I know our updates from “Down Under” have been a little behind these past couple of weeks. While business has been picking up we have encountered a situation that has been quiet challenging and a good “learning exercise” to be shared with my fellow competitors and industry professionals. We welcome any feed back or advice you would like to share.
I am embarrassed to say that the Perth limousine industry is going through some “growing pains,” and unfortunately it is not for the better. Unlike other states in Australia, Western Australia does not regulate the number of limousines that can operate within any given city within this state. he number of large 12-16 passenger vehicles have doubled in this past year in Perth, and now total about 25.
Instead of embracing the view of welcoming healthy competition, members of our industry are embarking on a campaign to actively try and put other competitors out of business. Several associates have been fortunate to have other jobs or income that has allowed them not to have to worry about making large monthly payments on their vehicles or overhead. During the winter when bookings were so slow, cold weather played a big part. Come to find out, a lot had to do with these companies slashing their hourly rates by almost 60%.
I know I am not going to get sympathy from our U.S. friends when I say last year a 16 passenger Hummer was going for $680 an hour. A 14-passenger was anywhere from $595 to $660. Please remember that the expenses importing a Hummer to Australia comes in right at $275,000, so the rates are relative to the costs. We were offering our 12-passenger Hummer for $525 per hour and $400 per hour for our Ford Excursion. (We came across the issue of the Ford not having the same name recognition or branding as the Hummer and had to adjust our rates accordingly). Everyone knew what everyone was charging. It seemed the industry was happy to have the sale be based more on the customers color and car preference and individual customer service.
These past couple of months we have companies sending out 14- and 16- passenger Hummers for $250 an hour. Not only has this thrown Hummer and large passenger limousine rates into a turmoil, it has affected the entire limousine industry. Companies that own Chrysler 300Cs and that were charging $350 to $400 per hour, depending on the color and amenities, have been quoting jobs as low as $150 to $250.
Going from Spring into Summer and the holiday season, it was a nightmare trying to decide how to adjust rates to stay competitive. Going into the second week of November we were behind last year’s sales 31%. That is a big hit when you consider we started the year 35% ahead of last year’s sales.
On an even darker note, dirty tricks are now being played that not only affect the limousine business owners, but the customers as well. The sad thing is it’s not just one company. These tricks are now becoming the “thing” to do to get a one up on your competition.
Here are a couple of examples:
A mother planned her twins’ 21st birthday months in advance and was quoted that $250 rate I spoke of earlier for a limousine that would normally have been booked out at $600 to $650 the same time last year. She calls the company the night before to ask how they want her to pay the balance and they told her they cancelled her booking because they had a better offer. Now this was a new company that just opened. They had no problems telling the distraught client this was “standard” practice.
A different company took a booking for a school ball. They continued to get calls for the same date as all the Hummers from other companies were already booked and another school had just announce it was holding its ball on the same date. This company decided to start a bidding war and eventually gave the car to a different client who won the bid. They never called the kids who originally booked the car. They left them stranded on prom night, standing outside waiting.
My business partner and I have tried to approach other companies to start an affiliate program. What a mistake that turned out to be. Again, two different companies, other than the ones I have just spoken about above, showed interest at first. While we were trying to work out terms, we found out that they just wanted information about our rates and our company. They gave us false rates, undercut our existing rates, and said bad things about our vehicles and service to potential clients who were shopping around and mentioned they had called us.
We have just lost a return client because they thought we were ripping them off. Perth has a music festival every year, and they called us to provide limousine services for them again. I sent them out a booking form which quoted them a rate of $895 for this two-hour job. (I quoted them a lower rate than last year’s $1,050 to try and compensate for the market now). A friend of theirs who was going to be with the group didn’t know our client was booking with us and had called one of our competitors who quoted them $550 for the same job. My client called me up when he heard this, went off on me, and said he was never going to use us again.
Peter and I are not naive and know we cannot control what other companies do or say. We pretty much stay to ourselves, work hard, and that has let us grow our reputation and business. That is up until the last two months. Now everything is in a tailspin. With so many cars available now and the instability of pricing, customers are not making as many advance reservations. How does one adjust rates to stay competitive when the rates change by the day and can range from $250 to $680 per hour?
Has anyone ever heard of a market like this or have Aussies just lost their minds? I look forward to your thoughts. I hope my fellow competitors are having a good winter.
All the best,
Georgia Berg, LIMOUSINE EXCURSIONS, Perth, Western Australia
| posted on Wednesday, January 05, 2011 4:28 PM