Luxury Coach & Transportation

July 2018

Magazine for the professional limousine, charter and tour industry.

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How To Create Profitable Charter & Tour Packages As the limousine industry morphs into the coach business, operators are forced to learn new pricing models and create destination trips rather than simply wait for groups to reserve a vehicle. By Jim A. Luff, LCT contributing editor PHOTO/ILLUSTRATION: KEVIN HAEGELE, LCT ART DIRECTOR W hen limo buses arrived in the in- dustry in the mid 1990s, opera- tors simply priced them by the hour as they had done for years with limousines. However, the party bus fad came and went, and more operators began running traditional motorcoach- type vehicles without bothering to learn how the charter bus industry calculated pricing. It is a completely different mod- el, and one that requires a look back in time to be competitive and profitable. The Charter Price Model Charter bus companies have long used a pricing model that includes either an hourly or a per-mile rate. When I bought my first limo bus in 1997, I just assumed since it had a capacity of 19 passengers I should double the price of an eight passenger limousine and add a few dol- lars. I arrived at a price of $195 per hour. Once people found out I had a bus, they began calling to go to sports events, concerts, amusement parks, and wine tastings. Except, they wanted to take 40 people and were looking for a big bus. If I could farm out limo work, why not bus work? is is when I learned I could get a 47-passenger bus for $95 an hour or $1.25 per mile, whichever was great- er. At 234 miles, that equates to $292. If the trip lasted seven hours, it was $665. Using my hourly rate, my little 19- pas- senger bus would cost a client $1,365. You can clearly see why limo pricing will not work and why limo companies nationwide are now using charter bus price models instead of flat hourly pric- ing. It is important to note many com- panies offer a daily rate that covers an entire 24-hour period rather than either a per-mile or hourly rate. Setting Prices In addition to my personal experience, I spoke with veteran operators Paul ompson of Santa Fe Valet, George Ja- cobs of Windy City Limousine, and Tom Holden of Rose Chauffeured Transpor- tation, who all agree having a price matrix set in stone will never work for setting prices. e best we can do is set pricing based on each individual trip and the associated costs of the actual trip. ese costs can vary widely based on the length of the trip and increased costs due to compliance with hours of service rules set by the DOT. ompson uses a base formula of $650 for the first three hours (mini- mum) and $125 for each additional hour with a maximum of $1,500 per day in his local service area. However, his market is seasonal and he drops his daily rate to $1,300 from November to June. On long distance trips, he charges by the mile with the price determined by the cost of a gallon of fuel. Jacobs also uses a flat daily rate for local jobs, and tacks on a $1 per mile charge for long-distance trips plus an additional $350 to the daily rate. at covers $250 a day in wages and $25 for a per-diem amount. In providing local service, the flat daily rate would cover multiple moves during the day, and Windy City doesn't ever change its daily rate except to add on a fuel surcharge when fuel prices surge. Before ompson presents a price, he says, "I try to get a sense of whether they are looking for three-star or five- star service." ompson says his buses are all five-star vehicles, but believes it's important to meet the budgetary needs of the group as much as possible. ompson's rates also fluctuate based on the day of the week, with Monday through Wednesday being priced at lower rates. 2 0 WWW.LCTMAG.COM LUXURY COACH & TRANSPORTATION JULY 2018 MOTORCOACHES: FINANCE

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