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What started as a simple rent-a-RAGBRAI-bus-for-a-few-extra-bucks industry is now turning professional.

Driving the change in the party-bus business is an effort by the Iowa Department of Transportation (DOT) to more strictly enforce regulations, including a requirement for a $5 million liability insurance policy that especially cuts into the profits of those who rent out their buses occasionally. As a result, the industry has been shaken up over the past year, with some operators exiting and others using the decrease in competition as an opportunity to expand their fleets and market shares.

“The DOT inspection is very thorough,” said Steve Casteel, majority owner of Urge Party Bus, which entered the market with one bus last fall. “Even a cracked windshield wiper and they won’t let you drive. They put it as out of service, and if you get caught driving with it while it is out of service, you could get huge penalties and huge fines. They’ll take your authority to drive away from you, and if you get caught driving again, you’re pretty much done forever. It’s pretty strict. And I think the last couple of years, no one’s ever enforced it, which is why you see a lot of the other guys going out of business.”

The party-bus industry has attracted more attention as bus rentals have become a more popular mode of transportation for weekend partiers, wedding parties and even corporations for events.

“Every weekend we end up seeing a different bus we’ve never seen before,” said Adam King, owner of American Party Buses LLC.

Tougher enforcement

Capt. Dean House of the DOT’s office of motor vehicle enforcement said some officers went through additional training on inspecting buses last spring and his office has rearranged its schedule to better patrol party buses.

The biggest issues are making sure companies have the $5 million insurance policy and that drivers have a commercial driver’s license or chauffeur’s license, depending on the size of the bus, he said.

House could not determine how many citations his department issued against party buses last year, because they are lumped together with other commercial vehicle violations.

Fines vary depending on the violation, but if a bus does not have the proper paperwork, it could cost the owner a few hundred dollars.

To avoid problems, House’s office has hosted a couple of free training sessions in Ankeny to educate party-bus owners on the rules. “Ignorance of the regulations doesn’t get you out of it,” he said, “but we take the approach that if we can (cause) compliance through education, it’s best for everybody.”

Changing market

When King’s bus was pulled over and inspected last June, “he (the officer) said I was the first one of the night pulled over out of six that was legal,” he said.

King said he was prepared to comply with the regulations when he came into the business about a year ago, but other party-bus owners were taken by surprise. Those who were renting their buses out as a part-time venture are finding that they are not making as much money after having to pay for the insurance policy and are leaving the business. Others are deciding to increase their fleets to make more money to help cover the cost.

“Our margins have gotten smaller for sure,” said Alexander Grgurich, owner of Rockstar Party Buses, who has been in the business the past two and a half years.

As a result, Grgurich has sped up his company’s growth plans, increasing his fleet to five buses from the one he started with, and he may add another one this year. Part of his expansion has been through the acquisition of two companies during the two years, giving him access to buses, phone numbers, drivers and an existing customer base.

“We’ve taken it as an opportunity to grow,” he said. “It’s become more of a business rather than ‘I have something to make a little extra cash with.'”

King hopes to double his fleet to six by summer, including adding some smaller vehicles. He also has been advertising more to help boost business.

Casteel still has only one party bus, but the business is supplemented by Urge Entertainment, which provides wedding services such as disc jockeys and photography. He estimates that he pays $7,200 a year on insurance for the one bus.

“It’s really tough to make it off of a bus alone,” he said.

The other result of increased DOT enforcement is that some party bus owners will call in to the DOT to report a bus they don’t recognize or suspect may not comply with all of the requirements. House said that since his department increased enforcement, the number of tips has risen.

Many party bus owners are going through voluntary pre-inspections of their buses to avoid being stopped with customers on board.

What downturn?

Some owners who have stayed in the business have not seen any effects from the overall economic downturn yet. Part of that may be from a growing market share, but though Grgurich noticed a bump in business at first, he said the market has reached a balance again.

“For a little bit there, things really did boom in the sense that some companies went out of business,” he said, “and I think the companies that still stayed in business absorbed the lack of supply.”

Still, in winter, when business tends to slow down, he is booking buses and his revenues last year doubled compared with the year before, he said. “Revenue per bus has increased, so that it isn’t just the fact that we added more buses,” he said.

New to the business, King expected a winter slowdown, but is still fairly well booked, while Casteel said he is booking about 80 percent of his weekends.