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Operators Plan to Take on Bus Brokers with Co-Op

January 1, 2007

SUN VALLEY, Calif. -- A group of southern California motorcoach operators who say they are fed up with bus brokers trying to dominate the industry's charter business is setting its sights on derailing the effort by beating them at their own game.

The operators have formed The Bus Co-Op, and have crafted a business plan that will zero in on the Internet where bus brokers are doing almost all of their business.

"I believe we can knock them right out of the game," said Neil Eisenberg, owner of VanGo Inc., which is based in Sun Valley in the San Fernando Valley, and a lead participant in the fledging cooperative.

The group, which plans to roll out its campaign next month, has seven founding members and hopes to grow rapidly throughout the country to a maximum of 500 carriers that operate anywhere from about 10 to 40 coaches each.

"That will give us the strength we need to take them on," said Eisenberg, who has been in the motorcoach business for 15 years and is fearful many of the smaller operators could be run out of business if the brokers are not challenged.

The key to being successful, he said, is to take over the Internet where bus brokers get most of their business and do the most damage to small- and medium-size carriers.

Eisenberg said brokers get the bulk of the Internet charter business because their Web pages pop up first when someone searches to hire a motorcoach company. The brokers have been able to obtain and keep the highly sought-after lead positions on the search engines of Google, Yahoo and others by regularly out bidding competitors and paying the most for the spots. High spots can go for anywhere from $1 to $4 for each hit a company gets on its site.

"No one calls 411 or looks in the Yellow Pages anymore," he said. "They all go on the Internet now and that's where the brokers have the advantage and where they can put the squeeze on the carriers."

The Bus Co-Op hopes to take over many of the top search positions by pooling its money and out bidding the brokers for the lead positions. The positions can change frequently as companies offer more money to move up on the list of results.

The game plan of the cooperative is to recruit 500 small- and medium-size carriers from across the country that will buy into the cooperative with a one-time charge of $10,000 to $20,000. The fee, which would depend on the location and size of the company, could be paid with 25 percent down and quarterly payments over three or four years.

This would give each of them an ownership share in the cooperative, exclusive rights to customers in one or more three-digit Zip Codes they select, and discounts on equipment and services.

And, it would give the cooperative enough money to immediately begin making a run at moving past the bus brokers on the search engines. Organizations and individuals hunting for a charter company on the Internet would find Bus Co-Op's Web site high on the list of returns, giving the cooperative a better shot at landing charter work.

Eisenberg said the co-op's Web site will provide potential customers with a quote for their charter and then turn them over to the individual company in their area that they could deal with directly.

"When someone uses a broker they have no idea what company they will be getting until the coach pulls up to pick them up," he noted. "With us, the customers will get direct access to the carriers so they know who they are dealing with."

Customers will benefit with price reductions, too, because the broker or middle person would no longer be in the picture, according to Eisenberg.

He said the cooperative has been requesting quotes from a number of brokers for typical charters and is finding that brokers are getting huge returns. For instance, the brokers came back with prices of between $3,200 and $4,500 for a charter that normally would cost $2,400.

"They're making more money than we are and they don't have any equipment to buy, insurance payments or anything other than the Internet to worry about," he noted.

Eisenberg predicted that once customers have an easy alternative when searching for a charter company, the high markups the brokers are cashing in on will disappear.

In addition to getting new business for their companies, motorcoach operators who join the cooperative would be eligible for discounts on equipment, fuel, medical insurance and a variety of other products and services. Industry suppliers already have indicated to the group they would like to take part once the cooperative gets under way, according to Eisenberg.

"With 500 companies and 7,500 coaches, we would have very strong buying power for equipment and services," he adds.

Under the group's business plan, the cooperative would obtain contracts from vendors that would allow them to purchase the products and services at sharply reduced prices. The group then would resell them to its members with a slight markup, which would produce a steady flow of revenue that would keep the cooperative in business and allow it to continue to maintain its high position on the search engines.

Eisenberg said he views the effort as life saving for many small- to medium-size carriers that could be run out of business if the brokers continue to grow their businesses and more of them enter the market.

"The brokers are putting the squeeze on the carriers now and it has become a real serious problem," he emphasized. "Without some kind of program like ours, I believe many carriers will fall by the wayside."

He likened the situation to the clothing business where he spent more than 20 years before joining the motorcoach industry. Eisenberg was a clothing wholesaler who saw clothing brokers take over the industry, forcing hundreds of small clothing stores out of business.

"I know in my heart of hearts that that is going to happen in the motorcoach industry if we don't do something," he said.

The cooperative's Web site - www.buscoop.com - is expected to be up and running in early February.