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Thread: Joining Forces - Consolidation Curious

  1. #1
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    Why is this industry NOT consolidating? This is an open question.

    Considering the economy, 9/11 and the lack of any viable national brand recognition in this industry, why are small players not merging to form large players? Why are so-called "networks" the only viable national option for corporations and consumers? Why did Carey's plan for word domination fail? Why is BostonCoach's failing? Its got to be bigger than the obvious mistake that they overpaid to rollup the industry during an economic boom...or is it?

    After decades in a 12+ billion dollor industry, we have no Hertz or Avis, no AA or Delta, no Hilton or Marriott...whats holding it up?

    Obviously I have my thoughts I'm curious what are yours?

  2. #2
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    Limousines, 20 years ago, only a select few where actually able to use them... hollywood put off that image, to be a "star." in that 20 years, the economy has done well so everyone was able to use them... now after sept 11th, not everyone can... limousines are a luxury, not something that everyone can use. carey, bostoncoach, and others are too big. i really feel, the only industry who can really burn cars, is hollywood... in good times and bad, movies always come out, premeirs are made... there can not be an avis, or hilton in limousines, the market isnt big enough, cabs are always cheaper and can take you places just as fast. the people who stopped using limos, and sedans after sept 11th, didnt have the money, still, only that select few used cars.
    my 2 cents

  3. #3
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    I think blahblah's points are somewhat responsible. However, I also believe that "Barriers to Entry" is a factor as well.

    In all consolidated industries you mentioned (airlines, hotels, rental cars) the barriers to entry are huge. Not anyone can wake-up one day and start a hotel or airline business. You need millions in capital. Conversely, anyone with a town-car and a telephone can effective set-up shop and call themselves a limo business.

    In the limo biz, the "barriers to entry" are minimal. Anyone can start a company and effectively compete with the largest limo company in town. Try that in the hotel or airline business; you cant unless you have $100 million dollars laying around!

    This makes most of the limo industry small operators and it will continue to be so unless the barriers to entry increase. Any consolidation attempt will always be thwarted by small operators who continue to enter the marketplace and create the dispairities in service, price, vehicles, etc.

    Michael
    Limos.com


  4. #4
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    <BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Originally posted by Viperion Corporation / Limos.com:
    I think blahblah's points are somewhat responsible. However, I also believe that "Barriers to Entry" is a factor as well.

    In all consolidated industries you mentioned (airlines, hotels, rental cars) the _barriers to entry_ are huge. Not anyone can wake-up one day and start a hotel or airline business. You need millions in capital. Conversely, anyone with a town-car and a telephone can effective set-up shop and call themselves a limo business.

    In the limo biz, the "barriers to entry" are minimal. _Anyone can start a company and effectively compete with the largest limo company in town._ Try that in the hotel or airline business; you cant unless you have $100 million dollars laying around!

    This makes most of the limo industry small operators and it will continue to be so unless the barriers to entry increase. Any consolidation attempt will always be thwarted by small operators who continue to enter the marketplace and create the dispairities in service, price, vehicles, etc.

    Michael
    Limos.com<HR></BLOCKQUOTE>

    Michael I could not agree more with what you just said. I would add one more point. Because its an easy entry business, these same people that setup shop with one or two cars keep the rates down. Most of these people dont know a financial statement from a bank statement. They price themselves into a hole. They sell price, not service and it hurts the industry as a whole. I cant tell you how many times a week a corporate traveler will tell me "I have a guy in Orlando or New York that will give me limo airport transfers for $50.00". I usually ask who these people are and Ive never heard of them. It seems limo operators are content at just having a couple limos parked outside their home and say they are in the limo business. Also other than the really large cities there is not enough money in the limo business to attract large players.

    Wade Randolph

    [This message was edited by Viperion Corporation / Limos.com on April 17, 2002 at 10:58 PM.]

  5. #5
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    I've had a little experience with 'consolidaters'.
    Who are you? I don't like talking to thin air.

    Matt Harrison
    AAA Guaranteed On-Time Limouisne, Clinton NJ

  6. #6
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    Consolidation : The source of your "facts" please.

    Dean Schuler

  7. #7
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    Matt,

    Sorry for the anonimity...this industries ripe with shall we say competative distrust ...by remaining anonomous I was hoping for an open exchange and honesty without fear of offending or challenging...I'm somebody deeply interested in consolidation. Hope to hear more on your thoughts.

    <BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Originally posted by AAA/GOT:
    I've had a little experience with 'consolidaters'.
    Who are you? I don't like talking to thin air.

    Matt Harrison
    AAA Guaranteed On-Time Limouisne, Clinton NJ
    <HR></BLOCKQUOTE>

  8. #8
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    Which facts Dean? I don't mean this in a challenging way but what did you think I said that was questionable?

    <BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Originally posted by Dean Schuler:
    Consolidation : The source of your "facts" please.

    Dean Schuler<HR></BLOCKQUOTE>

  9. #9
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    I agree with this, although corporate service has much higher barriers than wedding and pleasure types...but a few problems. Consolidation is done to breed efficiences and economies of scale...As previously mentioned...Carey and others have failed (and I mean this in a macro sense visa vi world domination ) post acquisition not on price or on lack of customer willingness to pay the premium but because they didn't follow a few cardinal rules of role ups...1) buy people and capabilities not assets alone 2) derive short term benefit from a preplanned integration such as systems (backoffice?), redundant personel (call center?), etc...with a few acceptions the current crop of consolidators threw money (over priced) at operators (who I admire ) without any incentive to keep them in the captain chair and then ran the individual locations like they were still on there own with no common command and control or operations...thoughts? By the way this is not a bash session on Carey or others..I have a lot of respect for alot of people there and some of the things accomplished...I'm trying to stimulate a clinical discussion on the the failures and successes of the past consolidators and what could have been done different to breed success...

    <BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Originally posted by Wade Randolph:
    <BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Originally posted by Viperion Corporation / Limos.com:
    I think blahblah's points are somewhat responsible. However, I also believe that "Barriers to Entry" is a factor as well.

    In all consolidated industries you mentioned (airlines, hotels, rental cars) the _barriers to entry_ are huge. Not anyone can wake-up one day and start a hotel or airline business. You need millions in capital. Conversely, anyone with a town-car and a telephone can effective set-up shop and call themselves a limo business.

    In the limo biz, the "barriers to entry" are minimal. _Anyone can start a company and effectively compete with the largest limo company in town._ Try that in the hotel or airline business; you cant unless you have $100 million dollars laying around!

    This makes most of the limo industry small operators and it will continue to be so unless the barriers to entry increase. Any consolidation attempt will always be thwarted by small operators who continue to enter the marketplace and create the dispairities in service, price, vehicles, etc.

    Michael
    Limos.com<HR></BLOCKQUOTE>

    Michael I could not agree more with what you just said. I would add one more point. Because its an easy entry business, these same people that setup shop with one or two cars keep the rates down. Most of these people dont know a financial statement from a bank statement. They price themselves into a hole. They sell price, not service and it hurts the industry as a whole. I cant tell you how many times a week a corporate traveler will tell me "I have a guy in Orlando or New York that will give me limo airport transfers for $50.00". I usually ask who these people are and Ive never heard of them. It seems limo operators are content at just having a couple limos parked outside their home and say they are in the limo business. Also other than the really large cities there is not enough money in the limo business to attract large players.

    Wade Randolph

    [This message was edited by Viperion Corporation / Limos.com on April 17, 2002 at 10:58 PM.]<HR></BLOCKQUOTE>

  10. #10
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    Michael, nice to hear from you.

    Lets think airlines...think jetblue or southwest...they are the low cost carriers...also ironically the ones in the best shape and making money right now...why? stream lined systems and ops and motivated people even though they are the lowest paid in the industry...both traits needed in a successful consolidation...so I question the roll of low cost competition being the ultimate source of friction on the path to consolidation..also the barrier to entry is lower than one might think in these sister industries...albiet relative to your pocket size ...jetblue worked a deal with airbus for special financing if they used an all airbus fleet...creativity not dollors (again releatively) got them the entry into the game...my point being that our industry is waiting for the correct creative spark to ignite the process...what that spark will be has yet to show itself...but I'm real interested in hearing how many operators are interested in seeing that spark lite.

    <BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Originally posted by Viperion Corporation / Limos.com:
    I think blahblah's points are somewhat responsible. However, I also believe that "Barriers to Entry" is a factor as well.

    In all consolidated industries you mentioned (airlines, hotels, rental cars) the _barriers to entry_ are huge. Not anyone can wake-up one day and start a hotel or airline business. You need millions in capital. Conversely, anyone with a town-car and a telephone can effective set-up shop and call themselves a limo business.

    In the limo biz, the "barriers to entry" are minimal. _Anyone can start a company and effectively compete with the largest limo company in town._ Try that in the hotel or airline business; you cant unless you have $100 million dollars laying around!

    This makes most of the limo industry small operators and it will continue to be so unless the barriers to entry increase. Any consolidation attempt will always be thwarted by small operators who continue to enter the marketplace and create the dispairities in service, price, vehicles, etc.

    Michael
    Limos.com

    http://www.limousinesonline.com/proudmember.gif <HR></BLOCKQUOTE>

  11. #11
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    Allow me to throw my 2 cents in.

    In your letter you refer to the fact that there are no big players such as avis hertz or hyatt.
    Do you not think that FORD the princible behind Carey or that Fidelity Investments the princible behind Boston Coach are big players.
    As for a number of smaller companies joining forces to compete with the big boys think about this (Partners are for dancing with) or (The only ship that won't float is a partnership).
    You see everybody wants to run the show their way

    Networks while not perfect if managed correctly can compete with the big boys.

    You must however have an understanding and agreement that your clients and the clients of your network partners are one in the same and must be treated as such.
    You must also understand that it is your responsability to ensure that your network partners are providing the same standard of service as you.
    This can only be guranteed if you visit their facility and guinepig their service.

    If you are intrested in our affiliation program please feel free to e-mail me at jgardnerceotrans

  12. #12
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    Jack,

    Carey and Boston COULD and MIGHT be a hertz or avis but arn't and won't be anytime soon. Ford was the "leverage" in a classic leveraged buyout buy a leveraged buyout firm of a FAILING IPO that was out of cash and out of options and no way to return to the public in a secondary offering...no offense intended hear...markets changed and without compelling evidense of real cost savings and clear direction on an ongoing basis the public balked and analysts walked...they sell alot of cars to carey...we can all be honest and accept that Ford is not interested in cornering the limo industry at such an early stage and BC is an ongoing experiment by fidelity with no clear goal of consolidation that I can see...If they wanted to dominate the industry they most certainly could with the fidelity pockets and would not need the BC connection affiliate network as a fall back to successful consolidation tactics. Can you agree with me that in a down economy in the worst devastation this industries seen in decades...its a pretty good time to buy up operators cheap...I'm not noticing a scramble in these companies...they have yet to digest current operations they are in no posistion to expand.

    I agree networks can compete but I'm curious...can a single corporation do it better? remember I'm not bashing or looking for defense only exploring...when a network calls an operator and that network is only 5 trips a week out of 100 and a corporate client is 25 out of the 100...and both trips conflict...who gets picked up?...can the network EVER expect contollable delivery of there product through that mechanism? Even friends or partners have to draw the line to service that customer of highest importance right?


    <BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Originally posted by Jack Gardner:
    Allow me to throw my 2 cents in.

    In your letter you refer to the fact that there are no big players such as avis hertz or hyatt.
    Do you not think that FORD the princible behind Carey or that Fidelity Investments the princible behind Boston Coach are big players.
    As for a number of smaller companies joining forces to compete with the big boys think about this (Partners are for dancing with) or (The only ship that won't float is a partnership).
    You see everybody wants to run the show their way

    Networks while not perfect if managed correctly can compete with the big boys.

    You must however have an understanding and agreement that your clients and the clients of your network partners are one in the same and must be treated as such.
    You must also understand that it is your responsability to ensure that your network partners are providing the same standard of service as you.
    This can only be guranteed if you visit their facility and guinepig their service.

    If you are intrested in our affiliation program please feel free to e-mail me at jgardnerceotrans<HR></BLOCKQUOTE>

  13. #13
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    Your points are valid and raise even more questions.

    Do you buy companies at this point or do you wait and see who survives, why buy now they may not be around in 6 months.

    As for 5 trips from your network and 25 from your large account, remember these are the same network partners who are collecting your client at the airport tomorrow morning.

  14. #14
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    in reality, all a limousine company is, is a glorified taxi service... they are not made to get huge - the market is too shakey in every aspect. the first thing to get cut in any corporation is travel... companies can always use webcams... now, i am not saying i want this to happen, but it is just the way it is. things are going to go back to the way it used to be... only companies with real money will be able to use cars.

  15. #15
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    Now this is good stuff. I agree that limo companies will alsways be small companies on a locational basis, but whats the matter with a larger corporation owning 500 small local offices (or dare I say home offices..remember national infrastructure like call centers))...20-30 cars per location, etc...this does not change your stance only makes a larger entity the mother ship of the many small locations...right? if 300, 20 car operators got bought tommorrow and shared systems, ops and sales/marketting they would still be small local businesses, but with large national presence...think of small rental car agencies (not the airport locations) they have maybe 20-50 cars apeice in the burbs but still enjoy national brand and command & control facilities as well as group purchasing, low cost employee benefits, etc...thoughts??

    although I do dissagree with the last part...this industry in 2-3 years will be bigger than ever BECAUSE were an alternative to Taxi's...you hit the success factor dead on...the Carey's and Coaches and others have it wrong...high priced executive service is mostly a myth AND 10 times as elastic in down times...90 percent of their passengers are middle management that wants a clean and dependable ride to the airport in a sedan. all the "class" being pushed is to high end...they don't want a taxi, but they don't want the price required for a high end operator...the 90 percent i mean...
    <BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Originally posted by blahblah:
    in reality, all a limousine company is, is a glorified taxi service... they are not made to get huge - the market is too shakey in every aspect. the first thing to get cut in any corporation is travel... companies can always use webcams... now, i am not saying i want this to happen, but it is just the way it is. things are going to go back to the way it used to be... only companies with real money will be able to use cars.<HR></BLOCKQUOTE>

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