The chauffeured transportation industry in 2009 was a dark
place, plagued by plummeting corporate demand, the evisceration of the
financial companies that provided a consistent stream of business and the
tarring of their product by some as extravagant and unnecessary. Casualties
were plenty: Untold numbers of small limo companies died, major suppliers
pulled out of entire cities, countless jobs were lost and millions of dollars
in revenues evaporated. As time progressed, the U.S. economy approximated a
rally, corporations loosened the reins on travel spending, and the beleaguered
chauffeured industry began to see some rays of light shine through.
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"Investment bankers are still investment bankers, and
senior executives are still senior executives," said Dav El Chauffeured
Transportation Network president and CEO Scott Solombrino, pointing to similar
stabilization in other corporate travel sectors that appeal to those groups,
such as first class air travel, private aviation and luxury hotels. "People
want these efficiencies and are a little less worried about a shareholder
revolt. They missed those travel cycles."
Beginning in the early months of 2010, chauffeured suppliers
began to see those changing attitudes translate into a sunnier demand outlook.
While nobody suggested a full rebound already has taken place, the absence of
plummeting demand offered a starting point for a comeback.
"Flat is the new growth," said BostonCoach
president and CEO Larry Moulter.
Still, a sense that the worst of the storm has passed has
taken root in the industry. "Companies are traveling more frequently, and
they're getting back to more typical patterns," Solombrino said. "They're
seeing the safety and efficiency chauffeured cars offer. Their tolerance level
for inconvenience and inefficiencies has gone down. We were wondering if that
would ever get back to normal, and it is."
Changes in corporate demand patterns inevitably beget
changes in supplier negotiating strategy, and while corporate travel buyers
still can wield significant leverage in those talks, the days when chauffeured
suppliers can push back likely isn't too far off.
"We had a two-year degradation of the chauffeured car
sector, and thousands of companies went away," Solombrino said. "Now,
there's a correction of the supply and demand curve. There's a supply shortage,
and in the next six months we could have some upward pricing momentum for the
first time in two years."
Solombrino repeatedly offered the caveat that any overall
economic dip would imperil the segment's growth, but said, "We're all in a
very aggressive pattern now and trying to understand how improvements in the
economy are going to look going forward."
While corporate volume at EmpireCLS Worldwide Chauffeured
Services is "somewhat flat" versus 2009 levels, said chairman and CEO
David Seelinger, business from hotels and private aviation clients who offer
limousines to their customers has risen.
"There's not a lot of large carriers anymore,"
according to Seelinger. "A lot of midsize companies went out of business.
It doesn't really change our strategy. We're not the least expensive provider,
but we have competitive pricing, and a large number of customers are not
price-sensitive."
Pricing remains a sticky topic for suppliers, who live in a
competitive space and know current corporate travel procurement philosophies
dictate the importance of pricing and competitive bids, but also believe their
products are differentiated by service and traveler experience.
"We're selling through operational excellence,"
Moulter said. "We want to be meaningful partners with travel managers, CFOs
and procurement executives."
That will happen in three ways, Moulter said. "First is
maintaining the core competency: the ride, being on time and exceeding
expectations. Second, as customers have downsized, they need to be smarter and
more efficient with their T&E spend, and we're investing $9 million in tech
upgrades to help that. Third is a systemic approach to managing and controlling
spending with management reports and real-time data. Travel managers want to
audit spend and drive compliance, and the ability to create reports enables you
to reduce spend."
Introducing that level of report detail—"a big step
forward for us," according to Moulter, including such information as wait
and stop times, actual vs. quoted costs and cancellation information—is a
reaction to what Moulter said was the rising influence of procurement
philosophies in travel management.
"Chauffeured is 2 to 4 percent of T&E spend,"
according to Moulter. "People didn't worry about it. Now, procurement and
travel managers worry about every penny."
Moulter said BostonCoach has picked up 73 new corporate
clients since he became president and CEO in July 2008, but he criticized
request-for-proposals-based procurement approaches. "Clients who want an
RFP generally want to commoditize it," he said. "With RFPs, it can be
a 250-day sales cycle. That produces waste, and it's an old way of doing
things."
That said, it was also a way of doing things that had grown
in prominence in the past few years, with the recession certainly not lessening
anybody's emphasis on price. "A lot of corporations we service went out to
bid for better prices, and we captured some of that," Seelinger said,
adding that EmpireCLS is "not to quick to respond" to RFP-based
corporate procurement efforts, but "of course we participate. We
renegotiated pricing in certain markets, and we did not lose a customer."
EmpireCLS is pushing technological development, Seelinger
said, including electronic confirmations that include carbon emissions
information for all trips, automatic posting of limousine charges to hotel room
bills and planned applications for Apple's iPhone and iPad that will include
reservation and detailed chauffeur information.
"Corporate due diligence has increased dramatically,"
Seelinger said. "Companies are doing it the way it should be done. They
are ensuring services, engaging the company, seeing how the offices operate
internally and how they ensure services and safety."
Given the level of upheaval on the supplier side of the
chauffeured transportation industry, speculation persists that some significant
changes in the competitive roster could occur. Seelinger encouraged that line
of thinking.
"I can almost guarantee you that we will do more than
one transaction," said Seelinger, whose company in 2009 received $10
million in funding from Praesidian Capital Investors. "That's definitely
coming. It's just an issue of timing, the economy and lending sources. I hope
one happens before the end of the year."
Dav El pulled out of no cities during the downturn, a move
that Solombrino said has enabled him to increase the company's marketshare. "We
were the only company to make the choice not to close cities down,"
Solombrino said. "Maybe it wasn't the best financial decision, but it was
the best strategic decision for marketshare, and now we're reaping the
benefits."
One deal that already has occurred in 2010 is a marketing,
sales and distribution partnership between The Hertz Corp. and Dav El, in which
no equity changed hands.
"The size and breadth of the Hertz brand has been
extraordinarily helpful to me," Solombrino said. "We're in the res
systems, on websites, and we're cross-selling and cross-marketing. Every
conceivable way we can integrate, we're offering a seamless way to book."
"We're still navigating that, but it is another
solution," added Hertz Corp. senior vice president of global sales Robert
Stuart. "It gives you something else in the toolkit."
That deal followed a 2007 investment in Carey International
by Avis Budget Group, which currently owns 47.9 percent of the chauffeured
transportation supplier.
"Not a lot has changed, and we talk about it with
customers when appropriate," said Avis Budget senior vice president of
commercial sales Bob Lambert. "There are a few places where we've been
successful, but it's not earth-shattering. Chauffeured transportation
experienced maybe more of a downturn than we did. Hopefully, things are
improving."
Those signs are on the table, according to the chauffeured
executives, who now see themselves as being in a position to push the service
initiatives that are the bread and butter of their industry.
"One good thing about the downturn is that it let us refocus on our
day-to-day operations, with plenty of time for training and re-training,"
according to Solombrino, who specifically cited passengers' experience with
drivers. "Chauffeured is always going to be about the experience."