BTN Also Covers Car Rental Industry Trends

LCT Staff
Posted on June 11, 2008

NEW YORK CITY – The car rental industry saw big supplier changes in 2007, especially with Enterprise Rent-A-Car's acquisition of Vanguard Car Rental, parent of National Car Rental and Alamo Rent A Car, and Avis Budget Group taking a 45% interest in chauffeured transportation company Carey International. Meanwhile, a worsening economic climate caused many corporate buyers to become more cost-conscious, according to car rental company executives.

Enterprise completed the acquisition of National and Alamo last August and Enterprise and National will be targeting corporate business going forward, said Brad Carr, vice president of business rental development for the three brands. After the acquisition, Enterprise and National's sales teams started visiting corporate accounts together, and the two already have entered into several joint contracts with customers.

"Whenever possible, we try to go in jointly, because we have the subject matter experts on each brand available," according to Carr. "There are a large number of accounts that we've managed to land since Aug. 1 that we would not have landed individually prior to that date."

Historically, Enterprise has owned all its own fleet. "We're transitioning National into that sort of model as well," Carr said, adding that there would be a dramatic change in the next year or so.

"Enterprise has been perhaps undervalued in the past in terms of our ability to serve corporate customers. National has also been undervalued," Carr said, adding that the acquisition has allowed the companies to "gain marketshare and also maintain what we had."

Avis Budget Group last October announced it had bought a large minority interest in chauffeured ground transportation company Carey International. The company now owns 45% of Carey with an option to increase its interest to 80% before this October.

"That investment has given us some opportunities in the commercial marketplace," said Bob Lambert, senior vice president of commercial sales for Avis Budget Group. "We've had a lot of inquiries about our ability to integrate car rental with chauffeured transportation. We have an opportunity to acquire more of Carey in the near future. Once that transpires, you're going to see us take more advantage of cross-selling opportunities and what that will afford us."

The two companies are "well into the planning stages" of what cross-selling opportunities will be available, Lambert said.

Meanwhile, economic conditions have caused car rental executives to notice a more cautious attitude in corporate buyers.

"Their travel patterns have certainly changed," said Robert Stuart, senior vice president of global sales for The Hertz Corp., noting that some companies have mandated less travel.

Enterprise's Carr added, "We're having customers telling us that they're being more cost-conscious." The company offers a mileage reimbursement calculator that allows travelers to determine whether it's more economical to drive a personal car or rental car for a trip, by plugging in such factors as mileage and rental rate. National also guarantees companies with volume commitments a midsize rental car.

Avis Budget's Lambert added, "You're going to see a higher emphasis on program compliance from our corporate customers." However, he said the company had not seen "a dramatic downturn in corporate travel."

Dollar Thrifty Automotive Group is seeing demand growth, partially due to the economy, according to executive director of sales Cathy Funderburk. "Each time the economy has a downturn, our corporate business picks up because all of a sudden our value position ends up looking more attractive."

Last year was "a watershed year in terms of growth of our corporate sales department," Funderburk said. The company doubled the field offices that work with corporate accounts and created a sales team focused exclusively on small businesses. "That has been one of the most successful things we've done in a long time," she said.

Funderburk said that corporate customers are increasing their spend with Dollar Thrifty, but it is not clear if it is due to increased travel or if companies are shifting share. Buyers, though, feeling the pressures of the economy, are negotiating harder, she said.

"They have enormous pressure on them right now. They are negotiating tough," Funderburk said, adding that due to price increases, most companies are sticking to shorter contractual periods, usually one year.

However, Enterprise's Carr said corporate buyers are looking to extend contracts even longer to lock in prices. "People are looking for longer contracts, trying to tie it up for two or three years," he said.

Increasingly, buyers are using requests for proposals to examine their car rental options. "More companies than in the past are using requests for proposals," according to Carr. Dollar Thrifty's Funderburk added, "The RFP process is trickling down to smaller companies."

Avis Budget's Lambert and Enterprise's Carr said they had seen slightly more RFPs requesting information about environmental initiatives, and Carr has seen more procurement metrics like key performance indicators and service-level agreements. "Procurement certainly is having more of a role than they used to," Carr said.

Corporate rental car costs continue to increase slightly, according to American Express, up 4.4% in 2007. The average daily car rate in 2007 was up to $72 from $69 in 2006. Corporate rates increased industrywide 2% to 3% for 2008, said car rental industry consultant Neil Abrams, president of Purchase, N.Y.-based Abrams Consulting Group.

"We continue to see modest increases in our commercial pricing," said Avis Budget's Lambert. "We were able to achieve some modest increases in '07. I think we'll see it in '08."

Both Avis Budget and Hertz are looking to expand their off-airport presence, traditionally dominated by Enterprise. Lambert said Avis Budget's focus on off-airport growth started last year and "there's a lot of opportunity there."

Hertz during the first quarter of 2008 opened 81 off-airport locations, and the company looks to open 150 to 200 more each year, Stuart said. "That's been a part of our strategic direction for a while," he said.

Hertz last month announced the appointment of Scott Sider as president of off-airport operations. "We had never had one person focused on the off-airport," Stuart said.

Car rental companies also are focusing on their value-adds. All brands offer global positioning systems for travelers and claim that the response from customers has been positive.

Avis Budget last June rolled out a new chauffeured service in select markets, although Lambert said the offering will not compete with the company's dealings with Carey.

Source: Business Travel News

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