Friday, May 9, 2008

It's not all gas prices, you know...

While we blame high gas prices for everything, including kids not getting limos for prom, we need to keep some other stuff in mind.
Many operators have added surcharges in response to higher gasoline prices, which reached an average of $3.63 per gallon for regular unleaded in Maryland, AAA Mid-Atlantic reported yesterday. Rogers raised rates $35, bringing the cost of renting a limo to $885 for eight hours.

"The gas prices definitely are not helping us," she said. "It is working against us. We are trying not to raise the prices [again]. But the industry is suffering. It's not too far off."

Richard Kane, owner of International Limousine Service in Washington and president of the National Limousine Association, said operators suffered first-quarter losses of 10 percent to 30 percent.

Rate increases implemented in response to higher fuel costs range from 8 percent to 20 percent, Kane said.

"It is unfortunate, but we have to pass the costs on," said Kane, 38, who has tacked on a 13.5 percent surcharge.

Mike Vallard, owner of Bel Air-based Higher Quality Limousines, is among those who decided against raising prices, resigning himself to the possibility of simply breaking even. Vallard, who is president of the Maryland Limousine Association, charges $800 for six hours and $1,000 for eight hours.

First, a $35 increase to $885 is less than a 5% increase. Also, keep in mind it is harder for teens to get jobs than it used to be, due at least in part to the higher minimum wage, which primarily impacts part time and teenage workers. Also, don't forget the sales tax increase in Maryland from 5% to 6%. On that same $850 original limo rate, the increase in the sales tax is $8.50, about a quarter of the increase due to gas.

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