Following 9/11 and the economic downturn in the mid-2000s, many motorcoach operators began to diversify their businesses beyond just tour and charter.
The key reason for this shift was to create additional revenue streams that could help provide balance if one piece of a business is down.
“One big reason we wanted to diversify is that we just didn’t want all of our eggs in one basket, so to speak, because the revenue could go away if there’s a terrorist attack or you lose a particular client,” says Stephen Story, president of James River Transportation in Richmond, Va.
METRO spoke to some operators who successfully diversified their businesses to find out what they did and how they did it.
With business down slightly in the mid-2000s, Indian Trails began the diversification process by launching the Michigan Flyer airport service between East Lansing, Ann Arbor and Detroit Metropolitan Airport in 2006.
The service started with eight scheduled trips and carried about 40 passengers a day. Now 10 years in, the Michigan Flyer runs 12 round trips a day from East Lansing and 13 from Ann Arbor, carrying about 220,000 a year.
In addition to providing transportation to and from the airport, the service grew into a commuter system, carrying students, professors and staff between Michigan State University (MSU) in East Lansing and the University of Michigan in Ann Arbor.
“That was the first big, risky diversification we went into, but I’d say it’s definitely paid off now,” says Chad Cushman, president of Indian Trails.
Building on that success, Indian Trails got into contract shuttles in 2007, landing a contract providing transit services for Western Michigan University (WMU).
“They were contracting with the local authority and ready to announce the discontinuation of the service because they couldn’t afford the increases the agency was proposing,” says Cushman. “We were already doing some work for them, so they asked us to take a look at it, and in a few weeks, we had a one-year contract in place.”
Now in its ninth year, Bronco Transit provides 650,000 rides per year and has become a significant part of Indian Trails’ business, Cushman explains. It’s also become one of the selling points the university uses to recruit students.
Through the success of both Michigan Flyer and Bronco Transit, Indian Trails built visibility and has begun landing shuttle contracts for apartment complexes near WMU in Kalamazoo and MSU in East Lansing, providing private transportation services to and from the two campuses.
“If you would have told me 10 years ago that we’d have 20 transit buses in our fleet, I would have been shocked,” says Cushman. “But, we have learned that you have to go where business is and be open to diversify and try something different.”
While Indian Trails was able to land new work through both visibility and consistency, it was its willingness to take chances that helped it prepare to take advantage of the opportunities as they became available.
“We had a lot of experience doing temporary contract shuttles with motorcoaches or minibuses, so we knew the dollars and cents of what we needed to charge the customer,” Cushman says. “The important thing when it’s a long-term contract is you have to use that knowledge and find the right margin that you can be comfortable with.”
After purchasing the operation in 1992, Premier Coach, which at the time had a fleet of three coaches, began to aggressively locate potential customers and go after some key contracts, eventually landing a contract with Amtrak to run regular daily service.
“That was instrumental because it gave us a real base of revenue that was ongoing and not dependent upon the student travel season or fall colors or anything like that,” says Premier’s Sales Manager/Asst. GM, Chip Desautels.
In addition to its home base in Milton, Premier now has garage and maintenance facilities in two other states and has recently found success in collegiate athletics. All told, Premier has contracts in place with 20 colleges and universities from upstate New York to the sea coast of New Hampshire.
Most recently, Premier began providing shuttle services for one of its collegiate accounts, transporting faculty and employees from satellite parking lots to campus five days a week from 6 a.m. to 9:30 p.m.
“The really nice part about landing that contract is that it went right along with what we already did well,” says Desautels. “It also didn’t require us to add much infrastructure, in terms of management and facilities, and so, it became a really great way for us to expand.”
Another side benefit of that specific contract is that it increased utilization of Premier’s equipment Monday through Thursday — typically their slowest days of the year on a year-round basis, according to Desautels.
When looking to land new contracts for work, Desautels says that while it’s important to understand the expected operational costs, it may be even more important to provide a buffer when settling on a price.
“The customer is going to ask for some things that might not have occurred to them, especially if it’s a new service or something they haven’t done before,” he says. “To some extent, you want to give yourself a bit of a buffer to say yes to some of the smaller items they request that don’t have a huge cost associated with them.”
By finding the right buffer and staying flexible to make changes, Desautels says it helps build a relationship with a customer, particularly its college clientele who are often looking for somebody to provide transportation services on or around campus.
“It’s always different, but a fair amount of customers on the collegiate side have significant transportation requirements and it’s often in their best interest to outsource it and limit their liability,” Desautels explains. “Theoretically, we are in the motorcoach industry, and we’re already servicing that campus, so we are well-positioned to be a viable option for them to provide other transportation services as long as we do our job well and maintain that relationship.”
After purchasing the company in 2002, Easton Coach Co. soon began delving further into providing paratransit services for local transit agencies. Today, the company has more than 10 transit and paratransit contracts and over 350 vehicles in service for several different transit agencies located around the region, including the Southeastern Pennsylvania Transportation Authority and the Lehigh and Northampton Transportation Authority.
Joe Scott, president/CEO for Easton Coach, says the company’s decision to diversify has helped make the operation more stable.
“When we bought the company in 2002, if we lost a contract, it could have been devastating,” he explains. “If one of my big customers decided to take their paratransit services back in-house, for instance, I want to be diversified enough so it won’t have that kind of impact.”
In addition to charters and casino runs, Easton also has some college and university contracts, one of which recently helped land him a shuttle service contract with a local business by simply being seen out on the road.
“Some of the work we diversified into has come from reputation and some of it has simply come through visibility,” Scott says. “Truthfully, I can cite four or five examples of work that has come out of nowhere just because we happen to be in the area and they happen to be looking for someone to run their shuttle service.”
To prepare to move into new markets or lines of work, Scott says his operation relies on its past experience, learning from experiences it has had providing similar services and spending significant time understanding the work it is bidding on.
“The contracts we have won, I think, comes from the fact that we’re doing more groundwork than our competitors, because we really want to understand what the customer wants,” he says. “We’ll meet with the customer, visit their facilities, and really try to get an understanding of what they want and what they hope to accomplish.”
Realizing it wasn’t a good idea as a company to put all their eggs in one basket, James River Transportation decided it would go after more stable, Monday-through-Friday contract work. To that end, the company began going after that business and landing contracts.
“The contract work made sense for us to go after. Some of it was corporate, some was working with state and municipalities, and some of it was developing our own type of business, like a scheduled line-run,” explains Story. “We got into businesses that nobody else really wanted to get into. Back in those days, motorcoach companies felt like they needed to travel long distances.”
By 2001, Story explains that the company believed they were ready for their expansion and diversification efforts to come to an end, however, James River decided to purchase another company, which helped them better fill car services to and from the airport.
“That purchase fit well with us and solved a little problem we had because we were farming out some of our sedan work,” says Story. “The purchase allowed us to bring the contracted, year-round service that we had been developing for the past 20 years or so more in-house.”
The most recent piece of business James River has developed is private corporate commuter service for a major company in its service area, providing trips from hubs as close as 10 miles away and as far as 110 miles away.
“The difference with this client compared to others is that they need an extremely precise system that is monitored closely,” says Story. “If we’re late, we are expected to provide a recap of what happened and why it happened and what we’ll do to minimize it in the future. It’s just a lot different than what we’re used to doing. It has actually made our ability to provide all of our services much more efficiently, though.”
Story credits his operation’s success diversifying through working with peers in 20 Groups and the International Motor Coach Group, where operators share information with one another.
“Working in these groups allows you to develop an honest relationship with other operators, learn from each other’s mistakes and how to cost out all of your work,” says Story. “Our 20 Group experience, for example, has allowed me to make sure my financial costing models are much more precise to know what groups I should or shouldn’t go after and what margins I can live with.”