Consider an industry in which 30 percent of its market is held by
companies currently in Chapter 11 an industry in which fleets are
being slashed and cost-cutting is rampant.
Sound familiar? It’s not the airlines. It’s the car rental
industry that’s under the travel agent microscope these days. They
are wondering whether these ground-bound purveyors of travel will
a) be around much longer, and b) continue to pay commissions.
Experts tell TravelAge West the answers are “yes” and “yes.”
Though not doing particularly well, car rental companies are not as
bad off as the airlines, said Jon LeSage, vice president and
research director for Abrams Travel Data Services in Long Beach,
Calif. While air passenger loads are off 15 percent to 20 percent
at the major airports, they’re down about 10 percent at the car
rental companies, he said.
LeSage said he expects the three car rental companies now in
Chapter 11 Budget, Alamo and National to make it.
“There’s no reason to believe they’re going to cease
operations,” he said. The reason is that the fate of this nation’s
airlines and its car rental companies are not congruent. While car
rental firms especially Hertz, Avis, National and Budget are still
heavily dependent on airport-generated traffic, softening the blow
at car rental counters is a growing trend among business and
leisure travelers to forego the airlines and travel by road. LeSage
said 40 percent of the business that car rental companies are doing
these days is local or nonairport.
“People don’t want to fly,” said Steve Tucker, an agent with
Mesquite Travel in suburban Dallas. “They want to drive.”
An increasing number of businesspeople are passing up the
boarding pass and pressing the accelerator. Even the low-fare
carriers are affected. Instead of taking a 75-minute flight from
Dallas to New Orleans, Tucker said more clients are opting to rent
cars and spend eight hours on the road.
Judi Rowand, president of Red Carpet Travel & Cruises in
Spokane, Wash., said she sees her clients taking to the highway
with increasing frequency. “Montana and Idaho are expensive places
to fly to from here,” she said. “So they rent cars and drive. It’s
a lot more efficient.”
This trend shows no sign of abating.
“I would expect it only to accelerate,” said Kevin Mitchell,
president of the Business Travel Coalition and editor of BTC
Travelogue.com.
Capacity Concerns Car rental companies are
adapting to the migration and opening more suburban, nonairport
locations. It’s a key component in Hertz’ strategy, as is shifting
capacity to airports served by low-fare carriers.
“Wherever Southwest or JetBlue fly, you’ve seen a shift to those
airports,” said Richard Broome, Hertz’ vice president of corporate
affairs. “This has required us to make sure we have the right fleet
availability.”
Availability is a concern. Car rental companies haven’t suffered
as badly as airlines because their executives can cut capacity
quickly. It’s a far more painful process with airlines.
“There are fewer cars available today,” LeSage said. “If you’re
traveling Christmas week, you should probably book early. They’re
running out of cars at times.”
So far, however, “downfleeting” hasn’t seemed to hurt agents in
search of standard cars. Mesquite Travel’s Tucker said he has
experienced no shortages.
“When you need them, they’re always there,” he said.
Specialty vehicles and SUVs are another matter. “There are
certain kinds of vehicles that are hard to find,” said Antoine
Georges, vice president of the Happy Traveler in San Diego. “But,
on average, we haven’t had any problem.”
In addition to downfleeting, rental car companies are loading up
with older vehicles.
“Compared to 10 years ago, [the fleet] has quite a lot more
mileage,” LeSage said.
In 1992, the average age of a rental car was about 10,000 miles.
Today, it’s more than twice that. Agents should advise clients
that, when they rent, they’re more likely to get a high-mileage
vehicle at a small, secondary airport than at a large one.
“Business travelers don’t want a car that’s got 30,000 miles on
it,” LeSage said.
Nor do they want to pay a lot, no matter what the age of the
vehicle. LeSage said the average mid-size automobile rents for
about $44 per day about 10 percent higher than a year ago. After
rates dropped dramatically in the immediate wake of Sept. 11, Hertz
initiated a rate hike in December 2001. The rest of the industry
followed suit.
“There are some good deals to be had out there,” said Hertz’
Broome. His advice to agents: “Book well ahead and look for
specials.” Rental car executives insist travel agents are critical
to their success that commissions are here to stay. This despite
the elimination of commissions on negotiated corporate rates.
“That was a very narrow area,” Broome said. Travis Tanner
agreed. In the past, the long-time CEO of Carlson Wagonlit made his
living as a travel agent. Now executive vice president of ANC
Rental Corp., the parent of Alamo and National, he said, “We’ll
never abandon the travel agent.”
He said leisure and discretionary rentals will continue to
render commissions.
“We’ll be willing to pay agents for whatever business they move
our way, as long as they continue to prove to us they’re delivering
the business.”
Tanner said a disproportionate piece of National and Alamo’s
business comes from travel agents. He declined to say how much. Nor
would he talk about the percentage of business generated by the
Web.
Hertz said most of its car rental bookings come from travel
agents, while 17 percent comes from the Internet.
Budget’s reliance on its Web site is more pronounced. Jennifer
Sullivan,
Budget’s director of corporate communications, said 23 percent
of its domestic reservations flowed from Budget.com an increase of
12 percent over 2001 figures. Forty percent of its revenue comes
from travel agents. LeSage said he thinks these numbers are too
large to ignore that car rental firms will continue to pay leisure
commissions. While some caps and cuts could loom around the next
bend in the road, he said, “[Rental car companies] understand their
need for the travel agency community better than the airlines.”
