Try as they might, rental car firms this year have struggled
to increase rates on corporate clients, with commercial pricing down by as much
as 5 percent year over year. Corporate demand for rental cars, however, has
grown, as evidenced by an increase in rental days.
The average daily cost to rent a car in the United States
during the first quarter decreased nearly 5 percent year over year to $40.92,
according to Travel GPA data, which is based on nearly a million
2012 transactions booked primarily by U.S.-based travel management companies, roughly
the same total as last year.
Avis Budget this month reported first-quarter commercial
volumes grew 3 percent year over year, but pricing declined by 2 percent. Hertz,
meanwhile, disclosed that U.S. on-airport corporate pricing during the first
quarter fell 3.6 percent year over year.
Avis CEO Ron Nelson said the three primary competitors for U.S.
corporate business—Avis, Hertz and National, which is owned by privately held
Enterprise—have been "competing very fervently for corporate accounts, and
everyone continues to be very aggressive about pricing." He expected full-year
2012 corporate rates to decline year over year by 2 percent, similar to what
"we saw last year."
Nelson added that the increasing role of procurement in
negotiating car rental contracts also "tends to put downward bias on
"We can complain about corporate pricing all we
want," said Nelson, "and we try to get higher pricing all the time,
but really the answer for us is to figure out how to change our cost structure
so that we can maintain our margins in the face of a tougher market. We
continue to maintain a 99 percent retention rate, so we're not losing customers
by this. If we do lose a customer, it's because we've looked at it pretty
carefully and concluded that there's not an opportunity to make any money, so
we let it go."
While Dollar Thrifty did not share corporate-specific
pricing and demand metrics in its quarterly conference call on Wednesday, the
company indicated that overall first-quarter pricing decreased by 4 percent
year over year, though rental days experienced a 6.5 percent uptick.
Despite the weakness in corporate pricing, the three major
publicly traded rental car companies during the first quarter grew rental
revenues, thanks to increasing demand from both the leisure and business
segments. Meanwhile, those firms continue to benefit from a strong resale
market for used cars.