Opinion: How Truck Stops Are Like the Airlines
B>By William D. Fay
I>President & CEO
atso Inc.
Unfortunately for us, the financial landscape has changed as it has for other businesses. Decades ago, when truck stops were in their infancy, it was enough simply to pump fuel. Restaurants were often subsidized by fuel sales, as were free parking, showers, check cashing, truck washing, laundries, coffee and other services. As fuel margins have steadily diminished, however, truck stops are now struggling to eke profits from those service centers.
That’s where the innovation and versatility come in, but there are limits to the returns from ancillary operations at what is principally a fuel marketing location.
The most pertinent parallel to our industry’s current state can be found in America’s airlines. Once rife with small, independent carriers and myriad amenities, today’s airlines, too, are struggling. They are buying one another up in a mad frenzy to boost volume and unbundle services that were once taken for granted by passengers.
While there’s a dearth of financial data from truck stops, a cursory look at return on investment suggests a disturbing and unhealthy trend in recent years. Like airlines, shrinking profit margins have put many independent truck stops out of business or on the brink of bankruptcy.
Chains may be somewhat better off, but the feeding frenzy of mergers and acquisitions belies a search for improved returns through volume. But unlike airlines, truck stops are only beginning to address the mounting cost of free services.
It wasn’t that long ago that airfares were high enough to allow many free amenities. When profits became heavy losses, however, the freebies had to go for airlines to stay afloat. Pretzels replaced meals. Last August, the New York Times reported, “Already, hot meals are only a memory for many travelers . . . along with . . . magazines, free playing cards and other perks. After eliminating as many of these items as they think leisure travelers will trade for low fares . . . airlines may try to entice business travelers to pay a premium to get them back.” Under consideration for this treatment are meals and checked bag charges.
Between technology improvements that allow fleets to locate the lowest prices and discounts negotiated directly with truck stops, truck stop fuel sales margins have plummeted. And yet, unlike in the airlines, amenities continue for truckers who fill up their tanks: free showers, parking, check cashing and coffee — even frequency rewards similar to frequent flyer miles. The expenses of providing these amenities and the capital investments necessary to keep the bathrooms, shower stalls and parking lots in good condition continue to mount without the income to sustain them.
Some truck stops have been forced to follow the airline industry’s lead. Approximately 3% of truck stops now charge for parking and one has begun to charge fueling customers a small fee for showers. More are certain to follow.
One reason airlines are unbundling services is that corporations demand lower fares for their employees, even if it means fewer amenities. So who is the airline’s customer, the company paying the fare or the business passenger?
Truck stops are the home away from home for America’s truckers. It has been argued that because truckers are constantly on the road, truck stops know them better than their own employers know them. And yet when drivers fill their tanks at our facilities, it is the trucking company that negotiates the fuel price and pays the bill. Increasingly, the trucking company dictates where the driver stops.
So who is our customer, the fleet or the driver?
It depends on whom you ask. The number crunchers will say the fleet is our customer, while truck stop employees will say it’s the driver.
This dichotomy poses a huge challenge for the truck stop that is trying desperately to satisfy the customer. In essence, the trucker expects amenities for filling up, while the fleet — which wants the lowest possible fuel price — is paying the tab. It’s hard to conceive of another industry where employer and employee expectations are so misaligned.
Imagine the challenges to the truck stop operator, particularly when meeting one side’s expectations actually hinders meeting the other’s.
It’s unclear how far the parallels between the airline and truck stop industries go. Will we end up with three of four large truck stop chains, just as we seem destined to end up with three or four airlines? The jury is still out on whether — in the interest of lower fuel margins — truckers will accept fees on services they’ve taken for granted for decades. And who will truckers hold accountable, their employers who fervently seek cheaper fuel or the truck stop attempting to stay afloat financially?
I hope the trucking industry agrees that economically unhealthy truck stops don’t behoove trucking. Neither does an industry trying to boost its meager profit margin through the added revenues that come from mergers and acquisitions.
The writer has been president of Natso Inc., formerly known as the National Association of Truck Stop Operators, since December. The Alexandria, Va., organization represents approximately 1,100 truck stops and travel plazas.
This article appears in the March 31 print edition of Transport Topics. Subscribe today.