That burning question is front and center at the upcoming LCT Technology Summit.
Dav-El Livery, operating in New York, Los Angeles and Washington, D.C.; with major franchises in Chicago, Philadelphia and Atlantic City, New Jersey; a fleet of 350 limousines, vans and mini-buses; and standardized rates catering primarily to corporations clearly stands out as one of the country’s largest limousine services.
The reservations network Dav-El offers affiliates nationwide gives them the edge in obtaining corporate accounts, Klein said. Local Dav-El operators can offer service in their own city, “that nobody else offers, because he is a member of a group of companies that can get limousine service anywhere in the United States.”
Communication among members broadens the knowledge of all concerned. “Everybody gets together, passes on information to one another; new ideas, new plans,” Klein said.
Handling large corporate accounts maintains a steady business for Dav-El. “The corporate business is a Monday-through-Friday business. The corporations work all week. Come Friday night, they die.” Therefore, on weekends, Dav-El looks elsewhere for clients to keep their fleet railing. “We’re very happy to do weddings; very happy to do proms and things like that on weekends when you don’t have the corporations operating. It fits in to make a limousine company keep its equipment rolling all the time.
“Most Dav-El operations have a white limousine in their fleet for the wedding business. The corporations don’t ever want to see a white limousine arrive, so a lot of times you’re stuck with it. Let’s face it, the stockholders of big public companies don’t need to know that their executives are running around throwing company money away riding around with one guy in the back of a stretch.”
Formals and sedans are the primary conveyances for corporate big-shots, Klein said.
“There was an article in Business Week not too long ago on productivity, and I think the article really said it all. America had a declining productivity for so many years and we have to change that and get the country more productive. Executives have to be more productive also.
“Executives get paid so much money that you can’t have them wasting 15 minutes or half an hour of valuable time at $100,000-plus salaries a year. They have got to be working while they’re moving.”
Catering to the needs of the executive means allowing them to communicate while traveling. “We just go one step further for the corporate market, where New York is going to be hooked up to cellular (telephones) by next month (March) and every Dav-El vehicle, not just the stretches, but every sedan will have a telephone in it. The corporate executive needs a telephone while he’s moving around.”
Limousine turnover occurs after approximately two years. “In our business, a client wants the newest,” Klein said, which prompts Dav-El to consider the age of a limousine when trading it in, rather that using mileage as a consideration.
Keeping scores of limousines in service requires a comprehensive maintenance plan. Klein explained, “Our maintenance is completely computerized; it’s the key to the limousine company.
“The limousine goes into preventive maintenance at least once a month, and at that point everything is pulled out of the computer and we find out all the little things that the chauffeurs have complained about and it’s done.
“We don’t pull a car off the road for little things if it is out busy making money, unless something really distracts from the comfort of the limousine. We don’t send a limousine out where the television has been pulled out for repair. We’ll never send out a car with a hole like that.
“The cost of running a limousine company is very high. You have to find more things to do than just deal in the luxury carriage trade all the time. In order to do a big movement of people, convention work or a meeting situation, you need a van or a sightseeing mini-bus to accompany your fleet. We’ve always had to use two vans in the New York fleet alone just to carry luggage. Vans and minibuses are very important compliments to limousine services.”
Problems in Manhattan plague all limousine operations: too much traffic, too few parking spaces and scads of traffic laws.
“Everything that can possibly go wrong, goes wrong there (New York City),” Klein said. “You’re fighting against the worst police department. It’s not their fault, but they’ve got to move traffic. They don’t want to know from limousines; so you can’t pick up, you can’t drop off, you can’t wait for your client inside your limousine, you can’t do anything you really should be doing to provide good service. So you have to work with that.
“New York has got the worst roads, which will destroy your limousines. You’ve got Yellow Cabs all over the street who are hitting limousines left and right. We call them Yellow Hornets. They will drive into your car; they couldn’t care less how many times they smack into you because they’re looking for a fare.
“The biggest problem is the red zone. You no longer can stop at red zones. You cannot even let the passenger off. If you’re going to 585 Fifth Avenue and it’s pouring rain, you can’t let him off in front of the building where there is red zone. You must pull around the corner and let him off on a side street and then wait on a side street.”
The same thing applies with Third and Madison Avenues, where lanes exist for buses only, Klein said.
Mass transit ridership has not grown in proportion to total passengers coming into Manhattan. “There’s a breakdown of the mass transit system. It has got to be improved. Ridership has declined in relation to the number of automobiles that come into Manhattan every day,” he said.
“In 1948 there were 300,000 cars a day coming into Manhattan. In 1983, 800,000 cars a day came into Manhattan. The roads are still the exact same roads. They cannot handle that much traffic.
“The city has the responsibility to the citizens for keeping those roads moving in case of emergencies,” he said. “So they have to make these very strict laws.
“At this point, if you’re inside your limousine in a no-standing zone, they’ll hook you up and tow you away.
“It’s understanding their problem, but on the other hand, understanding our problem. We have to work around it.”
With the number of limousine services in New York City, private operators go into business frequently. “Limousine services face a very regular problem, and that is if the customer uses a lot of limousines and sees his limousine bills getting to a certain level, he buys his own limousine.
“A limousine operator should never feel badly that his customer took his chauffeur and bought his own limousine. It’s just going to happen all the time. You get used to it.”
Contrary to beliefs held by many persons, Klein said competition does not lower prices due to enormous overhead.
“Most good operators are run by smart business people today who are in business to make money. The limousine business right now is a very low profit business. Everybody thinks they’re going to make a fortune.
“In the beginning, when you drive yourself like I did, you make a lot of money. You think you’re going to make a fortune when you start putting on a lot of limousines. The more vehicles you put on, the lower your profit margin goes. There’s a very strong law of diminishing returns in the limousine business.
“The headaches are the chauffeurs smacking up your cars and drinking and stealing the cars, stealing your batteries and your tires and all these wretched things that happen to you as a big limousine operator. Therefore, most of the big limousine companies are pretty firm about their prices.”
In addition to theft, collecting accounts is detrimental to the cash flow. Said Klein, “Limousine services are the last bill ever paid. People pay their rent, their car payment, their phone bill, their light bill and then they’ll pay their department store charges and their Visas and last but not least they’ll pay their limousine bill.
“The biggest problem really is your cash flow and keeping above board so you don’t go under and sink. As you grow, your receivables grow with you. As I said before, limousine bills are the last bills paid. Before you know it, you’re carrying in excess of a million dollars in receivables. You must pay your car payments and you must pay your gasoline bills and you must pay your chauffeurs. Your expenses are all upfront. Too many limousine operators have really been afraid to put their foot down making sure their clients pay on time.”
Meeting clients at busy airports can be confusing, especially in bad weather, and during rush hour. Dav-El employs airport representatives at Kennedy Airport in New York to lead passengers to their limousines. This decreases the number of no-shows who miss their limousines and find alternate methods of transportation.
Klein explained, “Our no-show ratio was out of hand. We were missing people left and right at Kennedy Airport. Kennedy Airport is Bedlam as it is. We just couldn’t make the contacts all the time. The airport reps eliminated a lot of that no-show. The client finds the airport rep very quickly.”
Contributing to Dav-El’s continuing success are the referrals given by local affiliates. Local affiliates receive a percentage for referral work within the network. Reservations are made through the computerized national reservations network in Washington, D.C. Ten percent is the rate received by the affiliate placing the reservation.
“In New York and Los Angeles, Dav-El probably has $1 million invested in computer equipment. We’re now at the point where we feel we’re going to have to go to a bigger system. Our computer system is like an airline computer system; it’s very sophisticated.”
Rates are primarily standardized across the nation, with national accounts paying the same price anywhere, Klein said. Nevertheless, local operators can be flexible when determining their individual rate structures. National billing is handled in Washington, D.C., but rate variations are common for irregular local clients.
“A good example would be in a city that is small, where there’s not so much business and the operator does charge a long minimum, like a three-hour minimum. If there’s a regular Dav-EI client on a national account, they will be charged a two-hour minimum,” he explained.
In catering to that corporate account, Dav-El salesmen realize it isn’t the executives who decide which limousine to hire. “Executive secretaries make the decisions as to what limousine company to hire. The chairman of the board does not pick up the telephone and call for his own limousine, his secretary does. If she knows Dav-El and her boss says; “I need a limousine,” she says, ‘I’ll call Dav-El.”
Maintaining those accounts is a full-time job for sales representatives. If a client drops Dav-El, Klein said, the company follows up to learn if the cause was dissatisfaction. “The limousine business has to make adjustments to keep a client happy.
“The selling point to a small city is to represent the fact that the operator has limousine services he can offer in any city, and a relationship with the limousine companies in that city. He can personalize the service.
“The personal service he gets in that small town is the same as he’s getting when he goes to New York, Los Angeles or Chicago.
“It’s a total exchange of information. We live off of somebody else’s experiences. We’re not afraid to tell one another our trade secrets. We relay that information on to one another.”
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