Benchmark & Best Practices – Rate Increase
- Details
TOPIC: Are you doing or planning for a rate increase this year? If so, how much are your rates increasing and how are you rolling them out; if not, why?
With competitive pressure from TNCs and lowball pricing from locals, we are not expecting to increase our prices unless gas prices go back up. We are looking at reducing our overhead and increasing our margins by reining in costs on rent and utilities with a smaller building, vehicle insurance premiums, communications (e.g., cell, office VoIP, etc.), and health insurance benefits as necessary to keep it all in line.
Randy Allen, Owner/VP of Sales and Marketing
James Limousine Service in Richmond, Va.
Unfortunately, yes, we are planning a rate increase between 5 and 8 percent before the end of this year due to the fact that the minimum wage increase will take place in the beginning of 2016. California is a very challenging state to do business in because of its pro-employee state laws. We have one of the highest minimum wages in the nation and we cannot use the tip credits to cover the minimum wage. We also start paying overtime after eight consecutive hours of work per day.
Moreover, effective July 1 of this year, California will become the second state in the nation, after Connecticut, to mandate that employers provide their employees—including part-time and temporary workers—with paid sick leave. In addition, we are paying the highest gas prices in the nation, with the average price per gallon currently higher than even Hawaii.
We usually email blast our clients one week before the rate increase, and we honor all future bookings at the old prices. The email blast is a great promotional tool, and our future bookings do significantly increase because most of our clients want to take advantage of our existing prices before they go up.
Selim Aslan, President
Men In Black Transportation in San Diego, Calif.
Corporate Livery Toronto did a small increase last year, so there won’t be one this year. Our corporate rate also had a small increase last year: In December of 2014, we did raise our gratuity rates from 15 percent to 18 percent. Last year’s increases were about $5/hour across the board.
We have a two-tier pricing structure for general public or retail. For retail, we can increase charges any time based on the time of day or type of function (we do very little, if any, retail work). We also have surcharges for services performed between 2 a.m. and 5 a.m.
Phil Bozzelli, Owner
Corporate Livery Toronto in Toronto, Ontario
I feel that with lower fuel prices and stable insurance rates, right now is the time to keep prices solid. I would think there are areas where operators’ prices could be added to but I think most will stay close to where they are unless something bold changes for them.
Gary Day, President/CEO
American Limousines in Baltimore, Md.
We have not increased our rates in 2015 but we are planning a 5 percent increase in 2016. It will be a rack base rate increase and we normally finalize our rates by the end of the third quarter, so as to give our clients ample notice. If needed, we also honor our older prices for clients up to 30 days into the new year.
Sami Elotmani, VP of Operations
Destination MCO in Orlando, Fla.
We monitor both the economy and energy industry to determine how we adjust our convenience, fuel surcharge, and airport/parking fees as necessary, based on whether those expenses are going up or down, as well as the supply-and-demand curve for our market and our affiliates.
We will not be increasing our base rates this year—we will, however, be reducing our rates for Nashville travelers until Labor Day. This is a way to show appreciation to those who have supported the business over the years. This is the first time we’ve lowered our rates.
We’ve also launched some really aggressive and competitively priced airport shuttles with the 14-passenger vans. And then we’ve got some really aggressive airport-shuttle pricing for some of our larger hotels that we have contracts with. We’re also coordinating with parking companies and the hotels.
It’s all about increasing our volume. I said that this year, we’re not going to go with the conventional summer-is-slow acceptance: We’re going to try something different and see if it works.
Carl Haley, Owner
Grand Avenue Worldwide in Nashville, Tenn.
We are increasing rates beginning in July 2015. We haven’t increased rates since 2013, even though gas prices are down—although, more recently, our insurance rates have risen dramatically—and we haven’t had a claim in eight years. One of my great colleagues says that she increases rates 3 percent every year, so I’m planning just based on that. If you look at other industries, a hotel’s rate might be $179/night for a stay at one time but the same hotel may be $399/night the next time. We don’t fluctuate that much, but I believe you have to increase your prices: Your customers understand that your costs go up year after year.
We typically survey the market about twice a year and then try to stay in the middle/average price. Going forward, we may just set an automatic increase.
Wes Hart, Director of Operations
American Corporate Transportation in Houston, Texas
We are considering a price increase in 2016. The main reason is that we try to increase the pay for both the chauffeurs and the employees each year, and that money has to come from somewhere. We are fortunate to be in a sold-out market 9-10 months of the year.
We have also bought millions of dollars in new equipment and technology. If we can raise rates by a reasonable amount, we can keep doing more things for the clients.
George Jacobs, President
Windy City Limousine in Franklin Hill, Ill.
Yes, I am planning for a rate increase this fall when I pay airport renewal fees. I have been informed that the permits will increase by up to $100 per vehicle depending on size, so I am going to raise all rates by $10 to help absorb the costs of operating legally and following all airport rules and regulations (that is, being licensed, permitted, and insured). I plan on being completely honest with my clients as I raise my rates. Due to the economy and fear of losing clients, I have not been able to raise my rates in seven years.
I also have purchased new vehicles to stay edgy and fresh in my market, and I continue to grow my affiliate base by having new vehicles with current technology and new body styles to choose from—and I have a new Sprinter being built, too. I need to raise my rates and not look back!
Wendy Kleefisch, Owner
Brevard Executive Limousine in Indialantic, Fla.
Yes, we’re planning on increasing our rates from 3 percent to 5 percent starting July 1. With the rising costs of vehicles, labor, insurance, and the new healthcare plan, and in order for us to continue to invest in our people and our technology, we have to raise our rates. We hope our customers will see the value in our customer service, new vehicles, and new infrastructure in the coming months.
Jeff Nyikos, COO
Leros Point to Point in Hawthorne, N.Y.
We are not considering a rate increase this year. I am currently working on a growth plan that will likely add new products and services, but it will not be completed until September.
Renzo Ormsbee, President
Elite Worldwide Transportation Solutions in Houston, Texas
We look at our overall cost of doing business (specifically the greater expenses) and, as our cost of doing business increases, we adjust our pricing. We have a built-in percentage/margin that allows us to maintain pricing during temporary spikes, such as fuel costs; alternatively, we are focused on reducing costs, like leveraging technology to lower our expenses.
As for rolling out our price increase: Our contracted accounts have increases built in based on key costs that are mutually agreed upon. All invoiced accounts are notified in advance and credit card clients have rates displayed on their reservation confirmation.
Mike Zappone, CEO
All Transportation Network in Newburgh, N.Y.
We’ve loved hearing your answers to our benchmarking questions since debuting this interactive section—but we always welcome suggestions for future topics, too!
Have you wondered how others in the industry have tackled a concern you’re currently facing, handled a delicate issue, implemented a certain policy, or do you simply want to propose a topic for our consideration?
Send an email to rob@chauffeurdriven.com and you just might see your query answered in a future issue. We look forward to your input!
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