Luxury Rental Car Demand Increasing in Biz Sector
<B> Luxury Rental Car Demand Increasing in Biz Sector</B>
By Lynn Woods
Demand for luxury rental cars by corporate travelers is increasing, according to executives at major car rental companies, although the overall market for top-of-the-line cars continues to be miniscule compared with the corporate sector as a whole, they said.
Charles Piranian, vice president of sales at Budget Rent a Car, noted that corporate rentals of luxury cars are up 25 percent at Budget over the previous year. He said that 23 percent of all luxury rentals are comprised of corporate accounts.
About 30 percent of Budget's fleet consists of luxury or speciality vehicles: Lincoln Town Cars and Saab 95s in the luxury category and Ford Explorers, Ford Expeditions and Lincoln Navigators in the speciality category. Budget also offers Jaguars in the super-luxury category.
Piranian said this diversity has resulted in a successful niche business at Budget. "You can get more than just a Cadillac or Lincoln," he said. "Customers who want a luxury vehicle know they can get something different." This is particularly true in situations where "they are taking out a special client and want something better than a full-sized car." Another popular market for Budget luxury car rentals is corporate incentive programs, he said.
Lauren Garvey, spokesperson at the Hertz Corp., also reported higher usage of full-sized, premium and luxury rental cars by corporate travelers. What's driving the demand, she said, is rentals by groups of corporate travelers, who may, for example, be attending a presentation and are seeking a car large enough to accommodate the extra luggage. Corporate travelers who are attending a meeting and want to extend their trip to the weekend also occasionally trade in their midsized vehicle for a fancier car for their own personal use.
Hertz's premium class consists of Crown Victorias, while Lincoln Town Cars comprise the luxury category. Like Budget, Hertz also reports more demand for four-by-four speciality vehicles, particularly by industrial accounts that use them for onsite visits at factories or other manufacturing facilities. Sport utility vehicles are particularly popular with groups of businesspeople who want to rent a vehicle for leisure activities.
At National Car Rental, luxury cars--consisting of Buick Park Avenues, Cadillac Cateras, Cadillac de Villes and Oldsmobile Auroras--constitute less than 10 percent of the fleet. However, there has been a growing trend in both the corporate and leisure sectors for more rentals of full-sized vehicles, said National spokesperson Dan Callahan. Travelers "like the comfort of a bigger car, and businesspeople sometimes like to present a certain image," he said.
Only Avis Inc., the industry's number-two player, reported no change in demand for luxury cars. A spokesperson said that this segment was miniscule, well in the single digit percentile of Avis's overall business. Sport utility vehicles, he added, are an even smaller percentage. Of Avis's domestic car fleet of 200,000 vehicles, only 4,000 are comprised of luxury cars, mainly Cadillac de Villes.
"Most of these rentals tend to be upgrades by corporate travelers," mainly by members of Avis's Presidents' Club, who qualify for free upgrades. The Presidents' Club is the exclusive organization Avis has established for its most prestigious renters, consisting mainly of corporate executives "who make car rental decisions." (All of the major car rental companies maintain such clubs. Since membership is by invitation, the firms don't like to publicize them).
Outside of the clubs, none of the major car rental companies offer free upgrades to premium or luxury cars as a corporate account benefit. Budget does offer negotiated corporate rates on luxury cars to some of its accounts, and Hertz provides its corporate accounts with a discount on retail rates for top-of-the-line cars. Avis, however, does not offer any special deals. Avis' corporate customers who upgrade to these vehicles pay the retail rate.
Depending on the market, a luxury car can be a good or not-so-good deal. For example, in San Francisco, Hertz's daily rate for a Lincoln Town Car is $81.99, compared with $61.99 for a midsized car. The weekend rate differential is even more dramatic, with the luxury car costing $75.99 and the midsized car dropping to $41.99. But in Dallas, Hertz's daily rate for a luxury car is only $69.99, just $3 more than the $66.99 rate for a midsized vehicle. On the weekend, however, the price for the midsized car drops to $27.99, while the luxury car is $62.99.
At Avis, the daily rate for a Cadillac de Ville ranges between $70 and $90. Dollar Rent A Car's rates for its luxury cars--in this case, Chrysler 300 Ms and Chrysler LHSs--is significantly less, at an average of $55 a day. (Dollar's luxury cars, including sport utility vehicles, constitute approximately 3.5 percent of the company's total fleet).
According to Jon LeSage, executive editor at Auto Rental News, a trade publication based in Redondo Beach, Calif., the total number of luxury rental cars in the United States in 1997 was 72,200, just 4.7 percent of the nationwide car rental fleet. LeSage said demand wasn't the only issue affecting the luxury and speciality carrental market; many luxury car manufacturers--including BMW, Lexus and Mercedes-- provide very few cars to the rental market. "The programs are too expensive, or the cars aren't available" to the car rental firms, Le Sage said.
Corporate travelers seeking a luxury vehicle other than the standard Cadillac or Lincoln are best off in southern California, southern Florida, Las Vegas and other resort areas where major car rental companies and smaller, independent firms are more apt to cater to the demands of high-end leisure travelers. For example, Rent-a-Vette--with locations in San Diego, Tempe and Phoenix, Ariz., Las Vegas and Denver--specializes in Corvettes.
Richard Cox, owner of the Tempe location, said his fleet of 18 vehicles includes not only Corvettes but also Acuras, BMWs, Camaros, Mercedes, Mustangs, Plymouth Prowlers and Porsches, priced from $89 to $350 a day. Cox said much of his business consists of corporate travelers who've traded in the midsized vehicle they used for work and are seeking a more sporty car for a weekend day of sightseeing.