Shifting Travel Patterns Keep Ground Rates Firm, For Now

Travel managers this year are seeing ground transportation rates continue to hold, despite recent shifts in usage that hint at a future with new pricing structures. Meanwhile, safety concerns have made their way into this year's requests for proposals, producing more sophisticated documents within an industry segment that has lacked the formality of other travel supplier contracts.

After the high rates seen in 2000, and despite the well-vocalized insurance pressures on the industry, rate levels have not returned to those levels. Out of the majors, only self-insured BostonCoach has been able to avoid a tripling of insurance costs caused, in part, by a consolidation of insurance suppliers. Still, the pain incurred has not been enough for ground companies to boost costs to clients. "Ground companies are very leery of adjusting rates at all," said Tom Mazza, executive director of the National Limousine Association. "Travel managers know it's a buyer's market, and most major players are listening to the things they have to do to keep their customers. I don't think you'll see prices return to normal until 2003."

Those little favors include the elimination of surcharges on airport greeters, or on the time a chauffeur needs to wait for a passenger once their plane has landed. These surcharges, never hidden ones, were passed on to the customer in more cases than not, Mazza said. Now the surcharges have been shelved, despite the fact that more greeters than ever are needed to navigate travelers to waiting cars. In the past seven months, airports essentially have banished limos from curbside pickups, and now it's the traveler who could potentially suffer the wait, which can take as long as 20 minutes.

Hourly rates for as-directed work—which can include multiple stops— also are becoming more flexible, Mazza said.

Airport Ground Transportation Association executive director Ray Mundy argued that taxicabs recently have been losing airport transportation market share to limos from a cost perspective. Limo rates are only about 10 percent to 15 percent above taxi fare in some cities, so whereas those riders used to comprise a small band at the top, that band is growing when people now can preschedule, he said. "Cabs are lowering their service and raising rates," Mundy said. "You can literally call a tow truck for their price."

In another cost-cutting move that reduced providers' airport business, travel managers are finding more success in asking travelers to drive themselves to the airport. "We're encouraging people to drive more," said Sheri Bonsall, corporate travel manager with Warren, N.J.-based Chubb Group of Insurance Companies. "When Newark Airport was so difficult, we saw more chauffeur pickups. Now, construction is mostly over and there's a new parking deck and an expansion of offsite parking services, so driving is a reasonable alternative." More cost-cutting was found by Condé Nast director of travel Susan Goldfarb when the company shifted ground transportation payment from vouchers to their corporate card.

Meanwhile, vendors are surprised by the more comprehensive RFPs they're seeing this year. "The question we're seeing more and more is, 'Who's behind the wheel?' " said Mazza, who added that background checks of chauffeurs has become the common litmus test for suppliers.

"We are more concerned that our suppliers are doing all they can to ensure they're keeping good people," Bonsall said, "and maintaining a longevity with those people." A stronger RFP for ground transportation comes at the same time companies are more interested in a longer-term relationship with their ground providers. "It used to be that a traveler would try this company once and would pass a recommendation on by word of mouth," Bonsall said. "But now it's more formalized because of the potential liabilities. By doing an RFP, you cover the bases by making sure you have the right documentation."

Sources point to an imminent pricing evolution within the industry, spurred by the new, less airport-focused mentality of many business travelers in the past seven months. Responding to demand seen in early fall 2001, most of the major companies quickly formulated variations of city-to-city programs. The programs' major selling point was a flat rate from city environs to city environs, but industry sources said the programs ultimately fell short of expectation: Travel managers said the price is not cost-effective for a single traveler. At least in the Northeast, some travel managers said Amtrak's Boston to Washington high-speed rail service is biting into their car service numbers. Moreover, ground companies' argument for city-to-city usage, hinged upon the productivity that is lost on shuttle service, is lost when travelers can do comparable work on the train, travel managers said.

BostonCoach, however, said its Boston-New York route has been the most successful route for its city-to-city program, and there are further signs of investment in this transportation model, including the addition of new routes to the company's program. "There is a certain individual who says, 'This absolutely makes a lot of sense,' " said Chris Regan, senior vice president of global marketing for BostonCoach. "What you're doing is cutting out the drive to the airport and away if you're leaving from and going to locations not close to the airport."

In the meantime, certain shifts in corporate demand are keeping the wheels rolling. Carey International Inc. CEO Vince Wolfington said the down market has shifted user patterns to city to city and consolidated travel, as well as regional meetings that both keep ground transportation in the picture. "You sell fewer airline seats and hotel rooms, but they still need ground transportation," said Wolfington. "They'll now use our car for five or six visits, and go home."

To further address concerns of the travel management community working with ground transportation providers, the National Business Travel Association formed a new Ground Transportation Task Force in December. Though a representative could not be reached by press time to discuss the group's current initiatives, NBTA said it plans to standardize a glossary for the industry, illuminate best practices, review tech initiatives and develop a metric for managing a ground program, including car rental.