Operations

Breaking Better Than Even On A Bus

Jim Luff
Posted on September 12, 2013

In the late 1990s, coachbuilders began making limousine buses almost as fast as stretch limousines. By 2010, all major coachbuilders were producing limo buses. Companies that were already making buses began customizing them more toward the luxury transportation operators who started snatching up buses faster than charter bus companies.   

Operators have added shuttles, minibuses and charter tour buses to their fleets. I was no exception. After more than a decade of running limo buses, I decided to take the next step and add a charter bus that I wrote about at the time. Since then, we have added three more, including a massive 80-passenger articulated bus (two bus shells linked via a flexible accordion-style connector) that will go into service on Sept. 7. Buses are big money all the way around. They bring in a lot of money, but cost a lot to buy, maintain and license. And they present special tax issues if you cross state lines.

Entering the Bus Business

My experience running limo buses first prepared me to take on a motorcoach. In 1999, we jumped in head first into the bus market. It wasn’t well thought out and at first caused great financial pain. The bus business can be lucrative on some days and dismal on others. Because a local competitor was in a financial mess over its first limo bus, we were able to purchase it for a steal. Basically, we took over payments and gave them $5,000.

The company we bought the bus from soon was out of business over its unexpected lack of business for the bus and the cost of running one. The first time you get empty on the fuel gauge and have to pump 200 gallons of diesel at $800, reality sets in. When you realize that you averaged a mere 4 mpg on the tanks you just drained, reality becomes even more clear as you swallow hard and wonder what you got yourself into.

Whether you plan to buy a limo bus, shuttle, or motorcoach, I suggest you first farm out work to other companies in your area already operating them to make sure you will get enough business. Once we got to the point where we were farming out five to eight jobs a month during a period of six months, it became apparent we should buy our own bus.
But the operation of any bus varies a lot from that of a limousine or sedan. You must be aware of laws that apply to buses and drivers, or you will pay huge fines. Ignorance is no excuse.

Finding Drivers

One of the first things you must consider is who will drive your bus. Bus drivers must hold a commercial driver’s license with a passenger and air-brake endorsement (if equipped). In some states, the cost of a commercial driver’s license far exceeds that of a standard driver’s license. In other states, no special license is required to drive a limousine for hire, but the federal Department of Transportation regulates buses in all states. Many states also regulate buses through a state DOT agency with respect to passenger safety.

Don’t think that hiring one driver for your new bus is sufficient. Not even two is enough for a single bus. Due to the new hours of service laws, long trips may require two drivers in a single day. It is sometimes necessary to send a second driver to the bus’s destination. When the bus arrives, you may have to keep the first driver on duty until he reaches the maximum amount of on-duty time allowed by DOT laws and then have your second driver start to get them back home at the end of a long day. With both your drivers exhausted from this trip, you must have a third driver ready if your bus is going out again the following day.

Jennifer Kemper, a driver for my company, Limousine Scene, maintains a logbook for trips that travel beyond a certain radius from the base of operations. One source for finding good bus drivers is to recruit ones from charter bus companies. They can provide knowledge and guidance in training new drivers to operate a bus. There are federal DOT laws pertaining to drug and alcohol testing and how it must be administered.

Having an experienced person can spare you huge fines levied by state and federal authorities for violations. Logbooks are examined by state and federal DOT inspectors. By hiring experienced bus drivers, it is presumed that they know right from wrong and what needs to be done to remain legal. Don’t become a training ground for new bus drivers. Group transportation and the bus market can be lucrative in the long-term, but a bus is an expensive investment that comes at a higher risk than standard chauffeured vehicles.

To make things easier for you, LCT has garnered the following bus shopping tips from an expert panel at the 2012 International LCT Show in Las Vegas. The panel included moderator Gary Bauer of Bauer’s Intelligent Transportation in San Francisco; Brent Bell of Bell Trans in Las Vegas; Chuck Covington of People’s Transit near Detroit; and John Ferrari of AFC Transportation in Houston.

What Is The Break-Even Point On My Motorcoach?


Sample data in calculation
13 trips performed
78 total hours of service
1,450 miles of travel

ASSOCIATED HARD COSTS
Cost to “make ready”
13 washes/prep by detailer
$10/hour x 13 hours........$130

Driver wages (including pre/post trip)
$15/hour x 104 hours........$1,560

Fuel
263 Gallons @ $4.30 per gallon.........$1,130.90

Insurance (monthly premium)............$402

Monthly vehicle payment..........$3,942


ASSOCIATED SOFT COSTS

Oil change ($150 per 6,000 miles)    
.025 per mile x 1,450.........$36.25

Tire replacement ($450 per 100,000 miles).045 per mile x 1,450...........$65.25**

Major tune-up — ($600 per 75,000 miles) .008 per mile x 1,450..........$11.60


TOTAL MONTHLY BREAK-EVEN POINT


$7,251.93

Excludes employer payroll tax or workers’ comp premium
**Based on six tires


Hourly break-even point:

$7,251.93 / by 78 hours of service = rate of $92.97 per hour OR
$7,251.93 / 1,450 miles = $5.01 per mile

With 10% profit margin:

$102.27 per hour OR $5.50 per mile

1. Know Your Marketplace
Before buying a bus, it’s important for operators to determine if their markets can sustain the business:

    •     Figure out if the market is saturated or if there is room for another
        bus in town.

    •       Determine if the demand for buses is consistent or seasonal.
    
    •     Listen to clients and prospects to learn  what types of buses they seek.
    
    •     Buses with seatbelts can command much more money as they are
        hard to find.
    
    •     Look for underserved niche markets.
    
    •     Look for companies that have regular team building events needing
        transportation.
    
    •     Research opportunities to provide transportation for government contracts,
        hotels, corporations, special events, destination management companies,
        universities, sports teams and church groups.
    
    •     Gary Bauer advises operators to build up their book of business through farm-out work until the amount of business can justify the purchase of a bus. “If [your bus] is not rolling seven, eight or nine times a week, then you’re doing something wrong,” he says. “Buses should be doing more work than other vehicles.”

2. New vs. Used Vehicles
Buying a used bus initially may be cheaper than buying a new one, but it also can be a risky investment if they aren’t meticulously inspected and researched:

    •     “Used buses can be really good deals,” Chuck Covington says. “Municipali-ties tend to get rid of their buses after about 12 years, and the Altoona testing is good for about 18 years. Sometimes the engines are replaced at 10 years.”
    
    •     Operators always should get the biggest and longest warranty available, whether the bus is new or used, because “it is worth its weight,” Bauer says.
    
    •     Look closely at the warranty to see what parts are really covered, Ferrari says, because most warranties don’t cover turbochargers. And if those break and cause the engine to die, the warranty is null and void.

3. Type of Bus To Buy
With a variety of bus makes and models on the market, operators first should consider client needs and the opportunities in the market:

    •     Survey clients on present and future needs.
    
    •       Look for a bus that will fit multiple needs. Some buses offer hybrid seating options that can make a bus go from a forward-facing, charter/shuttle arrangement to limo seating.

    •     A monocoque chassis offers more structural integrity than a body-on-chassis bus but costs more. Body-on-chassis buses are cheaper but best suited for short runs and are not as durable as a monocoque chassis.

    •     Think of the average body size of your clientele and find a seating arrangement that will be roomy and comfortable.

    •     When weighing out fuel choice options, remember that compressed natural gas (CNG) and propane can be more cost effective than traditional fossil fuels, but filling stations are harder to find.

    •     If the coach is a limo bus, check to see that it has luggage compartments.

    •     Consider the regional climate and choose the color accordingly. Brent Bell, whose company operates in the Nevada desert, uses white buses because they stay cool.

    •     Bell suggests starting out with smaller buses, such as the E-450, and working up to larger buses. “You can still be competitive with a motor coach company if you’re efficiently running your minibuses.”

    •     Operators should market their vehicles to let people know they have the equipment because that will open them up to more business opportunities, Ferrari says.  

What Are the Costs of Running My Motorcoach?

Fuel
Bus fuel capacity:     50 to 250 gallons
Average MPG:     4 to 9 mpg
Average fill-up cost:     $217 — $1087
Commercial truck stop required for large buses

Maintenance
Tire replacement:     $400 — $600 each
Lube, oil and filter service:     $150 — $250
Turbo replacement (diesel):     $1,500 — $2,000

Insurance
Minimum: $5 million liability required
Monthly cost:     $280 — $500

Labor
National average hourly pay
School bus drivers:     $10.13 — $19.48
Transit bus drivers:     $9.43 — $21.10
Limo-Bus/Mobile Lounge Drivers:     $8.44 - $23.15
Source: Payscale.com
Greyhound Bus Lines:     $17
Source: Greyhound

Related Topics: buses, business management, motorcoach operators

Jim Luff Contributing Editor
Comments ( 2 )
  • See all comments
  • anthony

     | about 4 years ago

    In southern california there is a surplus of junk shuttle buses that are operating illegally and or the web site uses a new party bus and sends their junk bus having charged a rate for a new bus. The owners that have purchased the tiffany party bus is having to charge less per hour that barely covers the cost of the vehicle loan payment, insurance, etc. california regulators need to change the laws and get ridd of these junk buses by placing an age limit on party buses....my suggestion is 2008 or 2009 and up. We are also flooded with brokers that do not own any vehicles and take a huge % of the total rate for service. These buses are what you end up reading on the news with accidents, bus catching on fire, passenger fallling out of vehicle.

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