What the future of Real Estate and Limousines have in common
By andy on Wednesday, November 8, 2006 - 2:48 pm
Preface: I could go on and on with this analogy. But, for the fear of being too wordy, I have kept my comments curt.
During my trip to Manhattan yesterday, as I sat in JFK awaiting my hotel shuttle to arrive, I couldn’t help to notice the similarities between taxi cabs and the current state of real estate.
First: the story about taxi cabs.
In New York, if you flew into JFK airport and wanted travel home to the city, chances are you’ll walk out to the sidewalk, approach the cab stand, and stand in line for the next available yellow car. Once inside the taxi, just like all other vehicular options, you’ll be sitting in traffic for the next 60-90 minutes as your driver takes you to your destination. In the taxi, the meter runs constantly. Taxi meters work on the FM principal for me, but my guess is that there’s some algorithm which charges for each mile and each minute used during your ride. So, in essence your fare is a commission of the time & distance you travel. For this ride the total is going to average around $50.
Second: the story about private cars and limousines.
When traveling from the airport to home the taxicab isn’t your only option. In fact, there are several options – one of which is the private car and limousine service. When you walk out of the airport onto the street level chances are that you’ll see several black town cars and limousines. These private cars are sitting there to serve you, just as the yellow taxicabs are. However, instead of a metered ride, the limos and private cars offer a flat fee service. One driver I saw held a sign which said “$35 – All City”. This meant that for anywhere destination inside of Manhattan his fare would be a $35 flat fee.
What a deal, right!?! For the same travel time, you’ll travel inside of a nice town car with tinted windows, and have a driver who is nicely dressed in a full suit and tie – and for $15 less! All of this, plus you still have the personal service of having a car to yourself.
Third: the story about shared shuttles.
Another option for the commute into town is a shared shuttle. Many hotels offer a shuttle service as a complimentary pick-up service for their guests. But, in addition to these hotel shuttles there are a few-third party services which provide similar services — the shared shuttle.
With a shared shuttle, you’ll travel in a 8-15 passenger van along side many other travelers. The fare is significantly less (in this case just $15), but the trade off is that you’ll be crammed into a bouncy van along with 10-15 others on a long, nauseous ride. Luggage will be placed on laps, under your feet, and chances are you’ll travel all over town dropping the other passengers off at their destination prior to arriving at yours. It’s cheap, it’s not sexy, but the result is the same — front door drop-off at your destination.
So what does this have to do with Real Estate?
Clearly, you can see that the weary traveler has options. But sadly, most people don’t know that they do. You can take the yellow cab for about $50 (depending on the meter). You can grab a private car for $35. Or you can try a shared service for as low as $15. Depending on your mindset, a good argument can be made for selecting each service over the other. But, it’s obvious that the taxi cab is most expensive and offers no direct advantages to the consumer.
The only advantages that taxis have are that they outnumber the other options 100-fold. They are readily available on any street corner. They breed familiarity. And they are unionized regulated – one of the largest! (see Matt’s comment below).
So to figure out what this has to do with the future of Real Estate, read the above stories again. But, this time change the out the following words:
Taxi Cabs = Traditional Real Estate Brokerages
Limousines = Discount Realty Brokers
Shared Shuttles = Limited Service MLS Listings
Taxi Union = National Association of Realtors
Am I wrong??
I think I’ll be taking a limo from the airport from now on.
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Comments (10)
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Comment from Greg Tracy
Posted on Wednesday, 8 November 2006 at 5:14 pm
Great post… I like the analogy and your writing.
Comment from for sale by owner center
Posted on Wednesday, 8 November 2006 at 6:08 pm
Excellent post. I think you are right on with your analogy. Most people are intimidated by the black limo trying to figure out how can it be cheaper? Same thing for the discount as you mentioned.
Pingback from The Future of Real Estate and Limousines « BlueRoof.com Blog
Posted on Wednesday, 8 November 2006 at 6:32 pm
[...] Andy Denton writes a great post about differences in transportation options and how they are similar to the choices consumers have with real estate brokerages. It’s good reading and it has a good message. [...]
Comment from Andy
Posted on Wednesday, 8 November 2006 at 6:36 pm
@ for sale by owner center:
You’ve got that right. The discount broker’s biggest challenge isn’t from any other broker. Their biggest challenge is going to be educating the consumer.
If they can squash the myth that “it’s illegal to pay less than 6% commission”, then the traditional broker doesn’t stand a chance.
Comment from Matt Carter
Posted on Wednesday, 8 November 2006 at 7:33 pm
NYC cab drivers are not unionized — they haven’t been for years.
The reason a cab may cost you more than a limo is that cabs, unlike limos, are required by law to pick people up who hail them from the street, and take them on little piddly four-block trips that don’t pay very much. The limos are actually prohibited from picking up people who try to flag them down. Airport trips are much more profitable — you are spending more time with a fare in your vehicle, and less time sitting idle or driving empty somewhere with your meter off to pick up a fare.
In NYC, as in most cities, taxi fares are regulated. The reason you regulate a business like this, which is essentially providing a public service, is to make sure that everybody has access to it. Otherwise somebody could come in and pick up all the easy business (like the airport runs) but refuse to take less lucrative fares — like the woman in the bad neighborhood who needs a cab to take her two blocks to the laundromat. If mail service were completely unregulated, private companies could take all the easy deliveries between big cities, and people in the sticks either wouldn’t get any service at all or they’d pay through the the nose for it.
You may think the fares are high, but drivers — who lease or own their cabs, and pay for their own gas — will tell you it’s a tough way to make a living. Yes, the meter runs on both time and distance ($2 a mile), but not at the same time. You rack up charges at a rate of $12 an hour anytime you’re moving at less than 6 mph — hardly exorbitant.
All of which is irrelevant when you are taking a cab from JFK to Manhattan, because you are charged a $45 flat fee. The meter doesn’t get turned on. You may or may not be able to get a private car for less.
Comment from Andy
Posted on Wednesday, 8 November 2006 at 7:41 pm
Touche’, Matt! Touche’!
(I knew about the $45 flat fee, but left that out for affect.) Didn’t know about it not being unionized though. But, sounds like it’s certainly regulated – and for good reason as you indicate.
I guess analogies can only go so far. 
Comment from Will
Posted on Friday, 10 November 2006 at 12:08 am
Andy, that was quite the analytical post. I am impressed. It really made me think about my choice of Airport to destination travel as well as my realtor selection in buying my house. Maybe we could discuss these ideas more.
Comment from theyerg
Posted on Friday, 10 November 2006 at 10:52 am
interesting. but who is curt?
Comment from Airport Service Limousines
Posted on Thursday, 20 September 2007 at 12:41 pm
Some great comments Andy -certainly makes you think.
Comment from Andrew S
Posted on Tuesday, 4 November 2008 at 10:03 am
I did the shared service thing. Sucked and I don’t care how cheap it was. I got in a shuttle with 8 other people and waited around while we drive to 7 different hotels. Took almost two hours. Cab would have been MUCH quicker and I would have been there MUCH sooner. It is definitely worth the extra cost for someone who is dedicated entirely to me and not running on the bulk cycle to make the money.
I do realize that I am commenting on a 2 year old post.
Sorry, comments are closed for the moment.
