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While forecasts from travel management companies and industry groups predicted car rental costs in North America would rise this year between 2 percent and 7 percent--owing to higher fuel prices, fleet costs and local taxes--the category may represent a savings opportunity as many companies with mature air and hotel programs focus on ground transportation. A recent survey by management consulting firm Runzheimer International indicated that companies can negotiate lower rates in several ways while also securing from car rental firms various "value-add" components.
Car rental costs typically account for only five or 10 pennies of each corporate travel dollar, but the segment can present plenty of complexity. Travel buyers face a reshaped competitive landscape following Enterprise Rent-a-Car's 2007 purchase of the National and Alamo brandsand must assess such new options as chauffeured services from Avis Budget Group, an assortment of amenities and contractual benefits that can be included in negotiations, as well as vendor initiatives aimed at minimizing business travel's environmental impact.
"In 2008, costs will continue to rise for ground transportation companies, although the market will remain highly competitive," said Dave Kilduff, managing director of the CWT Solutions Group ground transportation practice, according to the latest industry newsletter published by CWT Travel Management Institute. Companies aiming to negotiate competitive terms should look "right down to the fine print of the contract," he said.
"A simple example in rental car might be ensuring that all suppliers responding to a strategic request for proposals provide rates that include a loss damage waiver and a collision damage waiver on all rate types (i.e., the company is exempt from some or all costs incurred through loss or damage to a vehicle)," Kilduff explained. "Another detail that can make a big difference is refueling rates--a lot of people do not know that these are negotiable."
In the Runzheimer survey of 43 respondents, the most cited concession received from car rental companies was unlimited mileage (85 percent), followed by upgrades (80 percent), premium club memberships (70 percent) and insurance concessions (65 percent). To obtain those benefits, 52 percent of respondents said they guaranteed an annual dollar volume, and 18 percent provided exclusivity for the vendor.
The Runzheimer survey, conducted in October 2007, collected responses from companies of all sizes and in all sectors, primarily located in the United States. The group had a median annual travel expense budget of $10.6 million and a median of 4,500 car rentals per year. Other findings included:
To extract the most value from car rental deals, companies need at least $100,000 in annual volume, according to CWT's Kilduff. "The main benefit is cost avoidance and savings: not just better rates upfront, but the ability to stabilize prices and reap benefits over the duration of the contract to avoid major price hikes as the market evolves," he said. "An effectively managed ground transportation program can also provide 'soft' benefits," including pre-printed contracts, meet-and-greet services and class-of-service upgrades. "Ground transportation [including rail and chauffeured car services] will grab travel managers' attention more and more as they realize the potential to create value," Kilduff concluded.
Meanwhile, Enterprise Rent-A-Car on Tuesday announced a new carbon-offset program covering the Enterprise, National Car Rental and Alamo Rent A Car brands. Customers reserving cars through the company's call centers or Web sites can opt to pay $1.25 per rental, which "represents the cost of offsetting the CO2 impact of the average rental vehicle operating in the company's fleet," according to Enterprise. As part of the program--developed with carbon-offset provider TerraPass, launched in the United States and Canada, and planned for Europe--Enterprise pledged to match customer contributions, up to $1 million.
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