Small car rental firms make big push

Business travel

May 04, 1992|By Tom Belden | Tom Belden,Knight-Ridder News Service

In a move similar to the airlines' new fare structure, Alamo Rent A Car recently launched a basic three-level rate system for renting cars on weekends through June 24.

In response, other car rental companies, including industry leader Hertz Corp., quickly lowered some weekend rates. Some, including Dollar Rent A Car, trumpeted the fact that in some cities their rates were already about the same or lower than Alamo's.

But there's more going on here than just another price war, the kind of bloody battle that often crops up as business tries to work its way back from a recession.

Beyond the benefits to leisure travelers, the pricing actions are just one part of a major push by the second tier of car rental companies, including Alamo, Budget, Dollar and Thrifty, to capture more of the business travel market, officials of the rental companies say.

Alamo's new rate structure for weekends set prices at $15 a day for a compact car, $19 a day for a mid-size car and $29 for a Cadillac, and applies to each car in the fleet of that size. Alamo requires a 24-hour advance reservation, and a renter has to be at least 25 years old to get that price.

In a new twist for the rental business, to get the Alamo rates, a car has to be kept over a Saturday night, similar to the airlines' rule of staying away from home over a Saturday night to get the lowest fare.

Hertz came back with a $14.99-a-day weekend rate for economy cars. Budget Rent A Car didn't match Alamo exactly, but said its rates were already competitive.

A Dollar survey of 25 cities found that it had compact-car rates of less than $15 a day on weekends in 23 of the locations, a spokeswoman said.

And neither Dollar nor most other companies require the "Saturday-night keep" that Alamo now does, she noted.

Dollar's chairman, Gary Paxton, commended Alamo's marketing prowess in announcing the new rates with great fanfare, but said that in some key markets, such as Florida, the new rates were actually a little higher than some of its old rates.

Alamo also advertised its new rate structure as a simplification because it owns and runs all 102 of its U.S. rental locations and thus can offer the same rates everywhere, spokeswoman Liz Clark said. Most other companies have franchisees who are allowed to set some of their own rates, she said.

The so-called first-tier rental companies are the traditional industry leaders -- Hertz, Avis and National. By some measures, Budget has caught up to National in the past year or so and now ranks third in revenues, but most companies are privately held and exact numbers are hard to determine.

The second tier of car rental companies -- Budget, Dollar, Thrifty and Alamo -- have traditionally derived less revenue from business-travel rentals and more from vacationers. And most of their commercial trade has been with independent business travelers who pay their own way or small businesses with just a handful of traveling employees.

The market the smaller rental companies are going after are the accounts of the biggest corporations, and some of their efforts are paying off. In the last few years, most of the second-tier companies have received 50 percent of their revenues from businesses, with bigger corporations providing for much of the growth, officials said.

During the recession, businesses large and small around the country not only cut back the amount of travel their employees did but they examined a wide array of options to save on travel expenses. Looking beyond using just the three biggest car rental companies was one of the options, Dollar executives said.

"We've always been a more cost-competitive company than the Big Three," Mr. Paxton said. "When companies are fat and happy . . . we can't get in the front door. But in recessionary times . . . we get more opportunities to tell our story."

For Dollar, being given the chance to compete has given it some major new accounts, such as being one of the preferred car rental companies used by GTE Corp., which spends $10 million a year on rental cars, Mr. Paxton said. Such accounts are more demanding than smaller companies, but the increased pressure is helping Dollar deliver better service, he said.

One of the few ways in which companies like Dollar lag behind the three largest companies is in the technology that enables frequent business travelers to bypass the rental counter at an airport, go directly to a car parked in a lot, drive to a check-out booth, show a driver's license or frequent-renter program card as identification, and drive off.

But Mr. Paxton predicted that Dollar would catch up with the Big three's technology in about 2 1/2 years. And because computer technology has improved dramatically in recent years, second-tier companies should be able to install such time-saving systems for frequent renters at 20 or 25 percent of the money the larger companies had to spend in the 1980s, he said.

Alamo also has been allowed to make bids to some very large corporations that wouldn't consider using the firm until the economy slowed down, Ms. Clark said.

"With the economy down, corporate travel managers have been allowing more than one car rental company in the door to make presentations," she said. "In many companies . . . employees now have a choice of renting from a company like Alamo, in addition to renting from Avis or Hertz."

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