Automation, machine learning, and artificial intelligence have made it faster and easier than ever to plan and book trips.
ATLANTIC CITY, N.J. — From educating clients to all-in pricing, luxury ground transportation operations can gain more corporate clients by improving some of their business practices and policies, according to two travel experts.
The experts spoke on Nov. 4, 2019 during an LCT East session, "The Ground Travel Buyer Forum." Hosted by Jay Campbell, journalist and co-founder of The Company Dime, the discussion drew on insights from Mike Boult, senior vice president of corporate sales for Travel Leaders, one of the world's largest travel companies, and David McDonald, global travel manager at Hogan Lovells International, a law firm operating in 45 countries.
Operators can find opportunities in helping educate potential clients on tracking, monitoring, and saving on-ground travel spending.
In the travel industry, whereas most companies have built their systems around measuring airlines, hotels, and car rental, ground transportation still seems elusive, Boult said. Many lack an accurate framework for figuring out that travel. If a company, for example, has 10 million employee miles expensed annually at 58 cents a mile, that results in huge expenditures.
Luxury transportation operators can add a value proposition for potential clients by helping their organizations better capture and realize where they're spending their money and all the various avenues in ground transportation that are available to them, “because they have no idea,” McDonald added.
“What we found with large firms is allocating and isolating where that money is spent on ground transportation is very difficult. It's very hard for an organization to figure out a strategy around ground transportation.” That would involve how to buy, what to use, and how to manage it.
“It's just a small line item on there, but it adds up,” Boult said. “It becomes a big number. Is it better for them to rent cars or to take chauffeured transportation? I think that's a huge opportunity.”
Many ground transportation costs are hidden and embedded in events, roadshows, marketing, and business development, he said.
“It’s just slid into this hubris budget that is never really fully identified. So if you're speaking to an organization and you ask them a basic question, ‘what is my opportunity in your organization?’ Don't be surprised if the answer is, ‘we don't know,’ or the answer is, ‘it's between point A and point B in terms of a cost to the business.’”
Expectations among travelers are shifting as well, Boult said, as companies try to accommodate a strong preference among employees for transportation network companies (TNCs) like Uber and Lyft. “The individual traveler has the power. Companies have had to embrace Uber and Lyft because they're not going away. The travelers are voting.”
For travel management, that means the classic model of one person controlling a company’s travel policies has given way to providing more user options, MacDonald said. “They're really trying to create a library and a platform of options for people to use, and instead of managing the traveler, they tend to manage the services, and create some guardrails. You can't ignore the fact your consumer is demanding it and you're giving them ‘choice.’”
A command and control environment no longer appeals to a younger workforce oriented to TNCs, he said. “We've given people what we consider to be reasonable options and explained the why and then let them really self-governance.”
In his experience with TNCs, Boult recounted how he’s become more concerned about consumers and his customers because of the behavior of drivers.
“In the last six months, I can't think of any positive conversation with a driver. They're all tired. They all feel victimized and complain openly about working too hard. None of them seem to be happy. I worry about my customers getting into a vehicle with someone who's disgruntled and tired. The allure of it being cheap and convenient for me is definitely going away.”
McDonald added depending on the random vehicle that shows up, “I've literally gotten into anything from a beat-up old Nissan Sentra where the driver has had to remove the baby seat and groceries she's just acquired about half an hour ago so I could sit down.
“I think there is a demographic shift. The high-end executive transportation type service still prevails at the upper echelons of organizations. You still have those who want to be seen as important and credible if they're showing up to clients or they're traveling with clients. But there are still many people who are more than happy to just go from A to B and back to A or A to B to C and they're fine with it.”
While most operators don’t directly compete with Uber and Lyft, they could leverage their audiences and upsell them luxury services “because it's convenient for the traveler and the eyeballs are already there,” Boult said. You convince them of a safe, professional experience.
McDonald has found in talking with senior partners at his firm worldwide, a common theme emerges about simplifying their lives and enabling them to focus on their customers. “In some respects, the on-demand service simplifies people's lives. On the other side, the high quality where you're in a car for an hour in a quiet, clean environment where you can work and take calls also simplifies their lives. So it's not a one-size world that we live in.”
He posed the question do you compete or collaborate with on-demand services?
“That’s a question you all have to ask yourself. From my lens based on the firm I work for simplification is the number one mechanism to drive behavior.”
The travel booking and management industry is undergoing a transformation as well, with the number of agencies falling from 38,000 in 1995 to 12,000 now, Bolt said. “We've had to undergo an amazing level of introspection in order to have a place in the market.”
McDonald advised operators the only factor they can control is what they do with their businesses. “Everything else outside of it is an influencer. In right-sizing your ship, if you go back to business as usual it’s probably not a direction I would take.”
Bolt observed the investment marketplace has far less patience for companies that fail to show long-term profits, leaving Uber and Lyft vulnerable. “We've seen Uber and Lyft racking up hundreds of millions of dollars worth of losses with no end in sight. They could go away. They could run out of money.”
“For us, it all comes down to service delivery. Who will help you at 3 a.m. on a Sunday? As long as you deliver world-class service, you win,” Boult said.
In response to a question about creating a technology network to link all chauffeured car providers and available fleets in real-time, Boult advised such a system would have good technology and ease of use but not enough customer eyeballs. “Rather than spend 30% of your margins on marketing, I would rather share 30% probably with those guys (TNCs). They already have the eyeballs.”
Given how TNCs have many customers, the technology, system architecture, and behavioral data on customers, it may be worthwhile for chauffeured transportation providers to become part of that business framework, McDonald said.
“I don't know if it's valuable for you and your industry to try to create and spend all the time and energy to create a competing technology in all markets just so you have something. Not only do you want to deliver good service in your industry, but in the interest of making money I would be asking, ‘what is the best place we can grow our business, market our brand, deliver service to our customers, and retain and/or increase our margin on our costs?’ And it could be the collaborative market.”
One way a luxury transportation operation can distinguish itself is to market to the growing corporate focus on environmental sustainability and emissions standards, Boult said. Electric and hybrid fleets would have growing appeal.
McDonald added, “It's going to be about sustainability, electric vehicles, and how the environment will benefit. Will that be the primary criteria for contracting and acquisition? No. But will it be a consideration? Without a doubt.”
“People need to know you are evolving as an industry,” he said. “They need to know you are carefully considering the environment and the changing nature of the consumer and the vehicles you operate and offer to the public.”
On the question of how to price service, Campbell asked the two experts: “At the GBTA conferences for the past few years, we've seen education sessions about pricing in ground transportation, hidden costs, and different ways on how to charge the customer. Is it based on time or distance? Are the tips built-in or not? What do the clients prefer? Is there a best practice on pricing?”
McDonald answered, “Keep it transparent and simple, whatever the cost is. If I get in a vehicle, I know it will cost me $40 or $100 to go from A to B. What I don't want is $100 to go from A to B and then I get a bill for $145. You need transparency, accuracy, and just keep it simple.”
“The whole idea of hidden fees across the entire industry is a frustration for buyers and organizations,” Boult added. “That $38 car rental ends up being $84. You're paying for stadiums, surcharges, and the costs of premium cities. It really adds up. This is an irritation for everybody. The consumer looks at on-demand prices and considers $24 a great deal for their journey, or $199 each way to fly to London. But then why should it cost me $299 to go 50 miles from my home to the airport? People are always evaluating what is value.”
Bolt doubted the industry would heavily consolidate given the high number of independent owner-operators. “I know there’s been some consolidation as we've seen other private equity firms put some money into this space, but I would think 80% of the market share is independents. I haven't seen a trend or imagine there will be a mass consolidation.”
McDonald predicted the industry will see niche partnering and acquisitions among smaller fleet operations, but not massive consolidation.
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