Cendant Boosts Budget For Biz

One year after its acquisition of Budget Rental Car Co., Avis parent Cendant Corp. is touting improvements to Budget's battered reputation, citing enhancements to Budget's customer service quality and fleet, as well as the integration of the two brands' salesforces and technology. Officials acknowledged, however, that there remains a long way to go to reestablish the brand.

Robert Salerno, who in June was promoted to CEO of Cendant Car Rental Group, said the success of business travel-oriented Avis stands as a blueprint for Budget, but the acquisition already has enabled Budget to reemerge as a quality product and has helped to fortify Cendant as a major player in the industry. "We love the Budget brand," Salerno said. "Its name screams value and leisure, it has a good mix of small- account and commercial business, and it allows us to appeal to a much broader segment."

"Certainly they are in the throes of transformation," said Neil Abrams, president of Abrams International Consulting based in Purchase, N.Y. "Pre-acquisition, Budget didn't have enough cars to meet their demand. Budget now has cars available that they didn't have before." Abrams, the preeminent U.S. car rental consultant, said the Cendant Car Rental Group was doing the right things in consolidating everything invisibly behind the logo while clearly differentiating the brands and had high praise for CEO Salerno. "He's a great operator who has been at this a long time. He's very hands on, very tough, very direct and doesn't dance around issues, so he strikes some people as rough around the edges, but he's done a great job."

Shortly after the Budget purchase, Salerno said Cendant began to monitor closely the quality of the product and service, tracking complaints. Despite an obvious deficiency in service initially, he said Budget employees acted swiftly to make positive changes in customer satisfaction levels.

"We've thrown a lot of things at them, and the speed in which they've reacted has probably been the best thing for us," Salerno said. "It really has turned around much faster than I thought it would, and it has led to a resurgence of the brand."

Chuck Fallon, Cendant executive vice president of revenue generation, also acknowledged the difficult situation Budget faced prior to the acquisition.

"Let's face it, the brand was under pressure and under-resourced from a personnel perspective, from a sales perspective and from an investment perspective," Fallon said. "A lot of that was easy to fix, but the question comes down to perception." While he said Budget needs to continue to improve, he noted that Cendant has "the right recipe to fix it."

Fallon added that Budget's damaged reputation is not a universal perception. Some clients have reported a marked improvement in service, while others said it consistently has been good, both before and after the acquisition. "It's better than people think," he said. "We're still not pretty yet, and this is taking a little longer than I would have hoped, but we've done a heck of a lot since the acquisition, and it's starting to show in the customer service numbers."

Early returns on those numbers indicate an impressive improvement in customer satisfaction statistics—a 41 percent drop in complaints. Fallon said those figures are encouraging, but he expects improvement in both market perception and customer satisfaction numbers in the first half of 2004.

Apart from repairing the Budget reputation, there were obvious operational challenges that Cendant faced in its first year of the Budget-Avis era. Salerno said the logistics of assuming such a large company into a new system was slow, but deliberate. The first order of business was providing Budget with such essentials as enough cars to operate, support staff, car washes and shuttle buses.

Cendant also doubled Budget's number of midsize cars—used most often by business travelers—to 20 percent and upped its full-size cars to 30 percent, from 26 percent, of its overall fleet. The overall fleet is up 2 percent since the acquisition, and more than half of Budget locations now feature the company's Rover rapid return system.

From a sales perspective, Salerno said one major hurdle with Budget was convincing commercial accounts that the service of the Budget brand had turned around.

Furthermore, the need to keep the two car rental companies separate was important, mainly because Avis Rent A Car System is a company with a reputation for exemplary service and innovative products, but at a higher price point. "The Budget brand is a more value-oriented company with great service at a value price, so the service offerings are a little bit different," Salerno said.

The majority of the new combined sales staff of 165 is comprised of Avis employees. Forty salespeople were carried over from Budget after the acquisition. "It is a very lean organization," Fallon said. The tenure of Avis salespeople is about 12 years, which meant the staff firmly was entrenched in its approach, "but we're trying to get back to basics. Now they've got two products in their bag of tricks," he added.

With a new product and a large corporate environment at Cendant, there was an immediate opportunity to use relationships within the organization to access a host of potential Budget clients.

Fallon noted Budget also has allowed Avis entrée into other markets due to pre-existing relationships. "There were certain accounts that, with Avis, we couldn't get our foot in the door," he said. "Now we can."

Despite a large pool of potential new business, Salerno stressed that nothing is guaranteed. "We have to compete for it, it's just not going to be handed to us," he said.

"We've tried to go out there and get it," Fallon added. "A lot of companies haven't done much of that, and they're down year after year," but "our base of clientele has grown, and we've got a broader base to benefit from when the economy comes back."

Salerno is optimistic: "You get the sense that [business] really wants to come back," he said, "if we could just lay low on terrorist warnings and threats for a little while. There's a lot of pent-up demand. We're hearing that our clients are starting to put travel back in their budgets; whether they execute on that budget or not remains to be seen. I'm feeling a whole lot better about next year than I felt about it six months ago."

When the economy does turn around, "I don't think there's going to be a massive rate shift," Salerno said, but "the market is ripe for some modest increases." In the meantime, Salerno said the integration of operating systems and technology probably is the most painstaking element of bringing Budget into Cendant Car Rental Group. "The IT system is going to be the key that allows a lot of our things to be in place so we don't have to run dual systems," he said. Avis' Wizard electronic management system is set to roll out in January to Budget's counter operations and could take at least six months to integrate.

"Our mantra is it has to be something that makes sense for our clients," Salerno said. "We're kind of choosy with what we do, especially with the economy being what it is. If it really isn't going to make a difference for the traveler or enhance the service, it just isn't worth it."

While Cendant owns both the Avis and Budget brands worldwide, Avis Europe is a separate operating entity that needed to take on Budget into its organization, which it did. Avis and Avis Europe, however, are tied together in the branding and marketing initiatives for worldwide purposes to project an image of a single company.

Both executives contend the resurgence of the Budget brand has just begun, and there are more challenges ahead. Yet, they also agreed that Cendant is committed to Budget and building up the rental car group into a powerful organization that can take advantage of the strengths and broad market coverage afforded by having two products at two price points.

"We're going to make Budget damn good," Fallon said, "but you're not going to get an Avis product at Budget prices, so where do we draw the line? The customer has to be satisfied, and we have a ways to go to get Budget where we want it to be."

Salerno added: "Avis is here, as it always has been, to bring excellent service, and now Budget, after some tough times, is back to serve commercial travelers in a value sense."

"Our focus really," Fallon said, "is that Budget means business in the business sector."