RAC Chains Revising Strategies and Policies
The following article appeared in the Wall Street Journal and other publications
last week. We are all aware of the changing economics in our industry. This
article goes into some details about how various chains are adjusting.
Industry Cuts Costs by Using Vehicles Longer, Adding Fees;
'It's Like Rent-a-Wreck'
By DARREN EVERSON,
Posted: 2007-10-03 13:13:54
Michael Klatt misses the days when rental cars were shiny and new. In June, he
rented a Ford Taurus in Fort Lauderdale, Fla., that had loose steering and
stained seats. "I was literally touching it to see if it was wet," he says. The
car, which had 20,000 miles on it, also had brakes that were a little wonky --
he had to push down hard on the pedal to make them work.
"Before you didn't get a car with 20,000 to 25,000 miles," the New Hill, N.C.,
resident and longtime Hertz customer says. "You can tell: They ride rough; they
have a shimmy going down the road; the seats have stains on them. It's like
rent-a-wreck."
Paula Rivera, a Hertz spokeswoman, says the company's fleet age -- typically 8
to 12 months and 16,000 to 20,000 miles -- hasn't changed, and that its cars are
maintained in accordance with manufacturer guidelines.
But while customers and car-rental companies debate whether the quality of
rental cars is sliding, the rental companies are indeed implementing stingier
policies as they look to cut costs. Vanguard Car Rental, which operates National
Car Rental and Alamo Rent A Car, says that there are about 2,000 more miles on
its vehicles on average fleet-wide now compared with a year ago. Hertz is being
less generous with its loyalty program and after-hours drop-offs. And some
customers say rental-car companies are being more nitpicky about where they
refuel, with some renters being slapped with fuel fees if they fill up more than
a few miles from the airport.
Rental-car companies have been pinched because auto makers, desperate to get their own
finances under control, are curtailing the practice of selling less-profitable
"program" cars to fleets. Program cars are vehicles that rental companies buy at
a reduced cost, then resell at prearranged prices through auction lots, usually
after around nine months. The auto makers used that avenue to rid themselves of
excess production. So rental companies are now filling their fleets with a
larger share of "risk" cars -- cars they ultimately have to sell themselves,
possibly at a loss.
Companies say that consumers shouldn't notice a difference in their rental cars
-- even if they have more mileage. Vanguard, which Enterprise Rent-A-Car Co.
recently bought, says the additional 2,000 miles on its cars is nothing
dramatic. Also, the cars are maintained by manufacturer-certified mechanics and
generally disposed of before they reach 20,000 miles. Industry observers agree.
"The cars are maintained fairly well," says Chris Brown, managing editor of the
trade publication Auto Rental News.
Higher gasoline prices may also be spurring some companies to be a bit more stringent about refueling. Before Jason Smith returned his rental car at Chicago's O'Hare International Airport in August, he filled up at a gas station 15 miles away. It never occurred to him he might be charged for having less than a full tank. But the needle had nudged just below "F." The attendant at the National Car Rental site charged him for an eighth of a tank, Mr. Smith says, which works out to nearly $17. "I showed them the receipt, but they were like, 'Sorry, you'll have to take that up with corporate,' " he says.
National stands by that decision. "We're not giving away gasoline," says Charles Pulley,
a spokesman for Vanguard.
It's clear that rental companies have to be careful about gas. Because gas
prices are high and profit margins on rentals are slim -- the typical margin on
a $50 rental is around $5, which is not much more than the price of a gallon of
gas -- companies need to be stingy, industry experts say. "This is an area where
profits can literally leak out of the fuel tank," says Neil Abrams, president of
Abrams Consulting Group Inc., a car rental consultancy.
Dollar
Thrifty Automotive Group Inc. says its
policy is that renters need to fill up within 10 miles of the return location
and be prepared to show their receipt. If they don't, they can be charged for
refueling, which generally includes a per-gallon charge and a service fee.
Enterprise, Hertz and Avis Budget Group Inc. say they do not mandate where
renters refuel. Vanguard says so as well, but Steve Clark, who rented a car from
Alamo in Orlando in April, says he was told by the rental agent that he had to
refuel within a three-mile radius of the return site. Mr. Pulley, the Vanguard
spokesman, says that's not the policy of either the company or the individual
rental location. "There obviously was some misunderstanding," he says.
Consumers who pre-pay for their gas with the rental company usually have to pay
about a quarter more than the typical price at the pump. But those who waive
that option can be charged $5 to $7 a gallon, if the company says the tank isn't
full enough.
The problem with having to refuel so near the return site, consumers say, is
that some gas stations use their proximity to rental-car drop-off areas as an
excuse to gouge customers. "That does go on," says Geoff Sundstrom, a spokesman
for AAA, the automobile association. Mr. Smith, the National renter, says that's
why he filled up 15 miles away from O'Hare.
In Orlando, the Suncoast Energy gas station near Orlando International Airport
was charging $4.39 for regular unleaded as of yesterday, well above the city's
average, which is $2.80, according to AAA. The
station also doesn't have a large sign displaying its prices, which can lead
customers to start pumping before realizing the price. Bob Barnes, the station
manager, explains that the price is posted on the pump, as required, that it
costs more to operate a station by the airport (because of high property taxes)
-- and that the price is actually a deal for rushed rental-car returners. "If
you're in a real hurry and you just drop it off at the rental car return, it's
going to cost you $7 a gallon to do it," he says.
Some new car-rental policies are hitting the companies' most loyal customers.
Hertz has become a bit less generous with its loyalty program and has added some
new fees. The company -- which Ford Motor Co.
sold two years ago to a group of investors (the Carlyle Group, Clayton Dubilier
& Rice and Merrill Lynch Global Private Equity) -- recently announced that, in
many cases, the cost of redemptions in its #1 Awards program will rise starting
March 1. The cost of a non-peak free rental day certificate, for example, will
increase to 600 points from 500. (Generally, members get one point per dollar
spent.)
In addition, Hertz in February instituted new
charges for after-hours returns. Hertz customers who return their car after the
rental location has closed now incur charges until the location reopens. The
company says it made that change because of an increased number of disputes over
both vehicle damage and the exact time when cars are returned.
Despite the nickel-and-diming, industry observers say car rentals are still a
decent deal compared with the rest of the travel industry. The rental companies
have hardly engendered the disgust that the airlines did this summer with their
record delays, and though the cost of a rental is rising, the increase isn't
greater than that of other travel industries. Mr. Abrams says that rates are up
between 5% and 7% for the year. As of Monday, a midsize car booked a week in
advance for one day cost $60.65, according to the Abrams Travel Data Rate Index,
up 0.6% from the same time last year. Meanwhile, the average daily rate at a
hotel in the U.S. in August rose 6% to $103.64, according to Smith Travel
Research.
The industry would like to raise rates further, but competition is preventing
them from doing so, says Michael J. Kane of VRCG Inc., a car-rental consulting
firm.
At Image Rent A Car the rates and policies are the same and even better
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These dealers treat you well. With your rental, you'll receive perks like free parking, free EZ Pass
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Escalade, Suburban, or Tahoe, and you'll find there is no comparison,
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