Bright Prospects for a Comfortable Ride
Paul Burnham Finney, The New York Times, 12/4/2007 (excerpted)
Those plump Lincoln Town Cars that provide a ride as soft as a pillow are clogging city streets and airport access roads these days — a sign that the $2.4 billion chauffeured transportation business in the United States is doing well, particularly with corporate customers.
"Chauffeured cars are no longer considered such a luxury," said Scott A. Solombrino, chief executive and owner of Dav El, the second-biggest limousine company. "They're an efficiency tool mostly for highly paid executives who often don't have time to rent a car."
Perhaps the biggest indication of the bright long-term prospects for chauffeuring services is the Avis Budget Group's recent $60 million investment in Carey International, the industry leader with 2006 revenue of about $250 million.
Part of the lure was Carey's stake in the corporate market, which, according to Gary L. Kessler, Carey's chief executive, represents more than 80 percent of its business. The Avis purchase was definitely noticed on both sides of the street: the rental-car companies searching for new ways to grow and chauffeured entrepreneurs who envy the marketing prowess and deep pockets of the big rental car brands.
"We're entering a huge period of consolidation," Mr. Solombrino said.
The strong market in the United States comes at a time when the major growth is overseas, according to Camella Lobo, a senior editor at Limousine & Chauffeured Transportation magazine, which tracks the industry. As American companies go global, their managements look for the same services abroad as they get at home, she said.
Typical of this trend is the expansion overseas of BostonCoach. The private company grew out of Fidelity Investment's own fleet of sedans and limousines in 1985. Today, BostonCoach, like Carey and Dav El, caters to business clients in more than 450 cities worldwide — with affiliates from Bangalore, India, to Zurich.
"New York City is still the epicenter of the chauffeured vehicle industry," said Mr. Kessler of Carey, whose 200 or so cars and vans are busy largely delivering Wall Street and Midtown Manhattan executives to airports, meetings and — frequently — suburban homes. New York alone has an estimated 12,000 chauffeur cars owned by drivers, many of them franchisees of Carey and other transportation companies.
In a survey by Limousine & Chauffeured Transportation of 100 travel managers who are members of the National Business Travel Association, New York was first in use of chauffeured vehicles. Chicago came in second and then Washington, Boston, San Francisco, Los Angeles, Atlanta, Philadelphia, Miami and Orlando, Fla.
One reason New York is first is that it has three major airports (a car costs about $33 to La Guardia and $48 to Kennedy or Newark, not including tolls, tips and a $5 rush-hour surcharge). With air travel relentlessly expanding and airport routes jammed, business travelers more and more are opting for limousines. New Yorkers, confronted with a taxi meter clicking away when stuck in traffic, think the flat fees are a reasonable trade-off, the limousine owners say.
With cars generally smaller overseas, personal privacy highly prized, and company cars a popular way to greet guests at airports, foreign countries are just beginning to respond to the demand for quality chauffeured cars with a brand name.
Carey now operates in some 550 cities around the world. "It's a robust market overseas," Mr. Kessler said, adding, "especially in London, France, India, Hong Kong and Shanghai." In China and some other business hot spots, Mr. Kessler said, the chauffeured car of choice is a Mercedes.
With global operations accelerating, limousine operators joust with one another for corporate contracts, usually offering discounts of 5 to 15 percent. Carey, for instance, has corporate customers who use its web of partners to provide chauffeur service for "roadshows" of new products or financial packages.
Companies, it turns out, spend wildly different amounts for chauffeured services each year — with 21 percent of the limousine magazine survey participants saying they spend $101,000 to $250,000 annually and 19 percent saying they pay as much as $1 million to $5 million a year.
How do customers rate chauffeured services?
Participants in the magazine survey said their greatest concern was on-time pickup, clean interiors and professional driving (keep off the cellphone and stop chatting with your passengers). With their own BlackBerrys, laptops and other business tools, they told the magazine, there is no need to crowd the car with digital accessories.
They said that Internet access and satellite radio were two desirables, though secondary. And it might be nice to have bottled water, a newspaper and interior temperature controls. Carey says it provides Wi-Fi service on some cars.
In short, the survey found, corporate customers care mostly about basics, including efficient luggage handling and knowing the best routes. In other travel businesses, it's called good concierge service.
