Cities Tack On New Rental Fees

<B> Cities Tack On New Rental Fees</B>

By Lynn Woods

Car rentals in Boston got a lot more expensive on Jan. 1 with the implementation of a $10 flat fee--on top of the existing 5 percent sales tax--that applies regardless of the length of the rental. Beantown visitors also got hit with a 2.75 percent increase in the hotel room tax, upping the total tax to 12.45 percent. And if they stay the weekend and take a cruise on the harbor, they'll pay an additional 5 percent charge on the price of that ticket.

Car rental firms already are feeling the impact of the new tax. An executive at one major company said the $10 fee, introduced to help fund a new convention center, has led to a falloff in business at Logan Airport and in downtown Boston. Instead of driving themselves in rented cars, travelers are opting to take limousines or sedans.

As the extra charges on car rentals pile up, corporate travel managers find themselves paying a higher and higher percentage of their travel budget on these "fine print" items. Taxes alone are skyrocketing, with 11 cities charging a hotel tax of 14 percent or more and at least seven cities charging that for one-day car rentals.

At the car rental counter, however, taxes are but one of a list of extra charges. Car rental companies are allowed to charge on-airport concession fees, usually 9 or 10 percent of the cost of the rental, in 16 states. Vehicle registration fees, which first made an appearance in California, are now legal in 26 states, further upping the tab. Airport authorities also are levying extra charges. Newark International Airport in New Jersey, for example, charges 75 cents on car rentals, to help pay for the airport monorail. And Hertz is passing on the new airline excise tax on frequent flyer miles to its customers.

While executives at the car rental companies said corporate travelers are exempt from airport concession fees, travel managers nonetheless are seeing the charge pop up on car rental receipts. A travel manager at a multinational firm, for example, said a traveler had been charged the 10 percent fee at a Kentucky airport. Neil Abrams, president of Neil Abrams Associates, a car rental consultancy in Purchase, N.Y., said the car rental firms are in the process of negotiating the fee with their clients.

In the car rental companies' defense, Abrams noted that they have "had such a flat profit margin. Now that the auto rental companies are in the public domain, the industry is more aggressive in looking at fees they have had to absorb that have nothing to do with the transaction. The operative term is 'full disclosure' to the customer."

Concession fees in particular are a lucrative cost to recoup. An on-airport car rental location doing $10 million a year in business pays about $1 million in concession fees, Abrams estimated.

But with average daily car rental rates zooming above $40, these insidious "extras" can push the actual amount paid to extraordinary levels. In Salt Lake City, for example, travelers are paying 15.5 percent in car rental taxes. Coupled with the 10 percent airport concession fee, that's a total of almost 26 percent in extra charges. And it's getting worse: Budget franchisee Mike Taylor said that the state legislature recently passed a new bill allowing a 4 percent increase in the tax, expected to go into effect by the end of the year.

Boston and Salt Lake City are just two of a handful of municipalities that recently implemented or are considering levying new car rental and hotel taxes as a politically expedient way to fund stadiums, convention centers, and other civic attractions. Other cities include Amarillo, Texas, which this month implemented a 5 percent tax on short-term car rentals (those less than 30 days) and a 2 percent room occupancy tax. Amarillo's car tax total is now 13 percent, plus a $1.38 airport vehicle licensing fee.

Dallas, meanwhile, added a 5 percent tax on car rentals, pushing its total tax of 15 percent to fund civic projects.

Houston last fall raised its hotel room occupancy tax by 2 percent, leading to an overall total of 17 percent to fund a new stadium.

In the Northeast, Vermont increased its hotel and restaurant tax from 7 to 9 percent in October. Burlington adds its own local 1 percent lodging and restaurant tax, for a total 10 percent in the city.