine service [six vehicles] like I do, you could never do shared ride. You would not have the volume of business to book enough two- and three-passenger trips. But when you are selling normal luxury limousine services, you have to compete with this shared-ride mindset.” John Jansen says the problem goes deeper. “When people go into business in the Chicago area, they will start using the shared-ride prices as their guide. So let’s say I charge a $70 rate for a trip to O’Hare. The new guy may come in at $38. He is very busy driving the trips himself and he probably thinks he is doing well. Then a transmission goes and four months later, he may go out of business. If the same guy bought a hot dog truck and after a month he saw that he couldn’t make a profit selling his dogs for 50 cents, he would make a change.”
O’Hare Airport serves more passengers than any airport in the world. In 1998, there were 883,000 flights from O’Hare, with over 80 million people passing through the airport. That is nearly 2,500 scheduled flights per day. (There were also 265,000 flights from Midway Airport or 725 per day.) At most of the nation’s largest airports, a chauffeur meets the passengers at the baggage claim area at the arrival section of the terminal. But this is impossible with the massive number of arriving passengers in the Windy City. At O’Hare Airport, the arriving passenger must call the limousine operator from the baggage claim area and then meet the chauffeur outside the terminal. The waiting time can be 15 minutes or as long as an hour at peak times. Customers complain about operators being late, and chauffeurs get frustrated.
Rothstein says that many corporate customers will use chauffeured vehicles only to drop off at O’Hare. “They will jump in a cab and it will end up being much faster on the return trip.” Furthermore, when Rothstein receives O’Hare pickups from companies outside the area, problems arise. “We will get a job from a New York company and their customer will look for their chauffeur at baggage claim,” Rothstein says. “When they don’t see anyone, they will call New York to complain. It gets back to us and I get a call about a screw-up. There wasn’t any screw-up. This is the system we have, and we work very hard to give our customers the highest level of customer service possible.”
Heavy Traffic Is a Constant Frustration
There are 53.7 linear miles of expressway in the city of Chicago. The city has more than a million passenger cars, 69,000 trailers and semis, 52,000 trucks and almost 20,000 motorcycles, according to the city of Chicago. Traffic has gone beyond the “nightmare” description.
Our office is 23 miles from downtown Chicago,” says Hodge. “We have to give our chauffeurs two to two-and-a-half hours lead time to pick someone up downtown at peak times. It is very difficult to get a customer to pay for all of that time.”
John Sokol, president of Ritz Limousine, says “rush hour” has expanded dramatically. “We have almost constant traffic problems, but rush hour goes from before 4 to after 7 p.m. When we do a regular airport drop or even a pickup at a downtown business, our profit margins are extremely small.”
While the city of Chicago designates taxicab stands and bus parking downtown, there are no spaces downtown for limousines or executive sedans.
This causes trouble when you are picking up in offices downtown and your chauffeur is forced to wait,” Rothstein says. “He has to move to avoid tickets and then the client is screaming for his vehicle.”
Chicago has one of the highest insurance rates in the limousine world. Operators report full coverage ($1.5 million) for a basic sedan in the range of $3,000 to $4,000 per year, about the same as New York but higher than other cities of similar size.
Fuel prices in Chicago were the highest in the country and topped the $2 per gallon mark for a time in 2000. Operators were forced to raise rates or add a fuel surcharge.
The city consistently features one of the fiercest winters in the country, with significant snowfall and sub-zero temperatures made worse by the fierce winds whipping off the lake.
Jansen says the challenges make the successes more satisfying. “When you see your fleet on the road and your customers satisfied, it is definitely a source of pride. This is a tough place to be successful.”
Operators Dino Javas and Matt McHugh are examples of industry upstarts who see potential in luxury vehicle service.
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