One-On-One With Dollar Thrifty COO Jay Foley: Car Rental Co. Ups Corporate Focus

Newly appointed Dollar Thrifty Automotive Group COO Jay Foley spoke with Business Travel News editors David Meyer and Elissa Hunter in February to discuss the company's difficult fourth quarter in 2007—punctuated by fleet delivery problems, a decline in demand and overfleeting—and its approach to corporate business in uncertain economic times.

Business Travel News: What is the outlook for 2008 demand, particularly corporate?

Jay Foley: Our suspicion is that businesses are going to continue to travel. We feel, in a pressing economy, that corporations are going to be looking more toward the value proposition that our brands offer. They'll kind of migrate downstream to the value brands and we feel our value proposition to the business traveler is going to be very appealing. We're seeing that as we're making calls on corporate accounts. We're seeing a lot more appetite.

BTN: How important is the business travel buyer to Dollar Thrifty?

Foley: The perception of our brands is that we're a leisure company and we don't do a lot of business travel. That's a bit of a misconception because for years, we've had a corporate account sales force, signed many corporate accounts and had loyal customers as part of our Express program in both brands. We do a considerable amount of corporate travel business. It comes in markets we serve in the country that aren't leisure markets. You don't think of Dayton or Detroit as being leisure destinations, so we have a heavier reliance on the business traveler.

BTN: Are you looking to grow corporate as a percentage of your overall business?

Foley: Yes. We're doing it through developing new products for the business traveler, modifying the benefits that we have to make sure they appeal to the various accounts that we're selling and really focusing on our service levels.

BTN: How do you account for the difficulties you experienced in the fourth quarter? Are you shifting your strategy as a result?

Foley: The fourth quarter was perhaps the worst we've seen in history, with the exception of 9/11. Three things occurred. Clearly the economy was in the doldrums, so we saw a decline in demand on the leisure side. Secondly, in the fourth quarter the industry got oversupplied. We weren't able to turn on that spigot to delete cars very rapidly, so when the normal seasonal decline occurred in the fourth quarter—and it was a little bit steeper this year because of economic conditions—the industry got oversupplied. At the same time, because we were pushing so many cars through the auctions, risk car sale prices dropped and it made it difficult in some cases to sell them at a loss, where we knew if we held them over to the spring we could sell them at a much higher price. We consider that to be an anomaly. My suspicion is that all car rental companies are going to get a lot more disciplined at cutting off the peaks, so when we get into the valley periods, we don't get that flood of vehicles we can't return to manufacturers and delete as rapidly as in the past.

BTN: Recent car rental industry consolidation seemed to indicate that there would be more discipline with the fleet situation. Despite that, there is still a problem. Do you think that the changes haven't manifested themselves yet?

Foley: This quarter was the first with a lot of those ownership changes, and the amount of risk cars in the fleet is at the level it's at. We used to manage the fleet much more disciplined through the peaks and be able to handle the troughs. Had the economy been stronger, we wouldn't have experienced it as dramatically, but it was a perfect storm. Prices were down, the economy was sluggish, demand was down and we had a lot of risk cars. You're going to see much more disciplined, tighter fleets during the peaks, and much higher pricing during the peak for the leisure traveler.

BTN: Some of the fourth-quarter issues were due to fleet shipping problems. How does that tie in to your fleeting plans?

Foley: DaimlerChrysler is under new ownership and they've had some growing pains. In the fourth quarter there was a lot of volatility in the delivery of vehicles to us. We think that fourth-quarter event was an isolated incident. Chrysler has been a great partner to us for 20 years and we're going to work through it like a partner would.

BTN: What percentage of cars in your fleet now are from Chrysler?

Foley: Close to 85 percent. We're working at diversifying our fleet over time. It was 90 percent six months ago, now it's 85 percent and this year we're moving toward 80 percent and below.

BTN: How will you manage your fleet inventory differently?

Foley: We're employing a fleet-optimization tool, a very highly analytical software-based tool that helps us meet market demand much more effectively. As customer demand shifts over time and across geographies, this tool allows us much more to align the fleet, down to the car class, to the demand.

BTN: Even if you do improve the shipping to where the market need is, do you still need to worry about what your competitors are doing as far as inventory controls?

Foley: That all comes down to discipline again. Everyone I talk to across all our competitors recognizes that the fourth quarter was tough and it was a wake-up call and we're going to get better at it.

BTN: How long will it take you to implement these changes fully?

Foley: We've made tremendous strides since November. We started to see this come at us in October and November. We got caught a little bit by surprise in the fourth quarter. We learned our lesson. In the middle of March, our fleet will be precisely right.

BTN: Other car rental companies also have focused on the replacement business, meetings and chauffeured transportation. Do any of these areas make sense for you?

Foley: We're not doing the limousine or chauffeured angle right now. We are looking at getting into some new aspects of the transportation chain. We have what everybody else has in terms of global positioning system units. We're offering the toll pass in all the cities where we can. We're trying to be quick in the market.

BTN: Do you see further consolidation in the car rental market?

Foley: I don't know what the likelihood is, but I think it's obvious to the entire world if there was any further consolidation, it would involve our brand. Any other combination would seem to be an insurmountable hurdle from a Federal Trade Commission standpoint.