<B> Amex: Car Rates Up 19%</B>
By Lynn Woods
The average daily cost to rent a car in the first half of 1998 skyrocketed 19 percent over the same period in 1997, to $56, according to the 1998 American Express Survey of Business Travel Management, a biennial survey of more than 600 U.S.-based corporations.
American Express could not break out that astounding figure by rate versus such extras as fuel, taxes and insurance. But Kim Lewis, vice president and general manager of multinational corporate accounts for American Express Corporate Services, attributed the bulk of the increase to rate hikes and city and airport surcharges.
In some cities, the increase was even higher. For example, the survey noted that Houston's average surcharge for midsize car rentals had risen 24 percent since 1997.
Corporate renters are getting hit not only with a proliferation of state, municipal and local taxes designed to finance civic projects ranging from new sports stadiums to convention centers, but also with 10 percent airport concession fees at many airports and city surcharges imposed by the car rental companies.
One of the latest and most outrageous taxes to be levied on car rentals is Boston's $10 per-transaction fee to help fund a new convention center. In reaction to the ensuing furor, a bill has been introduced that would reduce the tax to $3 per transaction for locals. John Johnson, Hertz's vice president of sales, said Hertz has been sending information about the proposal to corporate accounts in Boston, many of whom have employees who locally rent cars.
For the most part, though, taxes don't seem to bother corporate travel managers, given the fact neither they nor their suppliers can do much to change them. "We focus on what we can control--the market share we give to the car rental company and the amount of rate increases presented. If there is a trend, it's that suppliers are more concerned about market share," said Tom McCabe, travel manager at EG&G Inc. in Wellesley, Mass.
While travel managers may not be aware of it, airport concession fees--which are imposed by the car rental companies and typically amount to 10 percent of the rate--are not a tax, though the car rental industry would like everyone to think otherwise. While executives have maintained that they aren't charging their corporate accounts the concession fees, that is not the case, according to Jim Schneider, general manager of supplier relations at Rosenbluth International in Philadelphia. "It can be an add on, or sometimes it's built into the contract," he said. "We're helping educate travel managers that the fee is a negotiable item."
The issue that everyone is focused on now is city surcharges. An informal survey of a handful of travel managers and corporate travel agencies revealed that each had been hit with increases, though most were able to negotiate them down. John Wenzelman, director of industry relations at BTI Americas, noted that his clients have seen city surcharges as high as $15 per rental in some cities (excluding New York, where the fees always have been astronomical). In the bigger cities, surcharges were typically in the $8 to $12 range.
"Everything is still negotiable," said Wenzelman. Typically, "the car rental companies will give you a break in one or two cities, but the rest will stand." He added that in order to successfully negotiate down the surcharges, corporate travel buyers have to know their volumes in particular cities. "It's a lot more difficult to analyze" one's business, he said.
Kim Ramquist, travel procurement analyst at Dayton-Hudson Corp. in Minneapolis, said that she has seen increases of $2 to $3 per city, along with new charges in additional cities. Joy Jolliff, manager of supplier relations at Maritz Travel Co. in St. Louis, noted that "a city that was $3 now is in the $5 category." And Paul Zielinski, travel manager at Dow Chemical, said car rental suppliers had attempted to add on new city surcharges, which "we were able to negotiate down."
"If you're big enough, you can negotiate with the car rental company to get them down to very few or none," concluded Gerard Smith, senior partner at The T&E Group travel management consultancy in Newport Beach, Calif. Besides being on their negotiating toes, Smith said travel buyers always should be sure to strike out the phrase "subject to change" in the contract. This protects them from additional increases the car rental firm might levy after the contract has taken effect.
Rolfe Shellenberger, senior analyst at Runzheimer International, said that the 19 percent increase reported by American Express is not solely attributable to heftier surcharges and taxes. It also might reflect the big corporate rate increases that took place in 1996 and early 1997, when multi-year corporate car rental contracts were renegotiated. "The average car rental rate in contracts negotiated in 1994 was somewhere around $37 or $38," said Shellenberger. In contrast, "some contracts I've seen this year have gone up to $45."
Other findings in the American Express survey include:<ul>
<li>Sixty percent of the companies surveyed require travelers to use their car rental vendor, compared with 53 percent two years ago.
<li>Companies are tightening up on car rental add-on costs. Forty-eight percent require travelers to refuel vehicles before return--up from 41 percent in two years--and 70 percent require them to refuse collision damage waivers, compared with 58 percent in 1996.
<li>More corporations are using two car rental suppliers. Nineteen percent of companies with travel budgets over $25 million acquired a secondary car rental vendor, compared with just 11 percent in 1996.
<li>Reflecting a general travel trend, companies spend more time negotiating their car rental contracts. The average length of time it took to negotiate the car rental contract was three and a half months, compared with 2.3 months in 1996.
<li>The number of companies with corporate car rental discounts continued to increase, from 61 percent in 1996 to 64 percent in 1998.