Insiders predict industry growth with fewer players

NASHVILLE—Don DeVivo has watched a lot of trends take shape during his 30-year career. As he looks ahead, he is seeing signs that the motorcoach industry will grow—but with fewer players.

Don DeVivo

Those disappearing from the scene tend to be midsize operators with fleets between 10 and 60 vehicles. These businesses are finding it more difficult to compete against bigger operators with more resources.

“I think what’s going to happen in our industry is you’re going to lose the middle because they are going to have a hard time surviving,” said DeVivo during a luncheon presentation at Motorcoach EXPO. “You’re going to have that mass in order to afford the infrastructure to keep things going. We’re seeing the consolidation already.”

DeVivo, president of the New England-based DATTCO Inc., was joined on stage by United Motorcoach Association Chair Gladys Gillis, president of the Seattle-based Starline Collection, as the two industry veterans sat down for a conversation with Christian Riddell, president of United Bus Technology.

‘Silver tsunami’

Midsize companies are ripe for merger and acquisition deals because their owners often are looking for an exit strategy.

“It seems that we’ve been sort of surfing a silver tsunami for a little while now, and it’s going to continue,” said Gillis. “There are operators looking for a way to get out because their kids aren’t coming up to take over the business, and they just need to find a plan to get out.”

For those who are determined to stay in the industry, success will depend on adopting new strategies that raise revenues and grow profit margins. One way to do that is expanding beyond the traditional business-to-business model (B2B) to a business-to-consumer (B2C) model.

Gillis shared one example of how her growing company is making inroads into the market by setting up express services that sell single ticket rides to events like concerts. The $1,600 bus rental fee is now baked into the cost of the first 20 tickets. But if she sells 50 seats, the run generates a revenue of $3,950—more than double what she would collect for a traditional B2B deal.

(l-r) Gladys Gillis, Don DeVivo and Christian Riddell

“It doesn’t go every day. It goes only on special occasions, essentially. But when it rolls, I’ll run 15 buses and I’ve changed the top line on that bus,” said Gillis. “I’ve radically redesigned the profit margin.”

Increased profits essential

Both Gillis and Riddell emphasized the importance of the industry collectively pushing up prices and educating consumers about the industry’s pricing pressures, from rising insurance rates to increased staff costs.

“I’ve said for a long time that I think we can fix a lot of the issues in the industry with increased profit margins,” agreed Riddell. “If we had more money to pay drivers, the driver shortage can be impacted. There’s a lot of things that go away if our profit margins increase, and not by two-percent this year and two-percent next year, but by finding a lot of ways to increase that.”

Even without raising base rates, operators can increase revenues with ancillary fees and add-ons. It’s one way to address the fear that you are going to raise your price and lose business because somebody else is willing to do it for less, he added.

“We talk about it all the time, the $24 rental car that ends up costing 100 bucks a day. Nobody goes to the Better Business Bureau over it,” Riddell said.

Right-size the fleet

DeVivo recommended that operators look at right-sizing their fleets so they have more options than 57-passenger buses. His company is seeing more smaller vehicles being requested, all the way down to town cars and vans.

“I think, with the Uber world, groups are getting smaller. For example, people are more conscious of drinking at an event, so they may provide transportation at a wedding or at a function that they weren’t necessarily doing before. There’s a lot of niches that you can fill with those vehicles,” he said.

Impact of technology

DeVivo also sees technology having a big impact on the industry in the next five years, from buses incorporating more artificial intelligence features for improved safety to online tools that make it easier for clients to book trips.

His son, Kyle, is playing a role. He has developed The Bus Network, a technology with capability to give a live quote for a charter, similar to how the travel search engine Kayak provides price quotes. Those interested in renting a bus or traveling by bus put in their information and can get a price instantaneously.

“We’ve kind of convinced ourselves that we’re so complicated that we can’t do that,” said the elder DeVivo. “But that’s what everybody else in the world is doing, and that’s where our industry has to catch up.”

Gillis said she is impressed that The Bus Network is also designed so that clients are directed to a page where the add-ons are presented after they finish building trips. They simply go through and click the ones they want—similar to what people do when they are booking amenities during a hotel stay or on a flight.

“Another cool thing about The Bus Network is that it allows the client to pay for the trip without ever using any salesperson time at all,” she said.

Reasons for optimism

Overall, there are many reasons to be optimistic about the future of the coach industry despite the changes underway, the three experts said. This transportation industry is well-positioned to address some of society’s major issues, from traffic congestion to carbon emissions.

“We need to be excited about the fact that we offer a service that no one else on the planet can offer,” said Riddell. “We are the safest way to be on the road. We are the greenest way to be on the road, and we’re really good at that. We have people in this room who are committed to it.”


Share this post