Rising diesel prices over recent months mean coach hire rates have risen to new heights – though set rates for tours means costs still must be absorbed
Rising fuel prices have proven to be advantageous for many operators of coach private hire work, conversations with companies across the UK have revealed.
The issue was raised at the July meeting of the UK Coach Operators Association (UKCOA), where operators of private hire work revealed that fuel prices have meant an increase in rates (see p.39). However, when it comes to other types of work, such as touring, accommodating that increase in cost has not been as simple.
Private hire rates ahead
Devon-based Blakes Coaches reveals that new private hire work booked over the past six weeks has been priced accordingly to counteract higher diesel costs. However, Managing Director David Blake reveals customers expect some quotations given before the rise in fuel prices to be honoured: “Even though there is a stipulated date on quotations of 14 days, they think that we are going to honour the price that we quoted four or five months ago, and are quite shocked when we tell them the new price,” he says. “Some people are totally unaccepting of what we have had to tell them. There is a double-edged sword to private hire work; what you quoted a long time ago, people think you can still honour.”
Rates for new jobs are seeing better acceptance. Many quotations are coming through at short notice; Mr Blake reveals six jobs were priced one day for travel the following week, leading him to believe the limited pool of availability is helping with acceptance of the higher rates.
While new private hire quotes take into consideration current fuel prices, Blakes also runs an extensive tour programme of advertised holidays and day excursions, where rates are trickier to manage. It produces two holiday brochures per annum, having agreements with hotels and attractions potentially 12 months in advance. “We have nearly contracted everything for 2023 and half of 2024 already. That is our biggest challenge – our own advertised holidays that we have priced sometimes 12 months in advance. Although it states clearly in our terms and conditions that we are able to surcharge due to government intervention or price of fuel, it takes a brave operator to apply a 10% surcharge to customers for an advertised holiday. You also have to bear in mind what competitors may or may not do; you also run the risk of customers not being prepared to pay and cancelling. So we have to be very careful.”
Blakes does not intend to add a surcharge, and reveals it would not consider using private hire to account for any losses incurred through operating its tour work. Mr Blake worries those tour prices based on a historic diesel fuel cost “will make a considerable difference” to their profitability. Having said that, some groups booking for day trips and holidays have volunteered surcharges. “For everyone that thinks you are taking advantage by putting the price up, we have a lot of good old-fashioned customers that are suggesting to us that they should pay more,” he reveals. “That is historic, having dealt with many groups over many years. That is built on many years of quality service to that particular group.”
Desire to keep confidence
UKCOA Managing Director Peter Bradley reveals operators are monitoring the situation when it comes to keeping tour prices pegged at old rates. “There is a real fear about having to raise prices,” he says. “A lot of the smaller coach operators that do large tour programmes are trying to resist increasing prices to those who have booked a long time ago. They are talking to people who have been loyal to companies through the pandemic and do not want to break that pattern of confidence if it isn’t necessary.
“Those operators are watching the cash flow and if they can avoid having to raise those prices for tour programmes they will try to maintain them, and make sure other parts of their businesses reflect current coach hire rates.”
Mr Bradley points out that helping to keep rates higher is the need for schools booking coach trips to spread the net “far and wide” to find availability. “A lot of UKCOA members are getting schools 50 or 60 miles away phoning up for private hire quotes. Those operators typically do not need work based that far away due to a sudden rise in coach hire demand and a shortage of drivers. Many have quoted prices they did not think the schools would accept – yet they have been accepted.”
One operator to receive such a request is Milligans Coach Travel in Mauchline, which received a request for a private hire from Cockermouth over 100 miles away. “It would be extortionate to book our coaches to go all the way down to Cumbria from Scotland,” explains Operations Director Morag Milligan, “but that customer said it had exhausted all operators in Cumbria.”
Higher private hire rates as a direct result of the fuel price increase have allowed operators such as Milligans to raise driver wages, though. It did so in March, stating explicitly that the higher rates were not just about absorbing fuel costs but also paying its staff fair wages. “There’s always been a race to the bottom where pricing is concerned,” adds Ms Milligan. “Now we are starting to get the rates that drivers deserve.”
Rates to stay high?
Anthony Marett, proprietor of Marett’s Chariots in Norfolk, reveals he is optimistic about the future of industry. A conscious decision to move into private hire work several years ago has allowed the business to react quickly to rising fuel costs and keep rates accordingly high. “It’s given us as a business the opportunity to get prices to where they probably should be to pay drivers more and, if fuel prices do drop and customers are used to paying a higher price, we have probably gotten ourselves into a position which would have happened organically over the next five to 10 years,” says he says.
Mr Bradley, cautious about whether rates will stay high long-term, highlights the range of factors resulting in the high volume of work within the coach sector. “I’m not sure what the position will be when the sudden influx of work tails off. It may be that in the autumn prices may need to fall. It will depend in the quieter months whether operators hold their nerve and keep rates up.”
While UKCOA does not advise operators on how coach hire should be priced, Mr Bradley does acknowledge that competition has driven rates down over many years and that the surge of “realistic pricing” has put driver wages “back to levels what they ought to be”.
Maintaining those rates would, he adds, have long-term benefits.
