|
Article Excerpt
The chauffeured transportation industry began 2002 by digging itself out of the crisis resulting from the Sept. 11, 2001, attacks. A 40 percent annual increase in insurance costs combined with flat rates meant that many companies had to scramble to survive.
"It was a really difficult year," said Tom Mazza, executive director of the National Limousine Association. "Companies reduced their fleets. While they once held on to their Lincoln Town Cars or Cadillac DeVilles for 18 months, now they're keeping them 24 months."
"All of us looked at volumes that were 10 percent to 20 percent behind those in 2001," said Russell Cooke, president of BostonCoach Corp., based in Everett, Mass. "We actually did a little better and were probably in the 8 percent range, but we had to watch our costs, and buyers are bringing prices down."
Sara McLean, publisher of Limousine and Chauffeured Transportation magazine, based in Torrance, Calif., estimated that business for the chauffeured transportation industry collectively was down 40 percent in the first quarter of 2003, compared with the same period a year ago. While business plunged 70 percent in the days after Sept. 11, it was already off about 30 percent in August 2001 as a result of the weakening economy.
"The luxury transportation business directly parallels the stock market," she said. During the six- to eight-year run of IPOs in the 1990s, ground transportation companies made a ton of money. With only four IPOs last year, "corporate luxury transportation stalled." Mazza estimated that "probably 8 percent" of the 10,000 or so U.S. chauffeured transportation companies have disappeared, and the overall fleet has been reduced by 15 percent. A soft used-car market meant companies had to sell their cars for a significant loss, although in many cases it was worth it for the insurance savings.
Insurance costs skyrocketed once the stock market, in which the insurance companies had invested their premiums, soured and claims soared in the wake of the attacks.
"When the bottom fell out after 9/11, the insurance industry reported a 47 percent loss," McLean said. "Companies either went out of business or started increasing rates to cover the debt." Such cycles, she added, have occurred before. In 1989, two years after Black Monday, operators paid about a $10,000 premium on a limousine. That amount was reduced to $3,000 by 2000 and is now back up to about $8,000 to $9,000. Eventually, she said, "it'll cycle around again."
With corporate travel down so significantly, many chauffeured car companies have diversified their operations--providing transportation for employees at government agencies, catering to families at funeral homes, providing corporate shuttles, working with retirement homes or in conjunction with school programs.
Firms "have been looking at other industries to service outside the travel industry," McLean said. "With expenses escalating and demand decreasing, people go into survival mode." Specialty companies serving a particular niche of the industry are sprouting up. For example, COSEP, the meetings and events division of Friends & Co., based in Washington, D.C., specializes in providing meet-and-greet airport and shuttle staff, as well as temporary employees for meetings and events. The company works with airports to develop its training programs, and it has a partnership with transportation management firm Logistics USA, which can provide shuttles upon request.
The sprouting up of such companies as COSEP also reflects the new reality at many airports, in which meet-and-greet staff has become essential due to security-related drop-off restrictions. "It's a really challenging situation," McLean said. Suppliers are "building it into their cost in cities like New York, where there are strict rules on waiting." The orange alerts earlier this year caused other problems, in which cars en route to the terminal were sometimes stopped without warning at hastily erected security roadblocks. Some airport authorities also added access fees on chauffeured cars of $1.50 at Boston Logan and Los Angeles International, $3 at Knoxville, Tenn., $5 at Cleveland and Richmond, Va., and $6.50 at Dallas Fort Worth, according to Bob Lockett, vice president of sales and marketing at Empire International in Norwood, N.J.
In response to heightened security concerns, Empire last year sent e-mails to key corporate accounts alerting customers of security-related delays and other information, such as the cordoning off of certain city blocks or random searches at airports. Chauffeurs also carry a wireless device to alert the dispatcher--who then can relay the information to other drivers--about unexpected delays. The device also enables Empire staff to track a passenger. Earlier this year, Carey International Inc., based in Washington, D.C., set up a special service desk for...
|
