Corps. Creatively Cut Car Costs

Peering in every corner for possible travel cost cuts, some companies have applied new tactics to lower their car rental and usage expenditures. According to Archstone Consulting principal Geoff Peters, those tactics include lower mileage reimbursement rates and bans on global positioning system devices that rental companies have been promoting as value-adds. During a recent webinar hosted by Business Finance, Peters noted other approaches that are becoming more common in managed travel programs, including consolidating preferred rental providers from three or more to one or two, and requiring travelers to refuel rental cars before returning them.

As corporate programs "are getting more mature and sophisticated in their information," Peters said, "they are eliminating GPS systems from rental cars, [which can be] $14.95 a day in many cities. They are just banning them.

"Most people understand that a GPS system in a car is a luxury, and they shouldn't have to get one for the sixth time they've gone to New York in the last six weeks," he continued.

Peters explained how one company, which no longer reimburses any traveler for a GPS rental within the United States, "gave every employee their own GPS," with the company logo on it, at a cost of $110 apiece. "They are saving money even though they laid out a couple of hundred thousand dollars in GPS systems themselves," he said.

Such creativity evidently is occurring on both the buyer and supplier sides. "Business travelers, as you might imagine, are cutting some of those ancillary [items], like [GPS-based] NeverLost," said Hertz Global Holdings CEO Mark Frissora during an April 29 conference call with analysts. "We've come up with a new strategy on that with our corporate customers, giving them additional incentives to use NeverLost."

Though he did not provide further details on such incentives, Frissora added that the company has "put together custom rental programs for our contracted customers that address their specific needs in the current environment. We're offering them new ways to gain efficiencies in the rental programs while securing our relationships and retaining accounts as the competition becomes more aggressive on pricing for corporate customers."

Avis Budget Group CEO Ron Nelson during a May 7 analysts call said that "the real art of this is learning how to provide value in ways other than simply the time and mileage rate per day. We need to convince our customers of the productivity gains of taking GPS."

The Avis Rent A Car brand this month said renters using its Where2 Garmin GPS devices "can now input their flight number or a time range into their GPS unit and receive up-to-date departure and arrival times."

Meanwhile, a growing number of organizations are encouraging or requiring travelers to refill rental cars themselves rather than pay much higher gasoline fees. "Training employees to refuel," according to a Carlson Wagonlit Travel industry advisory, is an "important cost-saving" measure.

Attempting to differentiate from competitors, Enterprise Rent-A-Car and sibling brands National Car Rental and Alamo Rent A Car "charge customers only about $3 per gallon when they bring a car back to the airport without a full tank of gas (depending on market pricing)," according to a company statement. "That's roughly 65 percent less than what some of the other major car rental brands charge their customers." (See the company's self-reported refueling cost comparisons below.)

Enterprise (and National and Alamo) this month revised its refueling policy so that "airport customers will pay the local-market price of self-serve gasoline, plus a mark-up not to exceed 50 percent of the fuel cost (at all corporate-owned locations and participating franchises)."

Hertz for the first quarter reported "a drag on our ancillary revenues" related to gasoline, according to executive vice president Joe Nothwang. He noted that "the dominant customer in that segment is the commercial customer," who has reduced rental volumes significantly.

Meanwhile, corporate travel management companies recently have reported differing average corporate car rental costs. CWT said the first-quarter average rental rate among its corporate clients fell 2.5 percent, to $44.61, compared with the same period last year. According to American Express, its business travel clients in the first quarter paid $73, which included rate, taxes, fees and other charges. [The company said the full-year 2008 average was $74.] Egencia, however, recently said that "rental prices for business travelers have been increasing at a rate of 10 percent to 20 percent." It cited "the rising cost of inventory and financing, and constricted demand due to the economic environment."

By comparison, Avis Budget's Nelson said year-over-year first-quarter commercial pricing "was down around 1 percent." He explained that "travel departments of major corporations have become very aggressive about bidding out business and making sure that they get as competitive a price as possible. "The competitive environment between the three major corporate rental car companies is as strong and healthy as it's ever been. In that environment, it is going to be a challenge to see increases in the corporate rental rate."

Hertz's Frissora said, "Pricing on corporate accounts is still competitive, and it's hard to predict with any confidence how the summer travel season will really play out. Buying from contracted accounts is falling much faster than leisure travel as corporations are keeping tight controls on expenses."

Regarding use of personal cars for business travel, Archstone's Peters said he could "probably cite four or five companies" that have adjusted downward mileage reimbursement rates for employees. Referring to analysis showing that a midsize car costs $0.32 per mile to operate (factoring in gasoline at an average price of $2.25 per gallon), he said some are using that calculation rather than the Internal Revenue Service standard deductible rate, set at $0.55 per mile for 2009. "When you take a dime-plus out of every reimbursement mile, sooner or later you are talking real money," Peters said.