What does the future hold for coach hire rates in 2021 and beyond? routeone speaks with operators across the UK to find out what they think
Mounting pressures placed upon the coach and bus industry from emission control zones, PSV Accessibility Regulations (PSVAR) and the downturn from the global pandemic means rates are under scrutiny.
As movement restrictions ease and businesses begin to reopen for bookings, operators across the UK have offered their thoughts on how recent developments could affect coach hire prices in 2021 and beyond. Can the industry look forward to a strong summer and rising rates, or will operators slash prices to bring work through the door?
Positive for the future
In Leighton Buzzard, Dean Marshall of Marshalls Coaches is maintaining an optimistic outlook, and expects high demand in coach travel given the success of the vaccine rollout.
As such he believes it is important for operators to stick to their standard rates formula and to prices that they know will guarantee profit. “Things are looking optimistic in terms of coach travel and tourism in general. I think there’s likely to be a lot of pent-up demand going to go into next year. When social distancing is eased and the economy opens up, I’m hoping by 2022 things will go back to how they were pre-COVID.”
In terms of coach hire rates, Mr Marshall reflects on the old ‘turnover is vanity, profit is sanity’ adage, and the effects brought by the number of coach and bus operators that have gone into administration. To that end he suggests there may be fewer coach operators chasing the same pool of work, allowing for stability in prices. “We should be able to stick to our rates rather than try to undercut each other, which we don’t like to do. Marshalls sticks to its rates – we have certain costs that need to be covered.”
Countering that, he appreciates some operators may be feeling the pressure of the downturn from COVID-19. At the moment, the business is keeping its rates competitive and will continue to do so until at least 21 June, the key date for restrictions to ease.
“We don’t expect there to be a lot of bookings at the moment, but we don’t want to outprice ourselves at the same time,” Mr Marshall explains. “It’s about making sure we are making profits but bringing the work in to fill up the days. Other operators will be competitive with their rates, and that’s just the way it is right now.”
With growing enquiries there is some sense of normality finally returning. But Marshalls expects it will not be until next year that levels of business return to what they were before COVID-19. “It all takes time – social distancing is the big barrier at the moment. Once that has gone it will make things easier and people will be more motivated to book. 20 people on a 53–seater is not always going to be economically viable to a customer.”
Mr Marshall says he is not concerned about an oversupply. “There is enough work here to keep everyone busy. There is no need to undercut and reduce prices to silly levels, particularly in the summer period. In a normal year, we are pretty much fully booked in June and July with 45 vehicles, running to maximum capacity.
“There is obviously going to be competition. Personally, I would like to see operators working together a little bit more and not trying to undercut each other. That kind of attitude is no good for anyone.”
Concerns in some areas
Echoing the call for co-operation is Barry Austin of Earlston-based Austin Coach Travel. He says COVID-19 has provided a watershed moment for the industry and that rates must rise – but instead he is seeing a drop in rates happening in some areas.
Mr Austin warns this could hamper a recovery. Part of the problem lies in the offerings of travel agents which do not reflect the true costs of operation. That requires an attitude change and for operators to co-operate and set a minimum level of cost.
“Rates have to rise if we are to put some money back into the business, move forward and invest in the future. This is the time for the coach industry to grasp the nettle, pull together, and say to the end users – the travellers – that they have to pay the going rate for top quality vehicles. If we don’t do it now, the industry is done.”
Austin Coach Travel has reacted well to the news of a lockdown roadmap and the vaccination programme. But Mr Austin says social distancing continues to dictate how coach travel operates and its viability, and leaving the pandemic he will not entertain a price war with such uncertainty – vehicles will stay mothballed if rates do not meet the minimum level. “I am not going to start vehicles up and put them out on the road and into service if the return is not worth it,” he says. “And I really hope that coach companies across the length and breadth of the UK do the same and say enough is enough.”
Stick to a formula
In Leadenham, Loveden Travel Transport Manager Sharon Longthorne says the business operates a standard formula for the way rates are calculated, which is based on drivers’ hours, cost of running and a percentage profit.
But Ms Longthorne is concerned that the industry will be divided into two camps immediately after the pandemic. That will include some operators charging higher than normal to recoup losses, with others dropping rates to pull in as much work as possible.
But while Ms Longthorne does not worry about extreme competition in her area, echoing Mr Marshall’s belief that there are now fewer operators seeking work, she does express concerns over a lack of business moving forward, particularly in the tour and day trip market, which will make it difficult to recoup losses taken over the last two years. “I don’t think there will be that many people wanting to take the holidays to start with,” she says. “The clientele for coaches are the older generations, and I don’t think they will want to go. It will be 2022 before they get moving again.”
Right now, recovery is more important to a smaller family business like Loveden Travel. Having missed out on a year’s profit Ms Longthorne worries it may be two or even three years before the operator can return to pre-pandemic levels. Current issues outside the pandemic have long been impacting rates as it is – Loveden Travel withdrew from the London market as ULEZ compliance was not economically viable.
Price reflects quality
Compliance with emission control zones as well as PSVAR continues to be a concern for many operators moving forward. Marshalls puts emphasis on having a modern, well-maintained fleet, workshops and offices, as well as well-trained staff, to show that customers get quality and peace of mind in return for its higher rates.
In the long term, Mr Marshall is hopeful PSVAR and emission control zones will drive rates up.
“Upgrading our vehicles to be ULEZ and PSVAR compliant has been a significant investment. There has been a lot of discussion about the impact of PSVAR on home-to-school contracts which is also a massive market for us and will have a big effect. The money for that investment has to be charged onto the customer. Of course, there is only so much you can do.”
Both Marshalls and Loveden Travel have expressed hope that the government will step in to support operators when it comes to compliance. Says Mr Marshall: “I am hoping there will be some green grants from government to at least assist operators with ULEZ compliance. I think we need all the help we can get, and with the COVID-19 situation, income for operators has been so low that the question of how to pay for it is even harder to answer.”
Right now, Mr Marshall says rates are not keeping pace with investments, but he is hopeful they will in the future. He also anticipates they will need to rise in order to attract drivers. “I am hoping by next year demand will be higher and with that higher demand we can expect rates to increase, especially during peak periods. It could take some time to recover fully but we are always looking at investing. You never make that money back quickly.”
21 June is now the key date for services to resume, but between now and 21 June, rates are likely to stay competitive, with ‘normality’ being considered only by 2022. A demand for coach travel and a focus on domestic tourism may serve as a beacon of hope for operators, but rates that reflect investment are likely to rely on the speed of recovery and on industry co-operation.
