Industry Research

Sedans, Vans, Motorcoaches Help Increase Revenue

Donna Englander, staff writer
Posted on May 1, 1992

Despite the high hopes the country placed on the Persian Gulf War ending the recession, the economy is still very sluggish. Yet the limousine industry seems to be holding its own. Although the average monthly gross per limousine of $3,014 is down 22% from last year and 36% during the past two years, the annual amount spent on chauffeured transportation is up 16% from $2.1 billion in 1990 to $2.5 billion in 1991. This annual amount includes revenue from stretch limousines, formals, sedans, vans, and motorcoaches. These numbers seem to support industry experts’ predictions that the trend in the livery business is toward fleet diversification.

These figures are just some of the results of the ninth annual Limousine & Chauffeur Operator Survey conducted in January and February of 1992. Surveys were sent to a representative sample of operators of all sizes across the country. There was a total response rate of 17.5% with 89% of the respondents listing themselves as “owner.”

10 Best Things That Happened to Operators in 1991

1Business increased
2Increase in corporate accounts
5Competitors went out of business
6Networked with other operators
7Added new vehicles to fleet
8Didn’t lose business
9Yellow Page ad got response
10Decreased insurance premium

Dealing with Tough Times

Even though overall revenues were up, operators still had to deal with skyrocketing fuel costs, corporate cutbacks in travel budgets, and increased expenses. One operator, Harold Berkman of Music Express in Los Angeles, sent a letter to his customers at the beginning of 1991 explaining he would be instituting a temporary fuel surcharge of $2.50 on airport transfers and 3% for hourly runs until fuel prices returned to normal.

Ken Finch of Executive Fleet, Inc. in Endicott, NY reports that he spends over 11% of his total annual budget on fuel — his third largest expenditure next to vehicle purchases and labor. Endicott is located on the New York/Pennsylvania border and much of Finch’s work takes his vehicles into New York City many times each day — over 190 miles away. For this reason, his vehicles average 100,000 miles each year, well over twice the yearly industry average of 36,034. “Our fuel costs are ridiculous,” says Finch. “For awhile we had an increase in fuel prices of two cents per gallon per month. The price per gallon of fuel topped off at $1.26. The prices finally started to come down in March of this year. Now we are paying about $1.06 per gallon.”

With corporations continuing to cut-back on their travel budgets, operators are trying to find other areas to market their services. Over the past two years, operators report the%age of corporate business has dropped 4% from 41% of their total business in 1989 to 37% in 1991. The good news is that hotel/resort business is up from 10% of total business in 1990 to 16% in 1991. Also reported, wedding business accounts for 29% of overall business and night-on-the-town work represents 30%.

10 Worst Things That Happened to Operators in 1991

  1. Competitors rates too low
  2. Too many gypsy operators
  3. Insurance premiums too expensive
  4. Too much regulation
  5. Poor image of industry
  6. Fees too high (i.e. airport, licensing, etc.)
  7. Others operating bad equipment
  8. Gas Guzzler Tax
  9. Problems with NYC Taxi & Limousine Commission
  10. Too much taxation

Survey Stats

 For the fourth year in a row, hourly stretch limousine rates have dropped $1. Rates are at their lowest point in four years. This is a sign of increasing competition among limousine operators. Illegal operators charging low rates also force hourly rates down.

  • 128 million passengers were transported by the livery industry in 1991.
  •  The average livery vehicle carries four passengers per trip.
  •  53% of operators work out of their homes.
  •  49% of limousine companies are between one and five years old.
  •  Stretches average $3,014 per month in gross income.
  •  Sedans average $3,479 per month in gross income.
  •  Vans average $2,925 per month in gross income.
  •  Livery vehicles go out on an average of 39 trips per month.
  •  21% of livery fleets are less than two years old.
  •  61% of livery fleets are between two and five years old.
  • The average stretch limousine rate is $48 per hour, formal rates are $43 per hour sedan rates are $36 per hour, and van or motor-coach rates are $63 per hour.
  • 13% of operators charge by distance traveled for airport transfers. The average fee is 56 cents per mile.
  • The average fleet has 2.8 leased vehicles.
  • The average operator bought 1.1 stretch limousines, 1.2 sedans, 0.1 formals and 0 5 vans or motorcoaches in the past year.
  • The average operator plans to buy 0.9 stretches. 1.2 sedans 0.2 formals, and 0.4 vans or motorcoaches next year.
  • The average operator employs 10.2 full-time and 9.1 part-time employees.
  • The average home operator employs 2 full-time and 6 part-time employees.
  • The average office-based operator employs 15 full-time and 12 part-time employees.
  • 50.9% of chauffeurs are classified as independent contractors.
  • The average chauffeurs salary is $10.75 including tip.
  • The average chauffeur’s tip is 19%.
  • 27.3% of operators include the tip with the invoice.
  • Based on a total fleet size of 15.7 vehicles, the average office-based operator had a total annual gross of $656,745.
  • The home-based operator, with a total fleet size of 3.4 vehicles, had an annual gross of $104,507.

 To keep the remaining piece of the corporate puzzle, operators are adding sedans to their fleets. The average company now operates 3.4 sedans, which is up from 2.3 sedans in 1990. Operators are decreasing the number of stretches in their fleets slightly — from 4.3 stretches in 1990 to 4 stretches in 1991. Filling out the average fleet are 0.4 formals and 1.3 vans or motorcoaches, making a total fleet size of 9.1 vehicles — up from 8.4 in 1990.

Home operators and those working out of an office are going after different markets. The average home operator has 3.4 vehicles in his fleet, including 2.3 stretches and less than one sedan. Home operators seem to be concentrating on the wedding market. They report having 16% more work in this area than office respondents.

The average fleet size of an office-based operation is 15.7 vehicles. There is an almost even breakdown between the 6.3 sedans and 6.1 stretches. Also included in this fleet are 2.5 vans or motorcoaches and 0.6 formals. Office-based respondents report 43% of their business is derived from corporate accounts.

Another area operators have had to deal with this past year is increased expenses. Stretch payments of our respondents are up 10% from $765 in 1990 to $851 in 1991. Sedan payments have increased almost twice as much as stretch payments — 18% from $377 to $463.

Van Revenues Increase

Fleet diversification has been a blessing for many operators. While stretch rates decreased $1 to $48 per hour and sedan and formal rates stayed the same at $36 and $43 respectively, van and motor-coach rates per hour increased 25%. Operators reported they were charging $48 per hour for a van or motorcoach in 1990 and $63 in 1991. Since the survey did not make a distinction between vans and motorcoaches, this number may reflect more operators running the large (over 15 passengers) motorcoaches.

In 1990, 61% of operators reported an increase in business and 23% reported business had decreased. In 1991, the numbers have changed slightly — 42% report business has increased, 33% say business has decreased, and 20% report business has stayed the same. Of those reporting an increase, their business has grown an average of 29%. The average drop in business for those reporting a decrease was 19%.

One area operators seem to be cutting back on to make ends meet is insurance. The amount of insurance carried by the average operator is down somewhat from $1.5 million to $1.04 million this year. This could explain the average premium dropping 11% from $3,007 to $2,669 this year. The average insurance deductible is $1,055 Eighty-one% of respondents get their insurance through an independent broker and 18% through an association-sponsored agent. Those reporting they are self-insured and those not carrying insurance total 0.6% each.

Association involvement is down. This year, 37% of respondents report they belong to a local association — down from 40% last year. The ranks of the National Limousine Association are holding steady at 28%.

The survey represents a cross section of L&C subscribers. The operators who answered the survey represent fleets ranging from one car to over 100 vehicles. Since the survey is based on the magazine’s subscription list, operators who do not receive the magazine cannot be included. Also, operators who may have gone out of business in the past year are also not included.

Related Topics: industry trends

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