LCT Publisher Sara Eastwood-Richardson and Dav El/BostonCoach CEO and NLA leader Scott Solombrino gave a state of the industry presentation Jan. 21, 2019 at Limo University's LABLive conference in Nashville, Tenn.
ABOUT PHOTO: Commonwealth Worldwide CEO Dawson Rutter (center) and Commonwealth national affiliate director Tami Saccoccio network with potential affiliates at an Affiliate Speed Meet during the 2011 International LCT Show in Las Vegas on Feb. 16. Rutter says operators must strive for excellent customer service to get noticed and grow in any economy. (Photo by Ron Rennells).
ADVICE: Regardless of how much the economy rebounds, operators who want to stay in the game need to grow sales, keep improving customer service, and change their business/fleet mix.
BOSTON — Dawson Rutter is coming up on three decades in the ground transportation business — he started driving a cab in 1982 — so you can say he’s been around all kinds of blocks in every possible chauffeured vehicle.
As the CEO of COMMONWEALTH WORLDWIDE CHAUFFEURED TRANSPORTATION and a longtime NLA board director, he knows a thing or two about adapting to recessions, recoveries, and confusing points in between. The current economy would fall into that third gray area.
Bottom line: “The industry is still struggling, but getting better. It’s starting to get fun again,” said Rutter, during a recent wide-ranging interview with LCT.
For Commonwealth, a Boston-based operation with 85 company-owned vehicles in Boston and 127 in New York City, the “fun” started to kick in again last fall, when the global transportation provider saw a consistent surge in revenues that continues strong into this quarter. That contrasts sharply with the layoffs and fleet cuts that characterized this recession for Commonwealth and operators nationwide.
“The economy is not recovering quickly,” Rutter said. “You can’t depend on the economy to recover your business. . . It’s more that the good companies are getting better and taking work from those that are stagnant.”
Companies that succeed in such an environment are doing three things, Rutter said: 1) Cultivate an aggressive sales force; 2) Deliver high quality service to customers; 3) Finding new market share or converting old business to new markets. Taking such an approach means “you can pull yourself out of the economic malaise,” he said.
As an example, Rutter cited Rose Chauffeured Transportation in Charlotte, N.C., as an operation that adapted quickly to the downturn and rebounded. Owner and CEO H.A. Thompson started a motorcoach division from scratch in 2008, which has generated most of the company’s revenue rebound since 2009, as REPORTED IN LCT E-NEWS LAST WEEK.
“Companies that are doing well are doing just that — changing their business mix,” he said. “Buses are clearly saving many businesses. There’s a common theme. . . any limousine company operating buses is doing well.”
The biggest economic wild card for the chauffeured transportation industry going forward is the volatility of fuel prices, Rutter said. Prices are echoing the disastrous summer of 2008 when fuel prices nationwide spiked well beyond the $4 per gallon range and provided the final push into a full blown recession.
Sustained rising fuel prices could slip the economy into a double-dip recession, or at least keep it from growing, Rutter said. For now, the industry seems to be holding it own. “Fuel prices haven’t gotten so severe that people aren’t riding,” Rutter said. “We have a fuel charge for customers. When it goes up, we recoup through the fuel charge, so it doesn’t hurt at all.”
Commonwealth spends about $1.5 million per year on fuel, so a 20% run-up in fuel costs necessitates a fuel surcharge, said Rutter, who varies his percentage charge from month to month and keeps it confidential for competitive reasons.
If fuel prices do not come down significantly in the fall after the spring and summer driving seasons, then there would be wider cause for concern in the industry, Rutter said. Meanwhile, operators who failed to levy a fuel surcharge in 2008 should learn that lesson quickly and adopt surcharges now, he advised. “They can’t get through this absorbing the [extra] costs themselves.”
The fuel price spike plays right into the hands of government advocates of greener energy sources, which Rutter says are not necessarily more efficient and not fully practical yet for the chauffeured transportation industry. CNG, propane and hydrogen sources are not readily available yet through an accessible infrastructure for fleets, he said.
“The more expensive gasoline gets, the more it becomes economically feasible to research and build green energy sources,” Rutter said. “But green energy in the next 10-20 years will not be a significant part of the U.S. energy scheme. It’s too small and there are too many problems with it.”
Hybrid batteries, for example, are “creating an environmental nightmare,” said Rutter, who, like many operators, has hybrid vehicles in his fleet because of customer demand. “Batteries are one of the worst polluters of any product that pollutes. . . they’re not handled properly and break down quickly and leach into ground. Batteries are a disaster, yet they’re building millions of them which are degrading the environment.” Rutter favors hydrogen and CNG vehicles as green alternatives, given their cleaner emissions and minimal environmental impacts.
Another challenge facing operators is the changed nature of business travel procurement. While the business travel sector has recovered somewhat since its nadir in 2009, the process of getting clients has become more formal, less personal, and more cost-driven, Rutter said.
“The industry has become more commoditized than in the past,” Rutter said. “Customers are driving prices down. A lot of procurement at corporate travel departments and companies is getting outsourced. There is no emotional attachment to purchasing, creating a commoditized atmosphere for transportation.”
Corporations, including many big banks, pay outside parties “to simply beat up on vendors,” he said. “You don’t have the chance to talk to a corporate travel manager and tell them you have better service that is worth more money,” Rutter said. “If you are at the low or middle end of the [pricing] market, you’re getting squeezed out.”
— Martin Romjue, LCT editor
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