During recessionary times, the knee-jerk reaction for most businesses is to try to cut costs. Which is why it comes as a surprise that Collette is doing the opposite: offering an ambitious -- and costly -- new complimentary service, door-to-door airport car transfers.
The Pawtucket, R.I.-based tour operator unveiled the new service, with an estimated $300 value, on April 1. The transfers, by private sedan, will be available within a 50-mile radius of 75 U.S. gateways on air-inclusive tour bookings for travel starting May 1 to the South Pacific, Canada and Europe as well as for Explorations by Collette and Smithsonian Journeys Travel Adventures, which Collette operates.
Beginning in May 2010, the service will be included on all air-inclusive tours on all of the Collette brands. Collette said that the majority of its clients book air-inclusive travel.
"We have a very strong balance sheet," said Dan Sullivan Jr., president and CEO of Collette. "We're fiscally solid. Now, when the market's soft, you've got to do things that cost money."
'Save for a rainy day'
He added that one reason Collette can introduce the service now is "because we're debt-free. ... My father always had the philosophy to save for a rainy day," said Sullivan, referring to the late Dan Sullivan Sr., who bought Collette with his brother-in-law in 1962.
Now that rainy day has come, and although it's more of a Category 5 hurricane, Collette is going through with its pricey plans. While Sullivan didn't say exactly how much the company anticipates investing to offer the service, he did say "we're talking about a lot of investment."
Sullivan said there is no precise percentage of the firm's revenue that is set aside to be able to spend on a program as ambitious as this.
"I don't think there's a formula, percentage-wise," said Sullivan. "We retain the earnings. We keep a good portion of the money ... and you have to keep building up as a percent of your revenue. We've just been pretty fiscally responsible."
Collette is not a publicly traded company, so the company does not disclose its financials. According to Sullivan, the tour operator has a 4A2 rating from Dun & Bradstreet, which provides commercial information about companies. The 4A category of between $10 million and $49.9 million reflects company size based on net worth or equity as computed by D&B. D&B evaluates companies' creditworthiness based on their financial statements -- the number 2 represents a "good" assessment, according to D&B.
Collette has offered the complimentary door-to-door service in Canada and the U.K. for many years, but this is the first time it will be available in the U.S.
Sullivan said he couldn't reveal the "numerous" car service companies Collette is working with to accomplish this feat.
While the infrastructure for the program is already in place because of the pre-existing Canada and U.K. programs, the logistics of offering a complimentary private airport transfer service across the U.S. is "much more complicated" than in the U.K. or Canada, said Sullivan.
In addition to the cost of paying for private drivers, Sullivan said Collette was also paying in terms of staff education and time to manage the service.
Collette said it would work with agents on group transfers, as well.
Doing it for agents
The reason for the door-to-door service, said Sullivan, is "to make it easier for agents to sell an escorted tour." He added that the perk should help agents bring more business to Collette, thus putting more commission money in agents' pockets.
Agents are "looking for ways in this challenging time to make money," said Sullivan. "There are still people traveling. The problem is, they're looking for deals. That hurts the agent. The agent's not making any money."
Not only are the deals pushing prices lower, but agents' commissions are getting squeezed, too.
"Agents have no commission opportunities. Cruise lines have taken out so much of the commission," said Sullivan. So, Collette is pushing the fact that the service will help agents book more Collette travel, and consequently get more commission on Collette product. Collette pays commission on the tours, options and air.
Collette is marketing the service on its website as well as to its agent partners.