A Virginia operator closes a longstanding motorcoach service to New York City amid receding profits and overwhelming competition.
The average hourly rate for a stretch limousine as indicated by the annual Limousine & Chauffeur livery operator survey was just over $47 per hour.
Based on a three-hour minimum, the typical invoice for charter limousine service thus averages over $150. Even considering the fact that many operators offer lesser flat rates to the airport and other destinations, the typical industry-wide tariff for limousine travel is well above $100.
Now consider this...O'Hare-Midway, a suburban limousine service based just outside Chicago, operates slightly over one hundred limousines and handles approximately 40,000 passengers each month at an average price of $31.80 per trip.
Despite the bargain pricing, O'Hare-Midway is not a sedan or van service. According to company owner George Parker, late model stretch limousines comprise 98 percent of his fleet. Eighty percent of the vehicles are less than two years old.
Parker has a steady record of growth since purchasing O'Hare- Midway in November 1984. Despite the fact that the limousine industry has experienced rising insurance rates, heavy competition, and generally sluggish growth during Parker's years in the business, O'Hare- Midway has more than doubled its sales volume. The company is currently growing at a rate of eight to ten percent each year.
Part of this success is due to the growing popularity of ride sharing. Shared rides represent approximately 60 percent the company's business according to Parker. Geared primarily for airport trips, ride sharing is an established form of business among van and shuttle bus operators.
"Our computer has been essential in this area," continues Parker. "Computerizing was a long and difficult process," he continues, "but it gives me much better control of everything."
Before Parker bought O'Hare- Midway, the company relied on manual procedures to manage reservations, operations, and accounting. Parker continued to run the company this way for about a year and a half before introducing computer software that essentially duplicated procedures previously done by hand.
O'Hare-Midway is still upgrading its computer hardware and software to streamline reservation and dispatching procedures, improve customer service, and increase the efficiency of vehicle scheduling. "Right now, our system handles 1100 reservations a day,'' maintains Parker.
Apart from his chronic need for qualified drivers, Parker has found solutions for many typical operation al problems. The key to success in the limousine business, he says, is to maintain control over the operation to ensure consistent service.
"The limousine business is very basic," says Parker. "People want a clean car, and they want it on time. As simple as that may seem, though, most limousine companies can't do it. At the same time, there are new things like employee regulations and insurance requirements that will make it even more difficult for a lot of companies, particularly small ones, to operate. There are going to be a lot of changes in this business in the next few years.
Parker recently looked at his operation and discussed the future of the limousine industry with Limousine 8, Chauffeur Editor and Associate Publisher Scott Fletcher.
L&C: How can a small limousine operator compete with a large computerized company like O'Hare- Midway?
Parker: A small operator can be as successful as a large operator if the efficiency is there. But there are small businesses with no real organization and no thought about how they are going to buy their cars or run their maintenance program or get insurance. Even when you have a small company, you have to think about those areas and try to be cost- effective.
Some costs are going up dramatically. It is becoming more expensive to operate vehicles and you have to make sure that they are generating X amount of dollars per day.
It's difficult for companies that have a limited number of accounts because a percentage of accounts aren't going to be using the service all the time and it's very difficult for some small operators to generate the dollars needed on a daily basis to make a nice return on investment.
L&C: So you think some small companies will filter out?
Parker: Yes. I think our business is becoming more sophisticated and it's going to become more difficult for people who don't look at the whole efficiency picture.
I look at this from the point of how many small companies call me and want to put their cars on with me. When I find out how they run their business, I can see what their problems are. Probably 8-10 owner- operators call me every week and want to put their cars on with me. They are having a difficult time because they are not booking enough dollars to generate a profit per vehicle.
The limo business is very glamorous right now. A lot of people think that with a little capital they can buy some cars. Well, buying cars is the easiest part of their business. Almost anybody today can finance a car. The question is being able to cover insurance, drivers, maintenance and still generate a profit.
L&C: What was your main contribution to the company when you first purchased it?
Parker: Mainly a change in equipment. I'm a real nut on cleanliness, and neatness, and having real good equipment. We checked out drivers more thoroughly and improved the driver training program. Then, computerizing the operation.
Our software was designed specifically for the way we run our business. For example, we have a trip tally which tells you how many cars you need for every 15 minutes during good and bad weather so the computer tells you when you can stop taking orders.
L&C: Tell me about quality of service with a high volume service like yours where cars put on more than 100,000 miles a year.
Parker: Our cars average 10,000-12,000 miles a month. We have a maintenance program where every car in our fleet gets oil changes weekly. We have records in the computer so we know when to rotate the tires, change the shocks, and every thing. We turn over cars every 18-24 months. We sometimes put on two or three sets of tires a year. Whatever is needed, we do.
We also add at least two new cars from Limousine Werks a month of our fleet. We now have two '85s left and the rest are '86s, '87s, and '88s. Most cars are '87s or '88s. We sell our two year old cars all day long for $25,000. You wouldn't know they have that many miles if we didn't tell you.
It takes a lot of expertise to move the number of people we do. It takes a sophisticated dispatching process. It takes special driver training. But dispatching is the key to the process. We know how to put people together.
If you want a private car, it's an hour pick-up time to the airport. If you share a car, it's an hour and a half. It is tremendously good that there is only a half hour difference. Most bus companies do two or three hours.
Our customers want the convenience of being picked up at the house and don't want to wait in the car while we pick up other people. .99999 percent of the time, we don't pick up more than two people. When we do pick up more than two, it's usually Wednesday, Thursday, Fri day, or Sunday nights returning from the airport and it's very simple be cause they are all together waiting to be driven to the suburbs.
When you have 2,000 customers who live in Highland Park, for example, it's very easy to coordinate a shared ride business. We are so heavy in most of the areas that we cover, that it's not a problem. We have no shared ride service in the City of Chicago because it's too difficult and time consuming.
L&C: Are you satisfied with your level of service?
Parker: I'm very satisfied with the service and there are a number of other companies in the area that also do an excellent job. Where I'm not satisfied is the quality of the drivers, the quality of equipment, and the internal computerization system. We just spent a quarter of a million dollars to upgrade our system. It's going to be even more sophisticated.
We're going to start a frequent traveler program. If you've been a customer of ours for awhile, you give us your telephone number and it will throw your whole dossier on the screen including directions to your home. If you build up a certain amount of dollars with us during a year, you'll get free trips. You start with a free shared ride, then a round- trip shared ride, then a one-way private trip, then a roundtrip private trip, then a charter.
The computer will also tell how many miles a trip is, how long it will take in good and bad weather, and what the rate is.
The computer will also identify our VIP accounts to make sure we send them the absolute best car and driver. Even though we are a large volume company, the computer allows us to provide high-quality service.
L&C: Who did you work with on your software?
Parker: It was a local person. We brought a programming consultant in a year and a half ago, and paid them to learn our business. We first had a small Intel mainframe and are now upgrading to a Motorola mainframe. The new system will go into effect on April 1. It's state-of-the-art.
L&C: Are you planning to move into other cities?
Parker: Yes. We are definitely planning on expanding to the West Coast. The same operation we have here will be in operation in that area. We've been working on that for the past year and we sense that we should be involved with that in the next 180 days. It will be another 100 car operation.
I want to emphasize again that smaller companies can succeed it they operate efficiently. You have to be very accountable and you can't shoot from the hip anymore. You have to have a good idea of what your fixed and variable costs are, and you have to run it as a profit center.
L&C:How do you feel about associations?
Parker: I don't have confidence in any of our associations right now. I've talked to a number of people involved with different associations and I don't think we have the leadership we need.
L&C: What kind of leadership is needed?
Parker: I see a need for monthly or quarterly workshops among people like myself to communicate ideas and to lobby at a very high level.
L&C: What about O'Hare Airport and other local problems?
Parker: I go to meetings of the air port authorities and I'm very involved. When the Department of Aviation wants to look at a system, they come to our office and use us as an example. My belief is that you work within your own city and try to help people out.
A lot of people here are upset with O'Hare. To give you an idea of what's happened there...In 1983, approximately 48 percent of the commercial vehicles leaving O'Hare were taxicabs and about 15 percent were limousines. In January 1988, there were 88,000 trips in taxicabs from O'Hare and 91,000 in limousines. Limousines have gotten so big that the airport doesn't know how to handle them. We're like a new animal to them.
L&C: What kind of marketing do you do?
Parker: Right now we don't do any marketing or advertising because we're booked. We open up about 40 accounts a month with no solicitation. I have a lot of marketing ideas but I can't implement them because I don't have the equipment or the drivers.
People find out about us through word of mouth. We have the smallest Yellow Page ad in the City of Chicago. I'm very fortunate. I bought a company that was 35 years old and had a very nice base of accounts. Since I bought the company, we've more than doubled the business. But I've been at the right place at the right time.
L&C: Has the business turned out the way you expected?
Parker: Initially it was a nightmare. When I did my first inspection of the vehicles, the cars were dirty and broken down, the drivers were in total disarray and I was very frustrated for awhile. Now I see the light at the end of the tunnel and beyond that I see nothing but blue sky.
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