Overview   Dallas Business Journal 2008 Business Travel Executive: June 2005   Business Travel Executive: June 2004   Business Travel Executive: December 2003   Dallas Business Journal: September, 1997

Next at Bat

        Requests for proposal are emerging as the prime tools driving systemization. “I’ve definitely seen an increase in [RFPs],” says J. Kevin Brady, Merrill Lynch’s vice president of global travel services. Brady says RFPs beget predictability and lower prices. Even honesty.

        “If nothing else,” says the transportation manager for a major New York-based corporation, “if something comes up, with the RFP you’ve got evidence as to how the service provider responded [to a solicitation].” Take fleet size, a critical factor in determining who gets what share of the business. If a firm tells you they have 1,000 cars, and a cross-check of New York Taxi and Limousine Commission records determines they have half that number, the bid number is right there in writing. It leaves little room for dispute should you want to void the deal.

        Deals are of shorter duration these days. And this too is a function of RFPs, says BostonCoach President and CEO Jonathan Danforth. Contracts that used to run three or four years are now one or two years long. The reason? Corporations are demanding constant, on-going accountability. “The only way they can do that is through the RFP process,” says Danforth.

The RFP Rational

If RFPs induce accountability, he contends, they also promote safety. Corporations “don’t want people Googling” for a car, he says. They want to know first how old the vehicles are, what kind of insurance the providers carry, and how those drivers are trained and screened. In this post-September 11 world we inhabit, paranoia runs deep indeed. Limousine companies have “got lives in their hands” says Danforth. High profile, well compensated lives.

        “Safety is a big issue today,” agrees Phillip Capers, director of marketing and communications for Wynne Transportation. Abductions happen. So do assaults. That means corporations need to know chauffeurs can drive not just defensively, but elusively as well. The skill is taught, and RFPs can document it.

        They can also document whether drivers have been rigorously vetted. “If you’re a woman and deplane at an unknown airport at 12:30 in the morning, and a car is going to pick you up, you’d like to know somebody has done background checks on that driver,” says Capers.

        So high are the stakes that “you can make a career mistake picking the wrong chauffeured transportation company,” says Scott Solombrino, president of the Dav El Chauffeured Transportation Network. Solombrino also serves as president of the National Limousine Association.

Case For Consolidation

He’s a true believer in RFPs, especially the National Business Travel Association’s format, conceived by corporate travel managers and providers. Solombrino says “It’s widely accepted.”

        Widely, perhaps. But far from universally. Solombrino, an NBTA board member, estimates 15 percent of corporations use RFPs for ground transportation — up from less than 5 percent a decade ago. While acceptance is progressing, “it’s not taking off like a rocket.” The RFPs appear to be exacting the most impact among Fortune 50 firms, which are accustomed to using the approach in other travel arenas, such as hotels.

        While Dav El and Boston Coach are sold on RFPs, other major limousine suppliers are less enthusiastic. “I haven’t seen a massive up-tick in the number of RFPs going out,” says Alex Danza, chief operating officer for Savoya. That may have something to do with the way his company pitches its product, he concedes. Savoya direct markets to corporate travel managers and executive assistants. “Typically,” he says, “we hope to develop the relationship well enough that it doesn’t have to go to the RFP phase.”

        Major providers may disagree on the value of RFPs, but they’re virtually unanimous on one count: their clients are consolidating contracts. One of the reasons, believes Brady, is better reporting. “If you can narrow it down to a couple of companies, you can get much better reporting,” says the Merrill Lynch exec. “As a general rule, car companies are way behind on reporting.” He says its tough, even for a firm with the clout of the brokerage giant, to get the kind of data it needs to manage transportation.

        Closely related to rich reporting is quick invoicing. “Clients want to be billed within 48 to 72 hours,” says Capers. Some corporate card companies operate on a 22-day billing cycle. A bill that arrives monthly is automatically kicked into the next cycle. That can delay expense reports. Indeed, “one of the big problems we have with our affiliates is that they want to bill once a month,” says the Wynne exec.

Global Contracts, Local Affiliates

In an era rife with code-shared airline flights, it’s no surprise that a significant slice of ground transport companies operate the same way. Most limousine companies can’t afford to maintain large, far-flung fleets. They rely on others to do the heavy lifting by forging affiliations. The trick lies in exercising quality control over that affiliate.

        When an airline such as Delta code-shares with another carrier, say Korean Air, Delta rigorously examines its partner — ensuring that maintenance, pilot training and service levels are up to its standards. Indeed, Delta was instrumental in the transformation of Korean from a problem-plagued carrier with a dubious safety record to one of the better operators on the planet.

        The same philosophy applies to most limousine affiliations. Wynne Transportation owns just 54 vehicles. Yet, via its affiliates, its reaches 450 cities worldwide. Before taking on a company as a partner, Wynne insists the would-be affiliate submit a 20-page application, covering areas such as insurance, vehicle type, maintenance, driver qualifications and company structure.

        This RAM (request for affiliate membership) winnows out weaklings. Wynne doesn’t employ sub-contractors, jobbers, or owner/operators. Capers contends that too often such mom ‘n pop shops, “keep minimum insurance and do minimum maintenance.”

        Savoya, which owns no vehicles, employs the same approach. “We go out and find the best providers in each market,” says COO Danza, “and put them through a rigorous certification process.” Savoya insists affiliates adopt its tracking technology. When a car and driver are assigned, Savoya runs them. It’s all about command and control.

        What corporate travel managers want to have more control over is pricing. They want to drive it lower, and to make it more transparent. Limousine companies counter that real value derives not so much from lower costs, as from enhanced service.

Low Bids, Low Balls & Low Blows

Driving the price equation (and driving more than a few operators crazy) is the reverse auction.

        Brady has employed it a couple of times in recent months, specifically for black cars, which he classes as mid-range transportation –- slotted between cabs and chauffeured limousines.

        He says reverse auctions “have their advantages. Rather than having separate negotiation sessions, you can conduct [an all-encompassing] session at one time, via the web.” The aim: it puts pressure on service providers to, “see how low they can go, giving us the opportunity to negotiate the best possible price.”

        Has it worked? Within the black car arena, “it saved us some money,” says the transportation chief. “We learned some things.”

        One of the things he learned was to beware of low-balling. “That was our biggest concern. It can be dangerous.”

        Solombrino couldn’t agree more. “Pricing gets too aggressive,” he says. When a company goes to contract, he contends they often find the low bidder can’t deliver the service it promised.

        Reverse auctions are terrific if a company is buying mid- to low-market hotel rooms, even pencils, Solombrino believes — but not chauffeured transportation. Dav El participates in reverse auctions, but if pricing becomes preposterous, “we drop out.”

        So does BostonCoach. “Each time we participate, it seems like an act of futility,” echoes Danforth. He contends reverse auctions commoditize what is essentially not a commoditized business: chauffeured transportation. “If you’re looking to commoditize it to the point that price is what it’s all about, it’s probably not where BostonCoach wants to be.”

        Wynne Transportation takes a different tack. Capers says he’s seeing more reverse auctions than ever these days — an observation that runs counter to that of Dav El and Boston Coach.

        Companies can save real money by running reverse auctions, says Capers. He witnessed one web war in which a company that had spent $1.2 million in a metropolitan area put their business up for bid, and ended up reducing costs by $320,000.

But At What Price?

At the height of reverse auctions, which he contends was late 2003 to early 2004, “We got blown out by a bid which was 30 percent lower [than ours],” says Solombrino. The company running the reverse was a 24-year customer of Dav El’s. “They went with the lowest [bid] because the senior vice president for procurement was stuck on price.”

        The procurement chief told Solombrino to match the deal or walk away. Dav El walked.

        In the first two weeks of the new contract, Solombrino says, the replacement company missed picking up the client’s CEO, president and senior vice president of sales – on four separate occasions. Airplanes flights were missed, and so were meetings.

        Revolt among the company’s executive ranks prompted a return to Dav El. Price may have preoccupied the procurement chief; but not senior execs at the point of contact with the real world.

        If you accept the premise that you get what you pay for, what’s a limo firm got to do to convince travel managers their product is worth the price? In an era of RFPs and reverse auctions, the trick, says Solombrino, “is justifying why your company’s service levels are worth more money than the next person’s”

        He believes corporate travel managers are weighing the value proposition more “rationally” than they did 18 months ago, when price was the dominant driver.

        The National Limousine Association president contends one reason reverse auctions are tapering off is that rising fuel and insurance costs have altered the negotiating equation. “[They] are so out of whack right now that the customer really isn’t in the driver’s seat.” Rather than pursue a contract at all costs, he asserts “operators are coming to the conclusion that if they make a bad deal it can put them out of business.”

        The result: prices are firming, and in some markets firming fast.

A Clear View — Of Extra Fees

If corporate travel managers posses less pricing pull, they still want to know what goes into making up that price. Transparency is a big issue in the limousine industry. It’s not like airlines, where federal standards mandate a provider breaks out its pricing.

        “I’ve had several people ask me, ‘Why can’t you just tell me what your rate is,’” says Capers. “’What’s wrong with your industry?’”

        There are simply too many hidden charges in the limo industry at large, he says, things such as “surface transportation charges,” and other bits of esoterica. “[They’re] really just added to screw the customer.”

        The motive behind the hidden fees? Capers says because the environment is so competitive today, and cost pressures so great on providers, “they don’t want to tell you the true cost of the trip.”

        So why do corporate travelers put up with add-ons? Perhaps it’s because they’re used to shelling out almost $.25 on ever airline dollar spent on a dizzying array of federal charges, or that governmental entities levy taxes on car rentals that can border on the ridiculous, or that cities stick it to hotel guests to the tune of 15 percent and up.

        “People are just used to looking at those add-ons, and paying them,” says Wynne Transportation’s marketing director.

        The operant word is looking. And so it is we return to requests for proposal. They render it easier than ever for corporate travel managers to do just that –- look at the add-ons, look at a limo company’s qualifications — and then make a better decision.

Please call or email for details and prices
To view a sample of our fleet vehicles,click here