As requests for proposals for chauffeured transportation service are becoming more commonplace, travel managers are not always taking the correct approach in their requests to ensure they get the service they desire—to the point where some major ground transportation won't even respond to their requests, according to the suppliers.
Major suppliers across the board said they are witnessing the disappearance of the reverse auction for corporate chauffeured services, much to their delight. Some travel managers, however, have begun taking the same approach with their RFPs, which the suppliers said ultimately weakens the managers' ground transportation programs.
"There's always companies that are price-focused in their RFPs," said Scott Solombrino, president of Chelsea, Mass.-based Dav El Chauffeured Transportation Network. "Some companies are just so driven by price that we can't compete. Our job is to convince the corporation that we can fit all of their needs and deliver them the highest quality service in the marketplace."
Other giants in the industry are echoing Solombrino's observation. Jonathan Danforth, CEO of Everett, Mass.-based BostonCoach, told BTN his company received several RFPs to which it will not respond because they are too concerned with price or are just looking for airport transfers, for which his company is not the best fit. Likewise, Norwood, N.J.-based Empire/CLS vice president of sales and marketing Bob Lockett said there is little room for negotiation in prices once his company puts out its proposal.
"We tailor our pricing in that RFP based on anticipated volume," Lockett said. "I'd be foolish to continue to cut that price because it doesn't make any sense. I know that with commoditization or procurement, their mandate is to cut cost, but you can only cut costs with our products so far, and then service levels deteriorate."
The problem, Solombrino said, is that some smaller chauffeured transportation providers often make promises to buyers that they cannot keep. Only a handful of suppliers actually have the assets to service a full-blown RFP, but it's easy for the smaller company to undercut the industry leaders, he said.
Those promises sometimes can be based on a network of affiliates that have varying qualities of service, he said.
"People are pretending that they have assets that they don't have," Solombrino said. "If you go and buy a computer from Dell, you want to make sure that you're getting it from Dell."
Kevin Iwamoto, a former president of the National Business Travel Association, who has experience on the travel buyer side with chauffeured transportation RFPs, said despite the suppliers' insistence on not becoming a commodity, price will always be an element in the RFP. However, Iwamoto agreed with the suppliers in that price should not be the top concern.
The key factors in choosing a ground transportation provider, according to Iwamoto, should be safety and security, risk mitigation and reliability, particularly when talking outside of the airport transfer realm. Because those who use the service are usually CEOs, other high-ranking executives or VIP guests, a lapse in any of those areas is going to be seen from the top, he said.
"Travel managers who make a selection just based on price are probably setting themselves up for failure," Iwamoto said. "In terms of commodity spend, it's probably not one of your highest spend areas. However, it's probably one of your highest-profile."
Many travel managers learn the hard way, said Jeff Greene, president of both the National Limousine Association and his own company, Greene Classic Limousines in Atlanta. A company that selects a supplier based solely on price will hear about it when one of their executives encounters a bad service incident.
"Cheap companies are a dime a dozen. They come and go," Greene said. "Companies that provide excellent, high-standard service are really hard to come by."
That's also a large reason behind the decline in reverse auctions, said Mike Fogarty, CEO of U.S. operations for United Kingdom-based Tristar Worldwide. A $5 difference in bids goes out the window once an executive is 10 minutes late for an important meeting, he said.
Fogarty said his company still will respond to price-focused RFPs, but he often sees even more basic problems in the RFPs he receives. Some, for example, seem to come from a generic template that include elements bearing no relevance whatsoever to ground transportation, he said.
Chauffeured car RFPs were rare as recently as three years ago, but have grown exponentially since then as more travel managers seek a managed chauffeured transportation program
(BTN, March 20). Dav El's Solombrino said he's seen a 25 percent year-over-year increase in RFPs at his company. Despite the problems with the proposals, Solombrino said that on the whole, the quality and sophistication of RFPs appear to be improving, although the onus of educating travel buyers to continue in that direction is on the suppliers. NBTA put out a template RFP about the time the proposals were becoming more prevalent, and more buyers have been following it recently thanks to some of those education efforts, he said.
Even as the wrinkles are ironed out, the increase in RFPs ultimately will be a positive trend for the larger companies. As more companies move to a managed program, they'll be less likely to look at regional providers in lieu of one company that can provide service for their entire program. That RFP trend did not go unnoticed by Tristar, which responded by setting up a U.S. affiliate network, soon to be followed by its own fleet in key markets.
"Companies seemed to be focused on their local providers. Then, it became more of a national RFP," Fogarty said. "Now, we're starting to see a trend of people looking at it globally."