LONG BEACH, Calif. — Motorcoach operators received a crash course over the past two years in how to — and how not to — run their businesses. The ones that did it right are around to talk about it today; many who didn’t are gone. And the ones who didn’t but somehow still managed to survive the pandemic-caused industry downturn have learned some hard lessons.
And as they emerge from the nightmare that was COVID-19, operators have to pay special attention to their finances and their company structures if they want to get back on track and return to profitability, said Peter Shelbo, a former motorcoach operator who is a facilitator for Spader Business Management.
“COVID decimated us,” Shelbo said during a well-attended education session on financial management during UMA Motorcoach EXPO 2022 in Long Beach, California. “We lost customers, we had to retire people, morale went way down. A lot of us had to change our organizational structures.”
Now, a new problem has emerged: the loss of business because there aren’t enough drivers to cover the returning demand. That has meant that owners, dispatchers, operations managers and other management staff have had to return to driving.
“Operators are doing more with less,” said Jim McCann of Spader, who joined Shelbo in leading the session titled “Reset and Renew: Management Driven vs. Market Driven.”
Three levels of management
McCann said there are three levels of organizational structure for motorcoach companies. At level one, the general manager manages everything. At level two, there are some other managers, but they still answer to the GM. At the third level, there are even more management layers, and the GM has less direct oversight.
When a company goes back to down to level one, which happened to many operators during the pandemic as business dried up and employees were laid off, the GM has to go back to wearing all those hats again, McCann said. “This is how we begin to build back.”
Another COVID-related problem was canceled trips, which led to demands for refunds of deposits already paid by customers.
“COVID cancellations messed up cash flows,” Shelbo said, with some operators having to refund thousands of dollars they had treated as income. Operators should consider deposits to be potential liabilities until the trips are actually taken, he said.
During a follow-up education panel discussion on cash management, some operators said they were forced to refund all deposits on canceled trips, while others said they have become stricter about giving refunds or have negotiated with customers to put the deposit money toward a future trip.
“We need to rethink this,” said Roxanne Gillis, founder and President of Northwest Navigator Luxury Coaches in Portland, Oregon, and a panel member at the education session. “I’d like to follow the airlines and restrict the reasons for getting refunds. We can’t afford to run it like last time, giving all the deposits back. We’ll give some back if they agree to book a trip next year.”
Warming up to raising prices
A growing number of operators also are warming to some ideas they shied away from before and during the pandemic downturn: raising prices to cover the cost of doing business and boost income, or tacking on a fuel surcharge to offset rising diesel prices.
“Operators were always afraid that someone would undercut them,” Shelbo said. But with insurance and fuel costs rising, and with less competition in the industry, “there is a tremendous opportunity for operators to grab that revenue. The smart ones are putting rates where they ought to be.”
Panel member Alan Robinson, owner of R&W Motorcoach Inc. in Stone Mountain, Georgia, said he has raised rates for bus trips in the past four months. “I was losing money because of fuel increases,” Robinson said. “It’s easy in the bus business to lose money.”
He and other operators said one of the keys to their survival was receiving federal Paycheck Protection Program (PPP) and Coronavirus Economic Relief for Transportation Services (CERTS) funding.
Operators said customers have been receptive to both rate increases and using deposits as credit for future trips.
Forecast and budget
Shelbo said that, going forward, operators have to pay attention to their benchmarks and their balance sheets, something many failed to do before the pandemic hit. “Know your cash flow. Know your costs. Forecast and budget. You went through this crash. Take a look at your work/life balance. Is it best to shrink your business or expand? You don’t need all new buses. Older ones have their place. It’s OK to come out of it as a different organization.”
Affordable Limousine in Grand Rapids, Michigan, is an example of a company that did what it could to weather to COVID storm, including controlling costs and adopting an all-hands-on-deck mentality of having management drive buses. The company has realized that having fewer levels of management results in efficiency and cost savings, and having a diverse fleet brings in more business.
“You have to be financially prepared, and some operators didn’t prepare,” said Ben Nelson, President and CEO of Affordable Limousine. “People got complacent when things were good. They expected it to keep going, for the spigot to never turn off. No one expected two years of a complete shutdown.”
Company founder and owner Justin Williams said as the business gets back to normal, except for the difficulty finding drivers, the company is using what it learned during the downturn to move forward.
“You come out the other side stronger,” Williams said.