<B> Car Forecast: Steady Going</B>
By Lynn Woods
Even if business travel should experience a downturn this year, the car rental industry would not be adversely affected, according to a new study of the U.S. market by Abrams Travel Data Services, a car rental consultancy based in Purchase, N.Y.
The report predicts revenues in the $16 billion car rental industry will grow 5 to 10 percent in 1999, and forecasts minimal rate increases of 2 to 3 percent if customer demand holds steady. Airport concession fees and other ancillary charges, which have upped rental prices significantly in the past few years, are not expected to increase much.
The report said one of the most singular events is Republic Industries' intention to purchase one large fleet for both of the two car rental firms it owns, National Car Rental and Alamo Rent A Car, for model year 2000. Implementing its new Odyssey computer system will greatly enhance Republic's ability to run a consolidated fleet and merge the its other operations. "Republic hopes to reduce its fleet acquisition, lifecycle, and remarketing costs through this group purchase and turnback process," the report noted.
While expressing concern that rising travel costs and fallout from the Asian economic crisis could adversely impact the travel industry, the report cited a number of reasons why the car rental industry should emerge unscathed: <ul>
<li>The industry has become more diversified into ancillary businesses such as truck rentals, used car sales and airport parking. Local rentals, including the replacement market, account for 42.5 percent of car rental transactions, making the industry less dependent on airport rentals than it was a decade ago.
<li>Fleet and operating costs have stabilized, and yields per rental have increased.
<li>The fact that nearly all the major car rental companies are publicly traded and accountable to shareholder demands for profitability makes it less likely that "rate wars"--once a common occurrence in this heavily competitive industry--will occur during times of softening demand. Instead, the car rental companies are leaning more toward disciplined fleet management as a way to cut costs and boost profits.
<li>A drop in the number of business travelers might be made up by an increase in leisure travelers as the airlines discount more fares to fill their planes.
<li>Car rental might even become a cost-saving tool for corporations, leading to more rentals. For example, travelers might be encouraged to rent cars instead of flying to destinations 150 to 200 miles away, or they might take one-day trips, in which they still rent a car but save on the hotel and meal costs. They also might be encouraged to rent a car in certain cities to enable them to reach more affordable hotels and restaurants in suburbs and other outlying areas.
<li>The car rental industry has greater flexibility than other travel segments to respond to changing demand by adjusting its fleet inventory. </ul>
If a downturn does occur, corporate travel managers "will likely be pursuing stricter enforcement of company travel policies and supplier contracts"--by instituting more car-size restrictions and limits on rental days.