DEC. LCT Publisher's Page: The mission of this year was about focus, retooling, and turning a profit.
The business travel sector overall saw encouraging signs toward late 2009, especially since September, with more group travel and companies scheduling conferences and events again. The anti-corporate chill has subsided somewhat, as politicians have backed off stigmatizing business travel.
Meanwhile, companies have proceeded more cautiously, opting for lower-profile locations, venues, and travel options. For ground transportation, many clients are becoming more practical in their preferences. Vans, SUVs, and buses blend into traffic better than sedans and stretches without sacrificing head and legroom.
“Companies that want to stay in the game need to be face-to-face with people,” said Robert Alexander, CEO of RMA Transportation in Rockville, Md., which operates a fleet of about 100 vehicles in the Washington, D.C. metro region. “Conferences are coming back. Groups will get less scrutiny than an individual.”
About to explode?
Chicago operator George Jacobs sees a lot of pent-up demand from companies frustrated with teleconferencing and ready to get in each other’s faces again. “Teleconferencing just doesn’t replace face-to-face meetings,” says Jacobs, owner and CEO of Windy City Limousine.
“This year business travelers have been cautious, but they are about to explode,” Jacobs says. “A lot of it will come back in 2010. I think they should be as aggressive as they possibly can. People are bursting at the seams to get out there and travel.”
IPOs and road shows are coming back, along with business travel connected to law firms, depending on the kind of work they do, Alexander says. “Overall, companies are becoming more profitable and efficient, but are not hiring. Once that is done, they will hire again.”
The business travel market gradually started turning around in the summer, with noticeable upticks in cities such as New York, Boston, Chicago, San Francisco, Los Angeles, Washington, D.C., and in North Carolina, says Terry Cox, director of worldwide affiliates for Sunny’s Worldwide Chauffeured Transportation, based near Washington, D.C. “Based on the economy bouncing back in 2011, things are moving and travel is increasing,” says Cox, who has noticed more consistent demand among consulting firms. “It will still be another year before you see the second tier of management getting the service they had before.”
Post-recession clients are much more price-conscious and insist on shopping for rates, Cox says. “If you’re a good company, you have to stick to the basics that brought you to where you were. You can’t sit on your heels and think it will come back,” he says. “Anybody can be a car service, but people are looking for someone who will be one step ahead.” Cox does not think the business travel market will return to 2007 or 2008 levels in 2010.
One way operators can increase revenues is by staying in front of current clients and getting in front of as many new clients as possible, Alexander says. “Make sure that if a company does an RFP, you are in the game. Companies are becoming more price-sensitive. You can’t win it if you are not part of the process.”
Ben Bloch, president of Los Angeles-based Eco-Nation, a green transportation provider, says he sees wide variation in demand among travel managers. Depending on how well a company and its industry are faring economically, some managers are cutting back while others are ratcheting up travel. “It still depends on each company based on risk tolerance, financial position, and market share,” he says. Operators need to study individual industries closely to see how quickly they are recovering.
“No matter what happens, people are more likely to get business when they’re traveling and aggressive,” Bloch says. “The more aggressive companies in this market will be those who gain ground.”
Eco-Nation has seen business travel clients increase in accordance with a rise in entertainment industry production this fall. “The important thing for any company is to make sure they are diversified in terms of customers,” Bloch says.
Hustle for new business
Operator Matt Silver, president of Ultimate Class Limousine in Hicksville, N.Y., serving the New York City region, recently hired an additional salesperson to canvass for business travel. Ultimate buys the phone numbers of operators who have gone out of business and pursues their clients. “It’s an inexpensive way to get new business,” says Silver, whose company has 23 vehicles and 45 employees.
Silver says he hired five full-time chauffeurs this fall as he sees business pick up. He estimates his business travel clientele fell 35% in 2009, but he is preparing for a quick turnaround in business. “It will take some time to go back to 2007 levels, but I will be ready when it does,” Silver says. “You don’t want to be caught short.”
To help business travel clients save money and gain the most value, operators should make sure they offer various tiers of group transportation packages with vehicles of varying size.
“If you are a company looking to cut down on business travel expenses, instead of 40 people in 40 sedans, put them on a bus,” Jacobs says. “It is so much more economical and convenient, and people enjoy the camraderies of being together.”
But despite the push among companies to economize on business travel, sedans and SUVs will maintain a strong industry presence, Jacobs says. With a few exceptions, stretch limousines, however, will remain solidly relegated to leisure travel.
“The limo is dead. SUVs have taken over,” Alexander says. “Clients are still choosing larger vehicles because the perception is better. An SUV has more of a utilitarian image and blends in better. The black Town Car stands out.”
While some companies request green vehicles, there is not a heavy demand for them, adds Alexander, whose fleet includes flex-fuel Chevrolet Suburbans and will include some Royale Ford Fusion Hybrid Ls. “No one has said go green or we won’t use you anymore. We haven’t heard that.”
Alexander advises operators to put egos on the shelf, and just focus on profits. “It’s not how big your cars are or how big your fleet is, it’s how much money does your fleet make you?
“The goal is to make more money, not necessarily make more revenue,” Alexander says. “Use each vehicle to its fullest potential.”
OPERATOR TIP SHEET
Chauffeured transportation operators exeprienced in the business travel market offered these observations and tips for gaining clients in the 2010 travel scene:
• Give something value-added: Talk about upgrades, give an SUV instead of a sedan, track individual travelers and reward them, give companies a 2% or 3% rebate on rates.
• Pursue pharmaceutical companies and markets. This sector conducts many conferences nationwide, and regularly releases products.
• Other industries to pursue: Health care, biotechnology, OEMs, electronics, and computer software.
• Offer clients a shuttle service that makes the rounds at airports and hotels when travelers arrive for a major conference.
• Get in front of people. You cannot wait for business, but must work harder than ever before to get your message out repeatedly.
• Provide clients with a better solution and prove it is preferable to the way they are traveling now.
• Seek companies with good cash positions on or near the top of the market. Focus on those doing well, since they are willing to spend.
• It can take a year to crack a customer. Have a reason for them to talk to you. Do you offer something different?
• Clients are more price conscious and apt to shop around for rates. Offer a variety of pricing options.
• Offer smaller vehicles at a lower cost. Some customers appreciate a lower cost option.
• SUVs are more in demand because they can fit more clients and luggage than a sedan.
• Get good salespeople who can sell value and not just your company. Don’t come in like a used car salesman and only say you can beat a price. It doesn’t help in the long run, since you’ll have to make up for lowball losses later.
• Look closely at your ranks of chauffeurs and decide who may need to leave. Now may be a good time to go through personnel and shake things up.
• Look for companies that are holding regional meetings instead of going to the obvious hotspots, such as Orlando and Las Vegas. Second-tier locations are becoming more popular as companies seek lower costs and travel profiles.
• Use targeted marketing and promotions. Business networking sites such as Linked In and Plaxo offer viral opportunties, while business magazines, radio advertising, billboards, and sporting events reach wider audiences.
• Sports events tend to attract the consumers who can afford to use luxury vehicles. If you can get the leisure business of fans in skyboxes and premiere seats, and season ticket holders, you are more likely to get their professional business.
Gregory Lording, president for FCm Travel Solutions USA, said that while the second half of 2008 was about consolidating corporate travel programs and 2009 a year for reducing costs, 2010 would see companies realigning their procurement strategies to adjust to the changing travel environment. “As the world maps its recovery, companies will need to adapt their mindset and buying behavior if they want to continue to achieve the best value for their travel,” Lording said. “We predict that 2010 will be a crucial year for companies to reassess their procurement strategies including their contracts with airlines and hotels to achieve maximum value in an environment where the pendulum of power is slowly starting to swing away from the consumer.”
— FCm Travel Solutions USA
• • • • •
With air travel and car rental costs expected to remain nearly flat and hotel rates expected to decline, businesses expect to travel more. That growth in travel is expected to lead to increases in travel expenditures. Nearly 7 in 10 (69%) of travel managers responding to an NBTA survey expect business travel volume to grow in 2010. 56% of travel managers project their total travel spend to increase in 2010; another 31% expect their total travel spend to remain flat year over year.
Travel and meetings buyers also expect to see an easing of travel and meeting reductions in 2010. Compared to the previous year, the percentage of travel managers expecting to see cuts has gone down in the following areas: number of meetings (-27%), non-essential travel and conference (-20%) and event attendance (-15%).
— National Business Travel Association
• • • • •
Following weakened demand in 2009, American Express Business Travel expects a pent-up need for travel and meetings to be unleashed in 2010. Overall, business travel growth is predicted to be up 1% for the U.S. and 15% for Canada in 2010. “As the world begins to show signs of emerging from the recession, businesses are adapting to a fundamental shift in thinking focused on proving the value of travel and every employee connection,” said Hervé Sedky of American Express Business Travel.
— American Express Business Travel
• • • • •
A recent Association of Corporate Travel Executives survey shows the global business travel industry can expect “a flicker” of relief in 2010, as a number of corporations say they will spend more for travel, or travel more often. However, these slight gains will be offset by an equal number of survey respondents planning to spend less. ACTE President Richard Crum said the survey underscores the highly fragile nature of a predicted global recovery, and strongly emphasizes the “pivotal” role of the business travel manager. Out of the survey’s 105 respondents, about 50% said they would spend the same amount in 2010 compared to 2009; 25% indicated they would spend more; and 25% said they would spend less. The range for those spending more was 16-45% in additional travel expenditures in 2010 compared to last year; the range for those spending less was 21-30% in reduced travel expenditures.
— Association of Corporate Travel Executives
DEC. LCT Publisher's Page: The mission of this year was about focus, retooling, and turning a profit.
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