Following Cendant's decision last month to ask corporate customers for a 7 percent to 8 percent increase on corporate car rates, Enterprise Rent-A-Car said it will not ask for an across-the-board corporate rate hike, while Hertz Corp. said that rising fleet costs from auto manufacturers certainly will play into 2006 negotiations with clients. Dollar Thrifty Automotive Group would not comment on the prospect of 2006 corporate rate increases.
Although some suppliers have elected not to give guidance on how much rates will jump, Neil Abrams, president of Purchase, N.Y.-based Abrams Consulting Group said buyers should look for higher rates from rental car firms for 2006—somewhere in the 5 percent to 7 percent range. "There hasn't been a wholesale corporate rate increase in some time," he said "Certainly with the fleet costs—which are the single largest expense by far out of any in the business—going up, now's the time to do it."
Yet, as always in the corporate car world, rates are negotiable, Abrams said. "It's one thing to ask, it's another to get."
As such, buyers for the most part still are optimistic about car negotiations. According to a WorldTravel BTI survey of 183 clients, only 9 percent anticipate the negotiating climate with rental car companies to be "very favorable," while 67 percent expect it to be "favorable." Thirteen percent said negotiations for car rates would be "unfavorable," and 11 percent said "very unfavorable."
Fleet costs have been the most oft-stated reason for price increases. Cendant last month said manufacturers are raising such costs by 15 percent to 20 percent—depending on manufacturer and vehicle type—for 2006 model year vehicles
(BTN, Aug.15).Abrams said fleet expenses represent 40 percent to 50 percent of rental car companies' expenses.
Given the rise in costs, most of major rental car companies, including Hertz, Cendant and Dollar Thrifty, this summer increased published rates
(BTN, July 18)."There is no doubt that costs are rising, particularly vehicle costs as 2006 model year vehicles are added to rental fleets starting this fall, and that will be a factor in upcoming corporate contract negotiations," a Hertz spokesperson said. "However, as the contracts are to be negotiated with corporations, it is not possible to provide a definitive percentage increase at this time."
Although Enterprise is subject to the same automobile manufacturing costs, it said it would not—like Cendant—unilaterally move toward corporate rate increases. "We've made a business decision to keep our prices among the lowest in the industry," said Brad Carr, Enterprise vice president of corporate business development. "That means we'll continue to honor existing contracts and won't be implementing across-the-board rate hikes."
Enterprise, which for years has been the dominant player in the rental replacement business, has continued to increase its relevance to the corporate rental car market, most notably through efforts to bolster on-airport locations, now standing at more than 200.