10/14 update: Senator Chuck Schumer (D-NY) calls for more scrutiny of stretches nationwide.
At the Limousine & Chauffeur Show & Conference in Atlantic City last December, more than five hundred people attended a panel discussion moderated by Limousine & Chauffeur executive editor Scott Fletcher which included panelists from both the coach-building and livery segments of the industry. Brief introductory remarks by the panelists preceded a question and answer period covering a variety of topics. The following comments have been condensed from the transcript of the session.
Fletcher: I would like to introduce the panel members: Danny Aldridge is the national director of sales and marketing for Armbruster/Stageway Coachbuilders. David Klein is the president of Dav-EI, a national limousine network. Jon Cornell is the president of Rush Limousine in Cleveland and is the past president of the Ohio Operators Association. John Rosing is the manager of Manhattan D.C. Livery and a director of the Washington D.C. area limousine association. Matt Baines is the executive vice president of Moloney Coachbuilders. And Michael Renehan is the president of Allaire Limousine in Brielle, NJ.
I would like to start by talking about the recent growth of the limousine industry. Over the last few years, we have experienced the feeling that the industry is moving forward, that there are more cars being built, that there are more operators in the business, and the industry is becoming more visible to the public. Jon Cornell has been in the business & for five years and has experienced growth as have many other people in this room. Jon, what are your perceptions of growth in the industry?
Cornell: When I started five years ago in Cleveland, the industry was very narrow. There were mostly black limos, six-door limos, and formals, and there was not much entertainment-oriented business. Most people were not aware of limos and did not use them. I was the first to use stretch limos with bars and TV consoles and started showing that limousines were a form of entertainment. I tried to pro mote a new market by creating a “need” that had been non-existent and making people aware of it. That was my format for growth. I didn’t want to step on the feet of operators who had already been in business for thirty or forty years. I didn’t want to chase their accounts. I wanted to start clean with another end of the business. Diversification was important.
Renehan: Our business started eight years ago. We’re a medium size company with thirty vehicles including formals, stretches, sedans, vans, and station wagons. When we started, there were probably fifteen operators in our county. Now there are probably sixty operators from 1-2 car companies up to one-hundred and fifty car fleets. We break our marketing areas down and about sixty percent of our work is airport service, fifteen percent of our work is from the private sector, and eighty-five percent of our accounts are corporate. As far as growth in New Jersey is concerned, it’s unprecedented. The drunk driving laws in New Jersey, which are among the most strict in the country, have had a great influence on people making limousine reservations. We also get business from our twenty-four hour nationwide toll-free reservation line. That’s not only for stretch and formal limousines but also for station wagons, sedans, and buses.
Klein: Dav-El has been in business for fourteen years and over the last 6 or 7, we have been one of the fastest growing companies in the United States. We were recognized by Inc. magazine for the last two years as one of the five hundred fastest growing companies. Our growth has been in all areas: sedans, formals, stretches, etc. Currently we are finding that most of our business is coming in the corporate area. Dav-EI is a national association and our growth has come from the business that we generate for one another. We have over one hundred affiliates in the United States and Canada, and the sales efforts of each of these operators have helped the entire company. Aggressive marketing has helped us. Each city is unique and you have to go out and find what the market is to make the best use of your limousines in that city. You should try special kinds of promotions, tours, convention groups, nights on the town, or whatever it takes to get those limousines out of your garage. Watch for changes in the market. We are finding that the stretch market is leveling off and we are getting some price resistance from customers who have been hiring limousines for thirty-five dollars an hour, plus gratuity. The livery client can only take so many five-thousand dollar-a-month bills before they decide to buy their own limousine and hire a chauffeur. So our growth has been in various markets and we are always looking for new markets.
Rosing: The Washington D.C. market has spurts of business. Two out of every three years, the World Monetary Fund converges on Washington and for a ten day period we need over a thousand vehicles. Every fourth year the presidential inauguration requires four hundred limousines for a four day period.
The District of Columbia has been a conservative area for limousines. The embassies and diplomats all have their own sedans or formal limousines. Our company has tried to develop the corporate market as well as the entertainment market. We are one of the companies that introduced the stretch limousine to the area and, frankly, we received some initial resistance by some who thought it was a little too ostentatious. After several years, we see the stretch market as being one of our strongest growth areas. The other areas we concentrated on were the embassies, lobbyists, and corporations. We pointed out that it was more economical to use our service than to have their own vehicle when you consider all the internal operating costs, particularly since their needs also occur in spurts. We have also developed a new approach to try and hold onto the market that David Klein mentioned. We all walk the tightrope of working with that good regular customer who eventually does an economic analysis and determines that it would probably be cheaper to have their own limousine and pay their own driver. We’ve used an approach of going to those people and pointing out the tax and other benefits of buying their own car and turning it over to us when they’re not using it. So we provide the garaging, the maintenance and the general upkeep of the vehicle and make it available to them X number of hours per month on a guaranteed basis and also do a split on the profits when we’re using it for general livery service.
Fletcher: Growth has also affected the coachbuilders. Moloney is one of the most established coachbuilders in the country and is recognized as one of the “brand names” in the industry. I would like to ask Matt Baines to talk about the growth patterns that his company has observed.
Baines: We have built luxury limousines since 1969 and in those days we had to go out and look for the customer. Now the industry has advanced tremendously and this kind of exchange between operators and coachbuilders will help us build cars to meet the different needs in the market.
Fletcher: I’d like to ask Danny Aldridge to give his company’s perception of industry growth.
Aldridge: Armbruster/Stageway, as many of you know, is one of the oldest limousine manufacturers in the world. We built our first stretch limousine in 1922 and, through the years, we have grown to where we are today with your help. We build over forty models of cars which are designed for different types of services. Looking at the Show floor, you have seen many lovely cars with many fine features. Some fit your market area and some do not. We believe that you, the customer, have the ultimate right to choose what you need. Therefore, we offer a wide variety of cars that are designed on Chevrolet Suburban chassis, we build six-doors, luxury VIP cars, and we are one of the few manufacturers who believe in the new Cadillac C-body cars. We have grown considerably since 1887, and with your help we intend to continue growing over the next few years.
Fletcher: I would like to invite questions for the panelists.
Question: Why are the manufacturers moving toward dealer distribution instead of direct distribution, causing operators to pay higher prices for limousines?
Baines: As the industry has grown, it became difficult to handle our customers one by one. The other major consideration is service. We are entering a new program where distributors will have trained personnel to service our product. We cannot service people on a daily basis out of the Chicago area as effectively as we can through a dealer network where facilities commit themselves to service a certain number of vehicles in a particular area.
Aldridge: Armbruster has a multifaceted marketing program in that our six-door cars are sold primarily through the funeral car distributors across the nation. As far as the cars that you are primarily using, they can be bought directly from the factory in some areas, and through distributors and automobile dealers in other areas. As Matt said, service is the key. We are going to try and service you efficiently and still pro vide a product at a reasonable price. We are currently trying to establish a national network of independent service centers that can work not only on our cars but also on Moloney cars, O’Gara cars, and others.
Question: What is the viability of the down-sized ‘85 Cadillac for conversion into a stretch-limousine?
Aldridge: Obviously the ‘85 C-body does have a smaller trunk. Cadillac is addressing this problem and has told us that they will have a larger trunk in the foreseeable future. We have to take what the manufacturers give us to work with and in this case it’s a small trunk. We have two choices, to leave it as it is or to enlarge it on our own which would increase the cost by several thou sand dollars. At this time, we don’t feel that consumers will bear that in creased cost, so we are making the car available with its standard trunk which can hold a reasonable amount of luggage. It may not be the car you need for your airport transfers but it does have a place in your fleet. If you specialize in airport transportation, you will probably want a full-size Cadillac or Lincoln, or a Suburban limousine or a van.
Fletcher: Is Armbruster planning to go into immediate production on the C-body?
Aldridge: We are in production, we have cars in the field, they have only been in use for three or four months, but they are holding up in the field. We have not had any major problems as far as brakes, transmissions, air conditioners, or anything of that nature. But the car is in production and they are holding up at this time.
Question: Does the Cadillac warranty still apply to a C-body Cadillac when it’s converted into a limousine?
Aldridge: Technically, when any Cadillac, be it a Fleetwood Brougham, Sedan DeVille, Eldorado, or whatever, is altered in any way, the warranty is null and void. In most cases, however, you will be able to work with your local dealer to get your car serviced under warranty if it has an engine or transmission problem. You have not had a bin ding warranty in the past on any Cadillac model stretch-limousine. Armbruster is looking into several independent sources that can give us a warranty to cover the complete vehicle that we can pass along to you. We want to be able to warranty the engine, transmission, drive- shaft, and the rest of the car, and be able to take care of everything for you but this program is not yet in effect. You have no problem with Lincoln limousines because Lincoln Town Car limousines are covered by the same warranty that they had before being converted. They cover the engine, transmission and rear end, and we cover the driveshaft. We hope to offer a warranty covering the entire vehicle sometime in the very near future.
Question: Don’t limousine distributors take unfair advantage of small operators with limited buying power?
Aldridge: Distributors and dealers actually provide advantages for operators by working with you on financing, leasing, trade-ins and other services that most manufacturers are unable to provide. Where else can you dispose of a car with 150,000 miles on it? You need to have this full range of service.
Question: Getting back to David Klein’s comment that the corporate market segment is growing, is this the area with the most potential or are other markets also growing?
Klein: All segments of the market are growing but I think that the most growth will be seen in corporate travel. Nationwide, there seems to be a need for limousines without bars and televisions like Cadillac has been building for many years. The coachbuilders have not been very sympathetic to limousine operators. We have been talking to deaf ears until Dillinger/Gaines started building corporate limousines. Coachbuilders need to realize that corporate business is important to us and we don’t have a supplier like Cadillac anymore.
Question: What is the best way to reach the market and improve business?
Klein: There are several ways that have been successful for us and the first thing to do is to find out what the best particular market is in your area. Find out who the primary limousine users are and target that market for special ideas and special promotions. Try advertising in local magazines, or direct mail advertising, and go out and sell your ideas. One example would be to try an advertising campaign to local neighborhoods saying that the best way to start a vacation is in a limousine so that you get to the air port on time. “Don’t drink and drive,” is a great area that I think we can all get serious about promoting. The laws in this area are very favorable to us. Once you have found your market and have developed a program, advertise it by direct mail and in newspapers and magazines. One thing we have found over the years is that the yellow pages do not pay. Our company has never been a big advertiser in the yellow pages but our industry has been one of the biggest suckers going. This albatross is around your neck all the time. Every month there’s that ‘bill from the yellow pages. I don’t understand how a 4 or 5 car operator is going to support a half page ad in the yellow pages and think that over the years it’s going to pay. Someone looking through the yellow pages is already going to use a limousine but we have grown to be a fairly large company by using new ideas and promotions so that we are not going after other people’s business but are getting new people into limousines.
Renehan: We find that in developing business, the main thing to keep in mind is to provide good service to customers and to keep in touch with those who have used our service. We encourage customers to let us know whether or not service was good so that if someone is dissatisfied, we can respond to them. We also believe in promoting ourselves locally. If we have a safe driver award, we let the local newspapers know about it. You should let people know when you do something in a positive manner. When we went to a toll-free reservation system, we sent out a press release and received free advertising. Referring to what Dave Klein said about yellow page ads that has always been a bitter pill to swallow. We try to justify it by using RCF numbers that are designated for certain areas. In New Jersey, the phone bills have the numbers listed and we can tell how many calls we get from each number and adjust our ads according to response. Generally, though, we find it is best to keep our current customers satisfied rather than have to spend money to attract new customers.
Cornell: One of the ways that we have promoted business was to enter an agreement with Ticketron so that customers can make reservations with us when they buy tickets for different events. They can get tickets through the mail just like for a concert, and use Master Card or Visa.
Rosing: We have found that our most effective salesmen are our chauffeurs. We give our chauffeurs formal training in ways that our most effective salesmen are our chauffeurs. We give our chauffeurs formal training in ways to develop business for us. We teach them to pass out cards and brochures, but more importantly how to behave with good customers or potential customers. We service four major hotels in Washington D.C. and part of our relationship with them is to transport their VIP guests. Our chauffeurs are trained how to talk with those guests in a discreet and professional way. Often these guests can become customers of ours.
Question: Do coachbuilders consider the particular needs of west coast operators in building limousines?
Baines: Yes we do. There is a different market on the west coast. We find that the corporate market is very strong on the east coast, as Dave Klein said, and west coast operators seem to want more options. We are aware of that and are building cars for both markets. We appreciate feedback from operators in different parts of the country concerning the kinds of equipment you need.
Aldridge: There certainly are different markets and we get feedback from automobile dealers, factory personnel, and distributors, as well as from operators. We take all of this into consideration and this is one of the reasons that we make forty-four models of cars.
Question: How can we improve air port restrictions concerning the operation of limousines?
Rosing: The only solution to the airport problems in Washington D.C. was to form an operator association. National Airport is old and small, and there is no room for expansion. The Washington Area Limousine Association has nineteen members and is two years old. The airport situation is one of the issues we addressed first and it took us almost two years to reach what is, fortunately, a very happy solution. We got a letter last month from the FAA designating four parking areas at the airport. Many of us had tried to do that individually but we had never gotten anywhere. As an association, they recognized that we were a viable force to contend with and it worked. One of the things that made it work, frankly, was that we hired a lobbyist to support our efforts.
Klein: I’m very much in agreement that associations are important, even for small operators who might feel they are too busy to get involved because they drive and take care of every aspect of their business. You need a strong association as well as cooperation between operators.
Question: Do the larger coach builders receive fleet discounts from car manufacturers and, if so, why are they not passed along to limousine operators?
Baines: Our base cars are purchased from distributors and we are not directly involved with the manufacturers. Some of those fleet incentives from the manufacturers do not reach us as coachbuilders.
Aldridge: Armbruster is in a similar situation in that many of our vehicles are sent to us by automobile dealers, or by operators who have bought them locally, so we don’t get involved in these discounts in many cases. We do buy a large number of vehicles ourselves and with those cars, we take the actual price we pay for the cars, which is a reduced price, and add a small amount to cover the interest charges while we have the vehicles. So the discounts really are passed along to you.
Question: How do you choose chauffeurs and set a starting rate of pay so that good ones will stay?
Klein: It is getting harder to find good chauffeurs. We have hired a management consulting firm and they are working with Dav-El to help us set up a selection program. In the past we have had local tests in each area to see if an applicant knows where they are going, but there is more to it than that. You want to know if they will fit into your company. We now have a chauffeur training videotape and training sessions so that we know they are knowledgeable before we put them out on the road. We start them at the minimum wage and they have to prove that they deserve more than that. There is no timetable for how fast they will earn more.
Rosing: Our most successful way is to use direct referrals from existing chauffeurs. We have an applicant review board which consists of several members of management as well as some of our chauffeurs. It is a formal session in which we ask all of the typical questions and what we try to do, more than just evaluate their technical knowledge, is to evaluate their attitude. We have found that this process has several benefits: First, it puts the monkey on the backs of the chauffeurs because they have to live with each other and look out for each other. In the District of Columbia there is a formal chauffeur’s license which involves a written test, a physical exam, a review of a person’s driving record, and even a fingerprint test so if they get by all of that, we think they will have the basic technical skills, so the right attitude is what we are concerned with.
Renehan: We use referrals from our chauffeurs and we also run ads. We have a two tier interviewing process and we look for things like whether they show up for their interview on time. If an applicant is late for their interview, it’s a good indication that there may be a problem. Also, we look to see if they have the common sense to have a pen with them when they fill out the application. New chauffeurs make training runs with experienced drivers and we look for things, like whether they have to smoke while they drive, which tell us they might not be the best possible chauffeur. It doesn’t always work out exactly right, but I think that through this process we can eliminate a lot of problems.
10/14 update: Senator Chuck Schumer (D-NY) calls for more scrutiny of stretches nationwide.
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