ARE GROUND TRANSPORT RATES TOO EXPENSIVE?

02 Nov ARE GROUND TRANSPORT RATES TOO EXPENSIVE?

On 26 October, Fanie van Zyl published the following article in Tourism Update. It is a very informative article and one we would like to share with our clients to give them some insight into our struggle to remain competitive.

“Let me start off with this scenario: A group of 48 travellers doing a one full-day tour along the Cape Peninsula – rate for the coach is R9 600. I can hear the tour operators discussing amongst themselves that it is ridiculous or outrageous, expensive, overcharged etc.  The current rate is in the region of R6 200 for a full-day local Peninsula tour.

The first quoted rate is based on 48 pax @ R 200 per person.

The general perception among our peers in the tourism fraternity on ground transport is that of expensive rates. This remains one of the most challenging issues that coach and vehicle operators face when presenting a quotation for ground transport for inbound tours.

Rates need to be carefully calculated in order to survive in a cut-throat industry.  The following expenses must be covered:

Instalment (keep in mind the 20% deposit required by the bank)

35 %

Comprehensive insurance

2 %

Passenger liability insurance

1 %

Driver’s salary

10 %

Depot fees

1 %

Diesel costs

25 %

Repairs/Maintenance costs

5 %

Office and staff expenses

8 %

Operating licence fees (every five years)

0.5%

Annual licence fees

1. %

Cross-border fees and  annual permit fees

0.5%

Profit margin

10. %

Total tour price

100%

Therefore, to be sustainable a coach company and ground transport operators must charge a rate related to covering the above costs and also allow for downtime, breakdowns, seasonality etc. Not to mention the accumulation of cash for the next deposit on a new vehicle if you are unwilling to sell the old vehicle.

But if you sell it, you cannot expand your fleet. Conversely if you keep the vehicle for longer than five years your maintenance and repairs increase exponentially not to mention downtime and recovery costs after a breakdown. With that you also lose income and must pay a third party to complete the tour or the day trip. This is dreaded by the coach industry.

Keep in mind that, after five years, a touring vehicle would have travelled approximately 400 000 km – some bigger charter companies use their vehicle on city-to-city fill-ins as well during holiday periods or long weekends, thus odometer can give a much higher read.

So this is  the question – is R 200 per day per person on a 48-seater full luxury coach with a value of R4,5million, passenger liability of R100million per incident and a professional driver too expensive?

Dinners at lodges and hotels are charged between R180 and R250 per meal, excluding drinks. Thus, add breakfast and lunch monies then surely the coach transport industry is under immense pressure to offer a quality and reliable vehicle if we are to remain at low rates.

My late dad used to say “you get what you paid for”. Our view is that we all are actually partners and should plan and work as a team. There is enough money to allow everyone to become sustainable but tour operators must be aware of the relentless drive from agents to cut back on transport rates as they perceive them to be expensive. Just provide them with the above equation.

Savings can be done by virtue of efficient tour planning, back-to-back tours, completion of tours at starting point thus exclusion of empty legs or volume of business, spreading of tours throughout the year (different markets/regions).

Quality and reliability over rate and sustainability in the ground transport industry remain a challenge.”

– See more at: http://www.tourismupdate.co.za/Home/Detail?articleId=103001&publishingChannelId=3#sthash.KHoJvzoq.dpuf