How is ground transportation faring in the current economic climate? Dave Richardson reports on an industry facing some big challenges
In these distressing times, a chauffeur-driven limo might well appear to be a gas-guzzling luxury no-one can afford on either cost or environmental grounds. You might say the same about minicabs or black taxis, but the cost and environmental issues surrounding the various types of ground transportation are by no means simple. When you do have to cut back, status may rear its ugly head. The cash-strapped chairman might fly Economy where no-one might spot him or her, but doesn't really want to be waved off from the office in a modest saloon rather than a shiny limo.
This can be a touchy issue. In one national newspaper report on the Barclays' tax avoidance scandal, we learn that "a secretary was fired for booking a taxi that was a Volvo rather than an S-Class Mercedes".
Survival rather than the environment now heads the agenda for most companies, and the top-of-the-range chauffeur-drive sector has been hit, especially in London, where the finance industry is its main customer. But the top companies are resilient, and their warnings about trading down are worth bearing in mind. Mathew Hassell, managing director of global ground transportation broker World Transfer, says: "The London chauffeur market has been hit hard.
Most industry insiders estimate that like-for-like sales are down by more than 20 per cent and, for companies exposed to the financial sector, in some cases more than 30 per cent. A huge swathe of demand has just disappeared from the market.
"Corporate customers are trading down and looking for more cost effective solutions, but most are doing nothing as no-one seems to want to make any decisions. The green agenda has, I'm afraid, disappeared, but among all this doom and gloom there are some opportunities.
"These mainly involve diversification into the public sector, as the government and its subsidiaries still love to spend money on transport. World Transfer is also targeting the business-to-consumer market via the internet."
Greg Mendoza, vice-president and general manager of Carey London, says the global chauffeur-drive operator is well placed to withstand the slump, while agreeing that the finance sector is down by 30 per cent. But there is still strong demand linked to meetings and events in London, buoyed by falling hotel rates and the weak pound.
"Companies should consider many things before they trade down," he warns. "Safety and security are top considerations for senior staff and VIPs, and you need to do due diligence on any ground transportation partner. If a ground transportation company is being squeezed to cut its prices, then it may squeeze its self-employed drivers to work harder and longer. Then you are taking risks. Carey offers the comfort factor on duty of care, as we employ all our drivers in London and own all our vehicles. Companies like ourselves who don't allow service levels to drop will be successful, as price cutting is a short-term strategy."
Dean de Beer, CEO of Tristar Worldwide, claims chauffeur-drive is not necessarily much more expensive than the alternatives. Typical costs are from £60 for a West End-Heathrow journey, or £75 from Canary Wharf to the airport. He says while it wouldn't make sense to book chauffeur-drive from the Paddington area when Heathrow Express is available, it would make eminent sense from the Home Counties.
"We have not seen many of our customers trading down; it is rather a case of them curtailing their business travel and making one international trip a year rather than six, for example," he explains. "With larger businesses we like to work together to find a model that makes sense for them, such as providing a shuttle service from office to airport at peak times. This reduces cost for the business and is more environmentally friendly."
De Beer adds that it is a totally false economy if you trade down but then end up with an unreliable operator and miss a flight - especially if you have booked a non-flexible ticket.
Although the green issue may be dropping down the agenda, operators such as Tristar are using the recession to push home the message that this could help save money as 'green' savings are passed on.
"When assessing the green credentials of their suppliers, we suggest that our customers take a holistic view of the whole operation and not just focus on the type of vehicle used," says De Beer.
"For example, how efficiently are vehicles allocated to reduce wasted mileage? What controls are in place to prevent bad driving habits like excessive speeding, which increases fuel consumption and, therefore, emissions? Does the company have emission reduction targets and are they being achieved?
"Most vehicles' emission levels are well down on a few years ago. We are constantly looking at ways to drive down emissions, and have started using nitrogen in our tyres rather than air. This improves fuel consumption, and the tyres last longer."
Carey has developed a bespoke chauffeur training package covering eco-driving techniques, and initial trials have demonstrated that a CO2 reduction of 10 per cent can be achieved while the target is 20 per cent. Carey is being validated by The CarbonNeutral Company, with all London chauffeurs being trained this year before the programme is rolled out to franchisees elsewhere.
"We were concerned that although we had a robust policy and were offsetting our emissions to net zero, we were still emitting 1,000 tonnes of CO2 a year into the atmosphere from our London fleet alone," explains Carey's Mendoza. "Many in our sector offset and make bold statements about their environmental credentials, but have nothing tangible to demonstrate their claims."
The green agenda is also important for Addison Lee, the leading premium mini-cab operator in London. It is investing in 1,000 new Ford Galaxy seven-seater multi purpose vehicles (MPVs), bringing its total of this type to 1,600 out of a 2,600-strong fleet in total. The Galaxy does 38 miles to the gallon while emitting a modest 196g CO2/km.
Addison Lee's acquisition earlier this year of the Premier Transport Group creates a combined operation with an annual turnover of more than £118 million. It carries 10 million passengers a year and has more than 12,000 corporate account customers, with advanced booking technology that can offer minicabs within 15 minutes in central London. The company is well placed to attract corporate customers who find chauffeur-drive too expensive, and it also offers a VIP option. A major selling point is that it has reduced emissions by over 17 per cent in the last five years, and goes to great lengths to reduce wasted journeys or 'dead mileage'.
Addison Lee managing director Liam Griffin says: "We're seeing a general trend for corporate clients to scale down from their previous use of VIP services, and implement tighter restrictions on which staff can use them rather than MPVs. Corporate clients still place huge emphasis on the environmental credentials of a transport provider, and our philosophy is that the greenest companies are the most efficient ones."
Addison Lee's main competition are black cabs, which can be the most expensive option, especially when the meter ticks up in traffic congestion. A trawl through its customers' own invoices shows that a journey from London W1 to SW1 costing £18 by Addison Lee costs £35 by black cab, while Heathrow to SW7 costs £55 as opposed to £86.
"Many firms are struggling to justify the cost of black taxis on account, when we can offer a saving of around 30 per cent and minicabs on demand at all times of the day or night," says Griffin. "One new corporate account customer is set to save more than £100,000 this year alone by switching their black cab journeys to Addison Lee."
But Addison Lee operates only in London, and elsewhere companies are more reliant on black cabs unless they can find a reliable mini-cab operator. Leading black cab booking agencies now offer a range of services to corporates, including central billing and management information.
Taxibank booked over one million miles for clients last year, and has launched a new emissions calculating service available on monthly invoices. It claims to offer a truly national service, covering over 1,000 companies with 10,000 vehicles.
Computer Cab reckons to have the largest London-based fleet, with over 3,500 vehicles, and a range of services, including Flightlink executive cars. And CityFleet has introduced single Trip Cabcharge vouchers, described as "the ultimate in account control".
However green car or cab companies claim to be, though, they are never going to be as green as travelling by coach which really makes sense when larger numbers are on the move, compared to using three or more smaller vehicles. But while car services are increasingly integrated into mainstream booking functions - with some chauffeur-drive operators now bookable on global distribution systems (GDS) - coach hire tends to stand apart.
Coach Hire Connections, part of the Kings Ferry Travel Group, provides corporate clients with a national network of coach operators using luxury vehicles of various sizes, from 16- to 53-seats. A single passenger in a car emits 33.2kg of CO2 on a London-Bristol journey, while a passenger on a full 53-seat coach emits only 3.3kg.
King's Ferry's sales manager, Mick Buston, says: "Almost without exception, every company will use coach in some form or other. Most common uses will be mass transferring clients to training, events, airports and functions. Most companies have no idea how much they spend on coach hire as it is often lost within expense management reports. Getting access to reliable MI reporting is almost impossible and because it does not show up as a cost, there is no particular urgency to sort it out.
"But managing cost is not the only reason for tackling coach hire. Connections offers corporate clients the comfort that we will manage compliance on their behalf. We are changing people's perceptions with improvements in vehicles, driver training, and refinements such as GPS tracking and wi-fi."
No sector is immune from recession, with major coach and taxi hire specialist Fraser Eagle collapsing in February only a few months after launching a national car booking network with a strong focus on corporates. It is believed to have owed coach and taxi operators around £3 million.
National Express put its Dot2Dot Airport 'ride sharing' service up for sale in October, less than a year after its launch, having incurred heavy losses. Dot2Dot continues to operate from Heathrow and Gatwick to central London addresses and hotels, but the viability of this much touted green ground transportation model has been called into question.
Whatever options you choose, you need to balance cost, reliability and the green agenda. But with improvements in the booking process and management information (MI), at least ground transportation has become a core part of the business travel family.
The writer, Dave Richardson, is author of Wheels in Motion, an Industry Report on ground transportation published by the ITM in October 2008.