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Best of Liz Benston

Gaming Guru

Liz Benston
 

In Vegas, there's no free market for taxis

16 February 2009

LAS VEGAS, Nevada -- For as long as anyone can remember, the Nevada Taxicab Authority has accommodated tourism growth in Las Vegas by annually letting more cabs onto the streets and allowing "special medallion" cabs to serve gatherings of at least 90,000 people.

That is until last year, when the regulatory body recognized that the slowing economy didn't warrant more cabs.

Another first: Regulators chose not to allocate additional cabs for this month's World of Concrete, Magic and World Furniture Market trade shows.

Expectations for 120,000 attendees at the Magic apparel show have dwindled to 60,000, with similarly depressed estimates for the other shows.

Cabdrivers, who have for years criticized the agency for putting too many cabs on the road, aren't exactly declaring victory. In fact, some are declaring war.

The Taxicab Authority, which allocates taxi licenses among 16 companies, oversees a controlled oligarchy protected from outside competition and somewhat shielded from market forces. Regulators allocate medallions — licenses to operate cabs at certain times — by gauging demand using statistical research, interviews with tourism insiders and firsthand observations. Proponents say this keeps out companies that would rip off customers, slash competitors' tires or otherwise fight for access to tourists.

Regulators have a mandate to ensure that passengers get the best possible service.

Historically, that meant more cabs — placing the agency in perpetual conflict with drivers.

Drivers accuse taxi officials of bowing to the profit motives of the companies they regulate, allocating more cabs than necessary. It's a self-serving argument: fewer cabs means fewer competitors for passengers.

Better to err on the side of too many cabs than too few, regulators say. Better that tourists have an enthusiastic cabbie at the ready than leave Las Vegas angry about a long wait.

It's hard to argue with the more-is-better theory, unless, of course, you drive a cab.

As the economy has worsened, drivers have called the Taxicab Authority to urge the further removal of cabs.

During last month's International Builders Show, drivers made desperate calls to the governor's office to turn up the heat on taxicab officials.

Around the same time, the Taxicab Authority pulled 26 of the 72 medallions allocated for the five-day event based on daily figures reported by cab companies and observations of slow business at the airport and the convention hall.

Appeals from drivers don't factor into such decisions, Taxicab Authority Administrator Gordon Walker said.

While companies have thousands more medallions than they did a few years ago, there are only about 250 more cabs in use today than in 2004, or fewer than 16 cabs per company during a period in which more than a dozen buildings have sprouted on or near the Strip.

Last year's official count on visitor traffic was flat with 2004, however.

Some companies say they're on the same side as drivers in the supply-demand debate.

Lucky Cab's profit margin is less than 10 percent, owner Jason Awad says — lower than many tourism businesses, including big casinos. Companies also make money selling advertising space on cabs, regardless of whether there are any passengers in the cab. But Awad says much of his revenue pays for fixed costs, including $12,000 per driver for auto insurance.

On an average weekend, revenue is down more than 20 percent from before the downturn, he said.

Cabdrivers, working through breaks or forgoing days off to make $6 an hour, aren't sympathetic.

"I had always made pretty good money and had a lot of years with a lot of companies," said James Ashcraft, who quit driving a cab for lack of business and is seeking unpaid wages under the state's minimum wage law. "Now a lot of us are struggling."