After years of stagnant rates, car rental suppliers are
raising rates, and small and midsize enterprises stand to pay the price on the
corporate side.
Car rental companies have made up the pricing ground lost
during the last recession, said Neil Abrams, president of car rental consulting
and research firm Abrams Consulting Group. Hertz, for example, will implement
rate increases for Hertz, Dollar and Thrifty on June 14, including a $5 per-day
hike at airport locations. At the same time, the major car rental companies
have tightened up fleet controls, making the price increases more likely to
stick.
“With corporate earnings relatively strong, the big rental
systems have been getting back some of that rate over the last three years,”
Abrams said. “We’re talking in some cases 50 cents a day, which might not be a
lot to you and me, but when doing 50,000 transactions a year, each of which is
an average of 3.5 rental days, that can be a substantial cost.”
Those increases have not affected all corporate travel
buyers equally. In its first-quarter earnings report, the Avis Budget Group
reported modest year-over-year pricing declines for contracted commercial
business, but it made that up, plus some, via increases in other segments—like
SMEs. Overall, commercial pricing rose 0.5 percent. SMEs make up a good bit of
that noncontracted business that filled the gap. That’s because car rental
companies require corporate accounts to spend at least $25,000 in annual car
rental spending—and usually closer to $50,000—in order to contract a fixed
rate, said BCD Travel vice president of supplier relations John Wenzelman.
Car rental companies have not pushed that threshold up, as
some other supplier categories have, but many smaller travel programs still
remain at the mercy of general pricing trends. For the third quarter of 2014,
Avis Budget reported that small-business rates were running over $10 a day
higher than its average large commercial rates.
Meanwhile, city surcharges and one-way, midweek, fuel and
GPS fees are adding to both market-rate and fixed-rate prices, American Express
Global Business Travel consulting manager Mark Biscardi added. “As a result,
the overall daily rate is higher, making up for any slight reductions in the
[contracted] base rate.”
Even so, strategies remain for SME travel buyers to keep car
rental spending under control. It helps that suppliers are eager to court SME
business. Enterprise Holdings vice president Brad Carr, who heads its corporate
business segment, called SME the company’s “largest area of opportunity.”
Much of this business relies on travelers shopping for
prices rather than on requests for proposals and direct negotiations, so car
rental companies take a different approach toward winning it. “They’re a little
easier to entice to your brands but a little tougher to retain because they
tend to be cost conscious,” Carr said.
Wenzelman said most car rental companies offer programs for
small business clients, including a floating discount off standard rental rates
and frequent flyer-like points toward future rentals. “As long as you’re
managing it at the corporate level, you can use it to offset more expenses,” he
said. These programs also can decrease fees. Some, for example, can remove the
surcharge for drivers under the age of 25, he said.
Travel management companies also can aid clients that don’t
have negotiated car rental programs, such as Amex’s Preferred Extras program,
Biscardi said. Abrams suggested that travelers draw upon their own personal
discounts like AAA and AARP.
SME buyers, particularly those close to qualifying for
fixed-rate contracts, should take a look at their mileage reimbursement
program, Wenzelman said. Buyers can analyze what they are paying per mile and
set a distance threshold beyond which it would make better economical sense for
travelers to rent a car. “If you’re paying 50 to 60 cents per mile, it doesn’t
take very long to get a lower rate from car rental than mileage,” Wenzelman
said. “This not only minimizes costs but raises your car rental volume and
might qualify you for a corporate agreement.” Enterprise, for one, provides a
mileage calculator to help travel buyers make that determination, Carr said.
Biscardi suggested pushing travelers to rent midsize rather
than large cars, to refuel on their own rather than paying the inflated rate
offered by suppliers, to carpool and to use mobile devices for navigation
rather than GPS add-ons. Off-airport rental locations also can cut down on
taxes and fees, he said.
Despite consolidation and price hikes, the industry remains
competitive, particularly as car rental companies expand. Among them,
Munich-based Sixt is growing aggressively in the United States, Abrams said.
Meanwhile, United States-based companies are expanding abroad.
“We’ve seen pretty dramatic growth in outbound from North
America to other markets, and small customer growth is faster than large
customer growth,” Carr said. Enterprise has expanded dramatically in Europe,
the Middle East and Africa and added to its network in Asia/Pacific and Latin
America. “So customers are looking for us in the other parts of the world.”
Correction, June 8: An earlier version of this report incorrectly identified John Wenzelman as vice president of supplier relations for BCD Travel’s Advito. He works directly for BCD Travel.
This report originally appeared in the June 1, 2015, issue of Business Travel News.