Hertz Corp. earlier this month announced a restructuring of its fleet as it launched a "green collection" of more than 35,000 cars with fuel-efficiency ratings of at least 28 miles per gallon, including such models as the Toyota Camry, the Ford Fusion, the Buick LaCrosse and the Hyundai Sonata.
Other major car rental suppliers also have adjusted their fleets to meet the needs of customers who want to cut fuel consumption for cost-cutting purposes and further environmental corporate social responsibility initiatives. Despite mounting pressure regarding fleet costs, those efforts have been limited to date. Even volatile fuel prices have yet to cause a noticeable impact on the behavior of corporate car rental customers.
According to Paula Rivera, manager of public affairs for Hertz, the size of the collection, designed to cater to a customer need for roomier vehicles that get better gas mileage, will guarantee availability at 50 major U.S. airport locations. "In the past year or so, we've noticed that more and more customers are asking about fuel-efficient cars," she said. "A lot of the cars in our compact and intermediate car classes are very fuel-efficient, but they do tend to be smaller. People in groups now have environmentally friendly, fuel-efficient cars to choose from."
Meanwhile, Avis Budget Group has about 170,000 vehicles with similar fuel efficiency ratings, said Bob Lambert, Avis Budget's senior vice president of corporate sales. "With more than half of our fleet that we have today, the customer will get a vehicle that has a mileage rating of greater than 28 miles per gallon on the highway," Lambert said. "So chances are, if you rent from us, there's a very high probability that it will have that rating."
In Avis Budget's case, however, fleet development progressed naturally as the fuel-efficient vehicles became more of the norm from the car manufacturers, he said. It was not a concerted effort to appeal to a particular demand as fuel costs rose.
That's because although fuel-efficient vehicles would seem a natural method of cost savings for travel budgets, Lambert and industry analysts said fuel costs alone rarely cause much of a shift in corporate rental behavior.
"With some customers, perhaps they've changed their policy from an intermediate car to a compact car, but we really haven't seen a change from the corporate standpoint," said Rose Stratford, senior vice president of industry relations for BCD Travel. "With refueling, that's something that the corporation absorbs every time."
One of the few noticeable shifts in corporate class preference during the past decade, Lambert said, was the move of some companies to larger car classes because of safety concerns with smaller cars. That began to dissipate as manufacturers improved safety features in the smaller cars. Fuel costs, on the other hand, might cause a slight fluctuation on the retail side of the business but rarely much on the corporate side, he said. Neil Abrams, president of Purchase, N.Y.-based Abrams Consulting Group, made a similar observation.
"There may be a softening in demand for SUVs and pickups, but less so in companies that cater to business rather than leisure," Abrams said. "People who rent SUVs and minivans do so because they need to, not because they like to."
Appealing to pure cost concerns, however, is not the only reason companies like Hertz are addressing fuel efficiency. U.S. travel managers increasingly are examining the environmental impact of their companies' travel policies in an effort to fit in with larger company green policies
(BTN, May 15).Hertz's new fleet launch also was designed with that in mind. More than half of the green selection is made up of vehicles that score well with the U.S. Environmental Protection Agency's test for limiting greenhouse gas and air pollution emission, according to Hertz.
"We're hearing more about the greenhouse issue," John Johnson, division vice president of sales for Hertz, told Business Travel News. "Also in that regard, companies are reviewing what car classes they need to feature as the preferred car class."
Some travel managers have taken that beyond the fuel-efficiency equation. Louisville, Ky.-based spirits producer Brown-Forman Corp., for one, developed an agreement with Hertz to use hybrid Toyota Prius automobiles for regional travel
(BTN, May 15).To a small extent, some suppliers have adapted fleets for this purpose as well. Enterprise Rent-A-Car added a handful of biodiesel vehicles to its Portland, Ore., fleet earlier this year. A few small companies have even specialized in biodiesel cars.
Fleet adjustment in this regard, however, has been minimal. With car rental industry already faced with rising fleet costs, it is not feasible for companies to withstand the large investment that would be required for sizable alternative fuel or hybrid fleets.
"Historically, they're very difficult to get," Avis Budget's Lambert said. "As the cost of those vehicles come down, and they become more plentiful, there could be a possibility there, but I don't see that on an immediate basis."
Outside of the types of cars rented, some suppliers also said that they've noticed an increase in their corporate business activity as a result of rising fuel prices. Fuel reimbursement rates fluctuate in conjunction with fuel costs, so in many cases, it can be more economical for companies to insist that employees use a rental car rather than their own personal vehicle for close-to-home trips, according to Brad Carr, Enterprise's vice president of corporate business development.
"While the U.S. Internal Revenue Service standard mileage rate is 44.5 cents—down slightly from last fall's record high of 48.5 cents, following the devastating Gulf Coast hurricanes—many companies are moving toward reimbursement rates of 50 cents a mile," Carr said. "As a result, organizations can realize significant savings by instead renting cars for their short-haul or regional travel needs."
Avis Budget's Lambert said that he had seen a similar corporate trend, although he said other factors outside of fuel costs factor in with the decision to discourage employees from using their personal vehicles.
"Mileage reimbursement is pretty substantial, so in the longer term, they might be more apt to utilize a car rental vehicle," he said. "A personal observation, however, is the wear and tear on a personal vehicle probably has as much to do with it as the mileage reimbursement."