Industry Research

Stirring Up Limo Business In A Shaken Economy

Jim Luff
Posted on August 2, 2011

For operators serving the corporate market exclusively, the recession was financially devastating. Many large companies that people never expected to fail died. From the collapse of financial institutions to big box stores, corporate travel seemed to grind to a halt. Even companies that had money stopped spending it lavishly out of embarrassment and criticism.

The Associated Press reported in February 2009 that Wells Fargo, a major consumer of chauffeured transportation, abruptly canceled a pricey Las Vegas casino junket for employees after receiving a $25 billion taxpayer bailout. Congress scolded AIG Inc. for spending $440,000 on spa treatments for executives. AIG is also a major consumer of chauffeured transportation, as is Morgan Stanley, which canceled an employee appreciation trip to Monte Carlo.

Who is serving corporate accounts?
While researching this article, LCT attempted to reach operators of all sizes by contacting more than 50 operators nationwide. It was not surprising to find that very few small operators are handling corporate transportation other than jobs given to them by large companies or networks on an occasional basis. There also appears to be a large, loosely knit network of medium-size operators who frequently network together at industry shows and events and tend use each other to deliver service worldwide, based on nothing more than a handshake agreement and perhaps a meal shared with mutual friends. Of the smaller companies with less than five cars, most operators focused on retail work such as weddings, proms and special-occasion charters. Most cited their fear of being unable to produce enough vehicles or react to the last-minute changes that are so common in corporate work.

Drug trips: Pharmaceutical industry
The “pharma” industry, as our industry calls it, has gone through changes that threatened to upset our apple cart. The effects weren’t nearly as powerful as we thought it would be.

“They haven’t slowed down a lick, although they have managed to beat down the rates considerably in the past three years,” says Jason Sharenow, COO of Broadway Elite Chauffeured Services in East Hanover, N.J. In July 2009, it became illegal for a pharma company to gift a doctor with a golf trip or dinner that in the past would have included limousine service. Today’s pharma business includes transportation of sales and marketing reps to various markets around the world and doctors to speaking engagements.

“It is simply more cost effective and productive to use a car service for traveling employees than pay for fuel, rental cars, airport parking and mileage on personal vehicles,” says Dr. Jamie Jolly, a marketing representative for Daiichi Sankyo.

 

Big spenders? Financial and banking sectors
This industry always has been good to ours. It should be noted that insurance companies play a major part in this segment simply because the nature of their business is to invest. The financial industry engages in “road shows” where executives hit the road and visit clients or potential clients in a single large city or multiple cities over a day or several days. This can include transportation in multiple cities and the coordination of affiliates worldwide. Large financial companies such as Citi Group have thousands of executives who travel.

Good check-up: Hotels & health care services
Considered a staple of the industry, hotels have experienced lagging sales due to the same travel cutbacks that affected the livery industry. These cutbacks have been extended to our industry but are showing signs of improvement.
Kyara Kahakauwila, co-owner of L.A. Limousines in Vancouver, B.C, provides service to hotels and works with Destination Management Companies (DMCs) that manage corporate events within a city. DMCs arrange team building excursions, lodging, meeting equipment, and of course, transportation. Many DMCs work with the same hotels year-round. Connecting with a hotel or the DMC is a gateway to the hospitality industry.
Steve Levin of Sterling Rose Transportation in San Diego has noticed a sharp rise in hotel business in Southern California as the number and size of group meetings are increasing. The most common groups using hotels for meetings seem to be the health care industry, many operators say.

Client advances: Technology sector
Technology-based companies are computer manufacturers, software developers and information management systems. They have teams that make site visits to their clients and require ground transportation for client entertaining and employee travel to client sites. Levin says: “Technology companies are still not at the level they used to be but are returning.” Jerry Thomas, owner of Primetime Limousines and Sedans in North Carolina, counts biotechnology, information technology and telecommunications companies among his top corporate clients.

Always on? That’s Entertainment
The 1980s were dominated by celebrity transportation. Clients included record labels, movie studios, and sports teams. While such clients continue to use our services, the industry is flat. Mo Garkani of Continental Limousines based in Orange County, Calif., considers his second top clients to be this category and estimates business in 2011 is down by at least 20%. Bill Faeth of Grand Avenue Chauffeured Transportation in Nashville, Tenn., says that despite the many country western stars and venues in the Nashville area, sales are stagnant. Entertainment may not be as robust as before, but the ability of its celebrity clients to be seen with black vehicles will always boost the image of chauffeured transportation.

 

Related Topics: building your clientele, business growth, business opportunities, business trends, client markets

Jim Luff Contributing Editor
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