Car rental buyers mostly are signing one- or two-year contracts with two car rental companies, according to a recently released survey, highlighting what analysts called a growing move toward longer contracts with fewer vendors that allow for renegotiation at specified periods of time.
Consulting firm Runzheimer International last month released a survey showing that 62 percent of 43 corporate, educational and government respondents surveyed had two signed contracts for negotiated car rental rates, while 15 percent had only one. Only 23 percent had three or more signed contracts. Runzheimer recommended limiting contracts to one supplier to improve concessions.
The survey results reflect what analysts called a move to consolidate car rental contracts. "We encourage companies to consolidate their spend. We're seeing more and more companies concerned about getting the best value out of their travel dollars," said David Balfour, director of advisory services for American Express Business Travel.
With fewer suppliers, "you should be able to leverage your spending to get a better deal with that particular vendor," said Rose Stratford, senior vice president of industry relations and GDS for BCD Travel. Stratford also has seen an increased focus on compliance in order to leverage that volume.
"The compliance issue has become more critical, more of a priority," said Neil Abrams, president of Abrams Consulting.
Companies also are beginning to more comprehensively explore the car rental marketplace. BCD's Stratford said she has seen more companies sending out requests for proposals for their car rental contracts than before, which lends itself to more competition.
"In many cases, when they're put out to bid it makes it a lot more difficult for them to be able to increase rates, because they're competing against others," she said.
Added Amex's Balfour,"More companies are trying to follow the best practice to take their car rental programs to the marketplace," especially midmarket and large firms.
Of those respondents to the Runzheimer survey, 41 percent had one-year contracts with car rental companies, while 36 percent had two-year contracts. Thirteen percent had three-year contracts, 8 percent had contracts of 18 months and 2 percent had contracts that were for more than three years.
Car rental companies typically prefer not to negotiate contracts of longer than 12 months because of changing fleet costs, said Dave Kilduff, managing director of ground transportation for Carlson Wagonlit Travel's CWT Solutions Group.
However, Abrams said he has seen contracts going "two or even three years out with a reopener capability," allowing either party to renegotiate the terms and volume commitments after a certain period of time.
"Because of fuel and changes in general, there are so many caveats in the contracts," said Carol Ann Salcito, president of business travel consultancy Management Alternatives. "They guarantee certain things, but there are many holes."
Meanwhile, Salcito and BCD's Stratford reported an increase in buyer interest in negotiating or removing global positioning system fees and city surcharges as contractual concessions.
When asked what was included in their car rental contracts, 9 percent of respondents said they did not pay city surcharges, while 80 percent said they received free or discounted collision and loss damage waivers. About 57 percent did not pay mileage charges and 34 percent avoided drop-off charges.
A flat per-day rate was the most popular choice for car rental discounts in the survey at 72 percent of responses. "Almost predominately in the industry, it's unlimited-mileage flat rates," said CWT's Kilduff.
Amex's Balfour said the fixed based rate was more common for companies with more than $200,000 in annual car rental spending.
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