Special Report: Annual Car & Ground Transportation Report-Buyers Armed W/ Ground Know-How Get Better Deals

Finding themselves in strong negotiating positions and better educated about the industry, buyers have been flooding car services suppliers with an unparalleled number of early requests for proposals, and finding more flexible pricing meeting them at the table, even from traditionally inflexible, luxury operators. However, buyers still are faced with the task of standardizing rates within an industry that offers disparate minimum costs and surcharges, and some are demanding that suppliers instead do this work.

For BostonCoach, the level of RFPs seen is "totally unprecedented in the business," according to president Russ Cooke, who is only one among several who attributed the boon to a new interest in consolidating suppliers while acknowledging the rush to capitalize on flexible rates.

"We're seeing tons of RFPs right now," added David Seelinger, president and CEO of Empire International. "There are definitely more at this end of the year than I've ever done."

Buyers not only are early, they also are savvier about seeing how various charges cloud true competitive costs.

Cisco Systems Inc. travel manager for the Americas Jane Gardner, who completed a car services bid two months ago, clinched satisfactory rates in strategic cities based on cost comparisons, and negotiated out certain surcharges. "We held onto things we felt someone had to absorb, like tolls and parking," she said. "We try to make sure things are fair." She noticed widely disparate driver gratuity levels—some as high as 30 percent—that she negotiated down to a standard rate. Another travel manager, who asked not to be identified, successfully negotiated the affiliate fee out of his contract.

"We asked suppliers to lay out all their surcharges on the table and asked them to bid in a standardized way," said Kevin Iwamoto, global air and car supplier manager for Hewlett-Packard. "Many had clever ways of diverting our attention with different hourly minimums, prices with or without tip, for instance, and we had them flatten it out."

"The larger companies have gotten a little bit inventive with surcharges and hidden fees," said Vince Wolfington, chairman and CEO of Carey International. "We did a pricing analysis that found, in some cases, that some of our lower-priced competitors were charging more with hidden costs." Driver wait time often is a substantial source of these hidden costs, some as low as 15 minutes.

Wolfington warned that some suppliers are cutting corners as they seek to weather the prolonged travel downturn. "While publicizing the purchase of new vehicles, they're actually carrying the majority of their vehicles for longer periods of time. What we're trying to do is stay out in front on all the key customer service touch points and, where appropriate, give some price breaks, but not as a general rule."

Darren Vance, Music Express midatlantic director of sales, said both the early arrival of the RFPs and their level of professionalism caught his eye. "They're much more detailed, and about double the size of what they were a few years ago, and we really like that. It raises the bar for our industry, because people are realizing that this represents a significant amount of travel spend."

In response to interest, suppliers this season are offering particularly aggressive pricing, though no majors said they have undercut rates to compete with smaller suppliers. "I am seeing pricing I haven't seen in 10 years," Empire's Seelinger said. "There are a lot of companies in trouble, and price is the primary concern for buyers."

"The people most aggressively squeezing down the cost are at the major corporations," Wolfington said. Carey's recent negotiations have allowed corporate customers to gain a single rate for trips in multiple cities.

"We put our best foot forward on price," BostonCoach's Cooke said, "but we're not trying to lowball anyone. I think people get lost in the price war. We're trying to get the travel manager to understand the other side of this value proposition."

Due to advantageously competitive pricing and an ongoing desire for supplier variety, buyers actively are seeking to consolidate their suppliers, but still resist committing to any single national brand or simply remain focused on a market-by-market basis. For example, Accenture this summer reduced its suppliers in the Atlanta region alone from 25 to a single supplier.

Hewlett-Packard recently concentrated work to no more than five suppliers from about 100. Iwamoto found consolidation led to an ideal number of suppliers. "You have to stay to that number, because some are offering great rates but are only in one city," he said. During his evaluation, Iwamoto also found disparate insurance levels among potential suppliers, which included black car companies, and he involved his risk management and legal departments in the process in order to get supplier insurance levels in line with company requirements.

Meanwhile, both buyers and suppliers admit a large corporate liability results from working with dozens or hundreds of car services—another problem solved within the consolidation process. "Part of our value is to reduce the risk they may have today with an unmanaged program," said Chris Regan, BostonCoach director of global marketing.

Of course, the need for stronger data may remain the top reason to undergo this process.

"I've been in the travel industry for 25 years. In the past five to 10 years, data and getting access to data has been on the forefront of every travel purchaser's mind—having it be readily available, in a customized format and fit the client's needs," Vance said. Music Express offers clients customized intranet pages through which they can book directly and into which the company adds account-specific information.

"As companies seek more areas for cost savings, it's the 80-20 rule," Iwamoto said. "Ground tends to be at the bottom," though HP has gone beyond ground to evaluate its lowest category of spend, airport parking. "Most travel managers, being as busy as they are, never get to it or give it a quick look, but I was amazed to see how much spend was in ground."

BostonCoach's new self-service, Web-based reporting tool gives the company a technological edge for companies seeking more ways to access data. Only BostonCoach and aggregate reservation and reporting company Saturn Reservations provide a self-service option for reporting. Saturn's tool can be accessed by both buyers and travel agencies and encompasses data from any car services company willing to receive bookings through Saturn's technology.

Expected officially to roll out in the fourth quarter, BostonCoach's tool will allow travel managers or approved staff to view outstanding reservations and previous travel trends. Inspecting patterns in travel can open doors to potential carpooling, which can appear, at first, to reduce overall revenues but remains a powerful approach for travel managers seeking to streamline their car supplier reports, determine complete spend and bring travel history to new vendors, BostonCoach officials said.

BostonCoach's tool breaks usage down into several fields, including passenger name, service city, airport and ride charges. Total charges then are broken down into the base fare, service fees and any other charges, wait and stop times and individual employee use. The system also provides self-service access to an online archive of the company's invoices.

"So far, everyone is saying, 'We've been waiting for this,' " Regan said. This tool also may help usher in a new era of surcharge transparency that buyers now have the power to demand.

Suppliers other than BostonCoach can't boast the self-service aspect of their reporting tools, but all said they customized the process based on client preference on frequency of reports and how the data is organized. Though vendors mutually push service and safety as the strengths they bring to corporate customers, some accept that reporting may serve as the differentiator. "My theory is, obviously, we provide good service," Empire's Seelinger said. "But if I give a customer good reports, the likelihood of someone else being able to do it, and the likelihood that they'll leave me for someone better, that's small."

Suppliers noted, however, that data reporting, reporting options and consolidated reservations will not come free. "There is a price tag on managing a network of affiliates," BostonCoach's Cooke said.

Despite the global claims of major suppliers, and the publicized quality control programs in place to standardize affiliates, not everyone sees the advantages of consolidating to major car services companies.

"Everyone tells you, 'I can take care of you worldwide,' " said Cisco Systems' Gardner. "But the problem is, while we may know what the initial company does, we don't have any guarantee that they meet the same standards with their affiliates. They're trying to stay on top of it, but they can't be hands-on enough to know. So, we're not averse to having a number of suppliers and maintaining a relationship with them."

To bolster confidence over the stability of networks, more than one major car supplier in recent months narrowed its standard reimbursement period by which its affiliates receive payment for services. The previous industry standard stood at 90 days, yet BostonCoach and, more recently, Empire International, have shrunk this to 10 business days. Suppliers said the decision worked to strengthen their relationships with affiliate car services, particularly during a year when business has been sought with an unusual, and sometimes desperate, aggression.

Empire finds buyers now are significantly interested in the affiliate relationship. "There's an enormous amount of questions asking about our relationship with our affiliates," Seelinger said. "RFPs have gotten to the point where buyers want to know affiliate names," as well as copies of affiliate contracts, their fleet number and type of vehicles.

"Buyers are getting more sophisticated about our industry," Regan agreed. "They're learning how the networks work."

Meanwhile, at this point in the travel downturn, buyers are exercising less procurement power through the reverse online auction process—in which suppliers bid against one another for a corporation's business in certain markets—than they were earlier this year.

"I think the word got out that that wasn't as successful as people thought," said Seelinger, who this year won business in three major markets as a result of auctions. In one of these markets, the lowest bidder was disqualified. "The problem is that the due diligence should have been done on the front end. For what it costs a large company to do it, and when you qualify the market, you find your options are really limited."

Matt Tolan, Carey regional vice president of sales, said one buyer conducting an auction informed suppliers that the attempt at comparison revealed itself to be "too complex" a process to complete.

"All of our initiatives have a savings or benefit for the travel managers," Cooke said. "If you want to lean on one thing, such as an auction, you're missing the chain. We have more to offer from a value standpoint, and this saves the hidden dollars for the travel manager."

For suppliers anticipating the start of the fall business travel season in a lackluster year, the anniversary of Sept. 11 effectively pushed the start of this season back by one week. Yet, they remain encouraged for the season ahead, thanks to what they see as a new level of engagement and understanding from travel buyers that is helping to build a mutual understanding of the car services business.

This fall also will see some new or relaunched transportation programs on the market. BostonCoach this fall is relaunching its City to City program for more than 50 cities, in which it offers fixed-price routes between more than 25 nearby city pairs; Carey advertises a similar program. Others said the regional trend, which spiked immediately after Sept. 11, quickly proved to be an overrated one and not worth isolating as its own program.

With the new launch, BostonCoach will add new roundtrip rates that include four hours of driver wait time. The company's highest volume within the program is seen in the Northeast, where it offers yet another alternative to the air shuttles and trains for travel between relatively close, major business destinations. Carey's program also sees its strongest business in the Northeast, followed by the Midwest region.

Further confidence in the city-to-city transport model can be found in Aiken, S.C.-based ExecConnect America. The company in July launched a daily motorcoach option between Cleveland and Pittsburgh—specifically designed for business travelers—that seeks to replicate the first class experience onboard an aircraft. The buses house 27 leather seats fitted with power ports, free Internet and e-mail connections. Two onboard attendants serve beverages and meal service, and the coaches are outfitted with a restroom, video monitors to feature business and news channels, and two four-person meeting areas, which can be reserved in advance.

The company offers four daily departures from each city and plans to expand its services to 54 routes within two years. "The time seems just right for such a service," said Doug Anderson, president of Anderson Coach and Travel, which operates the Cleveland-Pittsburgh route for ExecConnect. A roundtrip ticket between the cities costs $129 and the journey takes two hours and 40 minutes.

In terms of expansion, BostonCoach on Aug. 1 opened its doors in Atlanta, a market penetrated last year by Empire International and the home of the country's busiest passenger airport, at which BostonCoach was granted full airport authority. The city becomes the company's ninth owned and operated location, joining Boston, Chicago, Minneapolis, Newark, New York, Philadelphia, San Francisco and Washington, D.C. The new expansion remains part of a larger plan to expand into four new cities annually. The top 20 city pairs for potential locations already have been identified, according to BostonCoach's executive team.

BostonCoach this year also shifted some sales attention to dedicated business as well as road show and event work. "Traditionally, we've been identified as an airport company," but with the Lincoln Town Car Executive Series L car as its standard for just over a year, "We're selling a gamut of products," Cooke said. "This has been one of the busiest meetings years we've had."

On the international front, Carey has standardized rates, reservation centers and special desks within each of its global regions. The company now is offering a new destination management service for strategic European cities to U.S. corporate customers.

Overall, Carey sought to keep its services diversified, and, until the usual quiet period in July and August, saw business up from last year. "Typically, the cutback in business travel really touches the commodity services more than the value-add services," Wolfington said. "When safety and security become important, VIP movements become important."

Carey also this year began rolling out its 2003 Lincoln Town Car, which features in the backseat a roll-down work desk, heating and climate control, computer and telephone powerports, and a passenger door with a wider opening arc. When the rollout is complete, the new car should comprise more than half of Carey's total fleet. The company traditionally has been the first of the major suppliers to introduce new Lincoln editions into the market.

Music Express Limousine by October will open a new location—its fourth—in Washington, D.C., where it has worked with existing clients through its affiliate network. "We decided it would be a prudent choice to expand," Vance said. "We've gotten a wonderful response, and this is a city where so much is happening."

Dav El this month plans to roll out a new online reservation center, though president Scott Solombrino said only a small percentage of reservations ultimately will move online. The company this year has concentrated on opportunities within the meetings market. "We do a lot of surveying," Solombrino said, "and meetings is one area we've seen movement in."