As corporate travel managers scrutinize their car rental spend in order to save money, a few are beginning to consider the lower-price firms—Dollar Rent A Car, Thrifty Car Rental, Enterprise Rent-A-Car and Payless Car Rental Systems—as alternatives to The Hertz Corp. and Avis Rent A Car.
"Travel buyers are putting less of an emphasis on the perks and a higher emphasis on the amount of expense," said Michael Boult, CEO of Eclipse Advisors, which runs the procurement end of Rosenbluth International. "Certain customers are asking questions, and Enterprise especially is coming up as a possibility for the first time."
Boult hastened to add that the move toward low-cost providers is, at best, "a potential trend," since the value-oriented suppliers aren't really equipped to handle the needs of a major corporation. "We're seeing them as a secondary," said Michael Schmeltzer, Rosenbluth director of supplier relations. "Enterprise really can't handle a full corporate client," given its limited presence at airports, its lack of an express rental product and restricted hours at some locations. Plus, the company has a very limited presence overseas, which precludes contracting with a multinational.
The suppliers themselves admit their limitations. For example, Payless, which is on-airport at 37 locations and in-terminal at an additional 12, cannot service a major account because "we have no total management system interfacing with all locations," said Kathy Johnson, Payless vice president of customer relations. It also cannot include collision damage waiver insurance in a negotiated rate. The company continues to appeal mainly to independent business travelers, although Johnson said Payless is developing a total management system, due to be rolled out next year.
On the other hand, several factors are working to the value-price car rental companies' advantage. First, the construction of more consolidated car rental facilities at airports is enabling more of them to be on-airport, which also levels out the competitive advantage of a Hertz or Avis. "It's one bus, and everyone and their brother are going onboard," Boult said. Once inside the facility, "Thrifty is next to Hertz. There's very little differentiation in the car rental market." Second, the rate for what essentially are commodities—a fairly new economy, intermediate or full size car—can be 20 percent lower at such firms as Enterprise. Third, all of the low-cost providers are in the GDS, making them as easy to book as the majors.
"We're seeing interest from the corporate traveler we haven't seen before," said Donald Himelfarb, executive vice president at Dollar Thrifty Automotive Group and president of Thrifty. Some of this derives from the two brands' prominence on Expedia, Travelocity and Orbitz. "There is no question that the commercial traveler is giving us consideration, due to the easy availability, display and rate disparity" on these Web sites, added Gary Paxton, executive vice president at DTAG and president of Dollar. "In the past, we didn't get it."
Melinda Samp, supervisor of the business travel center at State Farm in Bloomington, Ill., said her company was in the process of seeking a negotiated contract with one of the low-price suppliers. "Because they're in the GDS, you can negotiate," she said, and right now "budget is very important, more than express services." Since so much depends on the individual traveler—time is at a premium for the seasoned road warrior, but the less-experienced traveler may not mind waiting in line—her plan is to offer a low-price supplier as an option. "We'll give them a variety to choose from. We'll keep with an Avis, but also offer an Enterprise."
The airport marketshare of Enterprise, while still miniscule, has been growing and is approximately 5 percent, according to Rob Hibbard, Enterprise vice president of rental development. The National Business Travel Association reported that in the first quarter of 2002, Enterprise had 3.3 percent of the top 50 airport marketshare, compared with 2.1 percent in 1Q01. Currently, Enterprise has 135 in-terminal airport locations, and its ability to operate efficiently keeps prices low. While there is no express service at the counter, staff with handheld devices help speed up the return process.
Enterprise is not the only low-cost provider that is attracting more interest from the corporate marketplace. Advantage Rent-A-Car, based in San Antonio, Texas, recently signed contracts with two large companies. "We've had inquiries from Fortune 500 companies and have been asked to participate in the bidding process," said Advantage director of sales Monte Ramey. As a regional player, Advantage traditionally has been a footnote to the corporate market. It has 29 airport locations, located in Texas and points west, last fall opened at John Wayne Airport in Orange County, Calif., and soon will be on-airport at Los Angeles International.
Ramey said corporate travelers also were booking Advantage on their own and that travel policies even had loosened up among agencies of the federal government. Advantage offers either a "best rate" program, in which its reservation system finds the lowest rate, or it can negotiate a rate that includes certain amenities, such as CDW.
So far, it's mostly companies with smaller travel budgets that are pursuing the second-tier players. A survey of WorldTravel BTI's 200 clients revealed that only one out of 10 accounts that had indicated interest in the value car rental companies actually had made the switch—in this case, from Hertz to Thrifty.