Global Deals Continue To Elude Corp. Buyers

<FONT SIZE="+3"><B>Global Deals Continue To Elude Corp. Buyers </B>

By Lynn Woods

After a three-year lag, interest in global car rental agreements is once again surging among corporate customers at The Hertz Corp., Avis Inc., Budget Rent A Car and National Car Rental.

Despite many advances, however, a truly global contract, which addresses all of a company's U.S. and overseas rentals in one document and promises consistent service, continues to elude many corporations.

"We'd love to have one worldwide agreement," said Joyce Bembry, manager of global business travel at Du Pont de Nemours & Co. in Wilmington, Del. "But so far, not one company can do it."

The benefits of globalization are obvious: deeper discounts tied to a larger volume of business, more efficient monitoring of policy and pricing, and administrative savings due to centralized billing and tracking. With their global networks of locations and sophisticated automation systems, the major car rental companies are actually at the forefront of the globalization trend. Other factors that are spurring the interest in global deals are companies' continual effort to seek savings in their travel budgets and the focus by midsized companies on overseas profits, according to Hertz vice president of sales John Johnson.

"Today, there are literally hundreds of deals, compared with just a handful in 1992," he said.

Yet many buyers are discovering that consolidating their car rental suppliers overseas is an evolutionary process at best. Local conditions affecting rates, service and insurance can undermine the industry's technological advances. While rental companies are steadily moving toward more standardization, the global deals they are offering today usually consist of a patchwork of regional agreements containing a daunting list of rates and insurance requirements.

DuPont, for example, has car rental agreements with Hertz and National in the United States, Canada and Europe, but each region has a different contract.

Typically, a company's global deal consists of multiple agreements pegged to different regions of the world with two or more car rental firms, supplemented by a sprinkling of local suppliers. Rates can take the form of a percentage off the published rate, the most common type of corporate discount in Europe. Different tax structures and the higher cost of vehicles, labor and fuel in some countries cause these rates to vary significantly.

Fluctuating currencies also need to be accounted for. And different insurance laws in each country mean that companies have to hammer out their insurance requirements on a country-by-country basis.

For example, most of the overseas rates negotiated by Houston-based Aramco Services Co. with Hertz, its global provider, are by car class. In a small minority of less-visited countries, such as Iceland, the corporate rate consists of a percentage off the published rate, said Jim Blande, traffic analyst at Aramco.

Aramco's insurance arrangements also vary. In a few European countries, it has loss-damage and theft protection included in the rate. But in most overseas destinations, the company reimburses employees for insurance purchased at the time of rental.

Insurance laws are obviously out of the car rental company's control. But vendors still have a long way to go in servicing corporations around the globe, said some corporate travel managers.

For instance, Bembry said that no one car rental company is uniformly strong in every region where her firm does business-a concern echoed by Hanna Murphy, manager of corporate travel and fleet agreements at Sunnyvale, Calif.-based Siemens, which conducts business in 185 countries and spends more than $40 million annually on car rentals.

Like DuPont, Siemens has separate agreements for each region, which lists rates and insurance by country: In some instances, insurance is covered by the corporate credit card, in some cases it's included in the rate and in still others Siemens self-insures.

While Siemens has two suppliers in North America and four in Europe, "globally we have many suppliers in areas where the big four aren't," Murphy said. "In South America, for example, the larger car rental firms are not in the areas where our manufacturing plants are located."

Competitive conditions in certain areas also might prompt a corporation to negotiate with other car rental companies. "We want to stay locally competitive," said Yvonne Wootten, manager of travel strategies at Dallas-based Texas Instruments, which has a global agreement with Avis.

Conditions often change in a local market, and Wootten said one of the challenges is working out "how you keep a global contract and also look toward local rates."

But overall, Wootten said, Texas Instruments' deal with Avis "is going very, well." Traveling employees receive a percentage off the corporate rate even in places where the company does little business, such as Russia.

Wootten also expressed satisfaction with Avis' WizCom system, which enables overseas franchisees to instantly call up the terms of the contract when printing the rental agreement. "It's my least complicated contract, compared to air and hotel," she said.

Despite the ability of Avis' system and those of the other car rental companies to link franchised locations electronically, many travel managers said that consistency of service is still a major problem overseas.

"I've worked with several companies that threw up their hands because they couldn't get consistent application of the contract in all countries or consistent applicable rates," said Tom Wilkinson, president of the Travel Management Group, a consultancy based in Alexandria, Va. "For Europe, the pricing sheet is several pages long." Typically, a traveler shows up at the car rental counter in a European city and is told that the insurance coverage under the corporate contract is not valid, he said.

In addition, express services are inconsistent overseas, although "everybody is trying to get better equipped," Murphy said.

However, Aramco's Blande said that while occasionally a Hertz non-corporate owned location won't honor the contracted rate, all overseas locations provide the same level of "exceptional" service.

Improvement is bound to occur as rental companies gain more corporate control of their locations overseas. "The situation is not so different than it was domestically 20 years ago, when U.S. franchisees didn't abide by the contract," said Harold Seligman, CEO of Management Alternatives in Stamford, Conn. "It's evolutionary."

Already, there's been progress. Murphy, a frequent traveler herself, said she had noticed many improvements over the past few years. The rental companies "are talking to their partners overseas, brand recognition is easier and they're getting better at tracking volume every year," she said.

Just seven years ago, Siemens had 19 car rental agreements in North America alone. Four of those agreements were with the same supplier, which quoted Siemens' subsidiary companies different rates because it wasn't aware they were part of the same corporation. "That wouldn't happen today," Murphy said.

Of Hertz's 4,100 locations outside the United States, 1,700 are corporate-owned. Avis Europe, the Avis franchisee that covers Avis rentals in Europe, the Middle East, and Africa, has about 2,400 locations, a mixture of corporate-owned and franchisees.

Budget has 105 corporate-owned locations outside the States, mostly in the United Kingdom and France; the remaining 2,045 locations are franchisees or licensees. National's partner, Europcar, has more than 2,000 locations, which are linked into the same seamless automation system.

Only Hertz, Avis and Alamo have automation systems allowing for seamless connectivity between domestic and overseas locations. Avis is extending WizCom, now available in 53 countries, to Eastern European locations.

National is working to more closely link its systems with those of Europcar, which use different software. National's purchase of its Canadian partner, Tilden, will eventually result in more links north of the border as well. The firm also plans to introduce its Emerald Aisle express rental service-currently available only in the United States-in Canada. Europcar has its own version of express service.

Overall, travel managers are optimistic about the future of globalization. "In a few more years," Murphy predicted, "over 80 percent of people's needs will be met by one or two car rental companies.