Though it has received far less attention than unbundled airline pricing, a pile-up of surcharges atop car rental base rates is adding to the total costs of rentals. Avis Budget, Dollar Thrifty, Enterprise Rent-A-Car and Hertz during the past few years, and especially more recently, have added all sorts of new fees--in addition to government-imposed taxes--in an effort to recoup costs and/or drive ancillary revenue.
While some fees are for the familiar options that travelers can choose--including insurance coverage, refueling programs, satellite radios, global positioning satellite systems, class-of-service upgrades and extra driver fees--the car rental companies are levying a new breed of fees in certain locations for such items as energy (to offset the amount of energy that car rental companies consume). Also, some rental firms last year added surcharges for those customers who want their rentals to accrue mileage in preferred airlines' loyalty programs. At Thrifty, "when the renter chooses to receive frequent flyer miles, we will collect a frequent flyer surcharge, not to exceed $1.50 per day, at the time of rental to offset a portion of the annual cost of participation in the frequent flyer program," according to the brand's Web site.
Still, other charges are not optional: Local, state and airport taxes--numbering more than 100 around the country--generally are passed through by car rental companies to consumers. For example, Massport, operator of Boston Logan International Airport, in December will add $2 a day to all car rentals on top of the $4 a day it already imposes to fund a consolidated rental facility, according to published reports. In Florida, all car renters must pay a mandatory "battery and tire fee," according to an Enterprise spokeswoman.
All told, costs above the standard "time and mileage" base rental rate can total another 25 percent to 40 percent, according to Neil Abrams of car rental specialist Abrams Consulting Group. The add-on charges, he said, "have been picking up steam in the past few years. It is a big, continuing problem."
Avis Budget Revving Up For No-Show Fees
A relatively new but significant development that may impact some renters is the addition of penalties for no-shows and cancellations--traditionally no-risk behavior by travelers. While such penalties historically have been only for specialty cars, Avis Budget Group, for one, is developing the capability to impose no-show fees in other circumstances.
[PULL_1]"We want to be able to turn on fees uniformly across all booking channels and all partners," according to an August letter from Avis Budget Group director of electronic distribution Buddy Altus to global distribution systems, asking them to be ready by Dec. 15. "The 'no show' fee will give Avis and Budget the ability to require a credit card or other acceptable forms of payment to make a reservation for a given location and given period of time. So, while for some locations and time periods we may choose to impose a no-show fee, for others we may choose not to. Our new capability will align the car rental industry with similar approaches in use by airlines, hotels and cruise lines. It is a long-overdue change."
When asked about no-show fees, managing director of the CWT Solutions Group ground transportation practice Dave Kilduff asked, "Why not charge for that? Some charges like that occur outside the United States and now are coming to the U.S. That certainly would be one that I would think would be a natural that most corporations are not even aware of."
According to its Web site, Avis Europe this year said that "to improve customer service vehicle availability" it became "the first car rental company to progressively implement standard travel industry procedure with respect to no-show customers in 2009. Customers who do not cancel prior to the allocated rental pick-up time, or do not turn up 24 hours thereafter, will be charged €40."
Abrams is a strong proponent of wider use of no-show fees in the car rental industry because "fleets are very tight and no-shows can cause significant disruption. No-show rates can be 20 percent to 30 percent. Airlines and hotels long ago figured out that, from an inventory control standpoint, you have to do something to get the customer to commit."
Harnessing Energy
Enterprise and its National and Alamo brands do not charge no-show, cancellation or energy fees. Energy fees particularly represent a "focus on short-term financial gain at the expense of customer relationships," according to a press statement attributed to Enterprise senior vice president of North American operations Matthew Darrah during this year's Car Rental Show in Las Vegas. "In our opinion, energy expenses are a standard cost of doing business and should be bundled into the rental rate. Fees like this have no place in our world. They are essentially disingenuous and intentionally worded in such a way as to mislead customers."
Carlson Wagonlit Travel's Kilduff said Avis, Budget and Hertz do levy energy fees.
Meanwhile, CWT is "seeing that the grace period [for returning a vehicle], which used to be 59 minutes for all the companies, has shrunk down to like 30 minutes. By the time you get to the next hour, you are literally paying for another day," Kilduff said.
Most major car rental companies also now charge customers a "motor vehicle licensing tax." Some but not all impose "recovery" or "concession recovery" fees and "lessor" taxes, according to information on the major brands' Web sites. Like excise taxes, these fees may vary by location.
Compounding the problem for consumers is the variability of surcharges across rental companies. "Some do almost none, and some do a majority of them," Kilduff said. "There is no average rule of thumb, but it certainly is costing you more."
Moreover, customers should not expect full visibility of total costs when dealing with just one brand. Municipal and airport facility taxes, of course, vary by location, and Hertz, for example, warns on its Web site that "taxes, fees and extras, if not included in the rate, are subject to change."
To sidestep some of the added costs, BCD Travel consultancy Advito advised corporate travel professionals to "be vigilant about fees and consider ways to negotiate them out of contracts or avoid them altogether, such as [by] using off-airport rental locations. Companies that have come close to maintaining their rental volumes in 2009 are in a strong position to negotiate lower rental costs for next year, perhaps not by adjusting the basic rate but by negotiating out extras, such as city or airport surcharges."
Said Kilduff, "as long as [fees and surcharges] are out there, corporate clients need to keep watching to see if more are coming, and there could be because [rental companies] are not getting the price relief they want in the corporate marketplace."
For some items (excluding taxes imposed by local, state and federal authorities), companies can attempt to negotiate, especially for such value-adds as satellite navigation systems, Kilduff suggested. "Generally, the rental companies leave it in place because they don't like to set the precedent of doing away with it," he said, "but they may give compensation on the back end as part of a negotiation. It can go as a rebate."
Rates To Hold Fast In 2010
In terms of total car rental costs for corporate buyers, 2010 forecasts from travel management companies and industry groups predicted marginal year-over-year changes.
While CWT predicted corporate rental rates may fall as much as 3 percent versus 2009, Kilduff said that leisure rates--used by corporate travelers whose companies do not negotiate flat prices--"are going up because fleets are tight."
American Express predicted that corporate rental rates "will likely increase slightly as the cost of vehicles is expected to rise following decreases in capacity in 2009 and car manufacturing consolidation, driving up the cost of replacing relatively old fleets."
Advito predicted "stable" car rental pricing next year but noted that "vehicle shortages [are] a distinct possibility in 2010." It therefore advised that "companies may need a secondary agreement if their primary supplier runs short."