Holding the Line on Car Spending
by Fred Gebhart /Finally, some good news on business travel spending.
Car spending was flat for 2014 and should remain flat into 2015. But only if travel managers watch the details.
“We will see modest rate increases proposed by car companies and renewed efforts to build ancillary revenues,” said Bob Brindley, vice president and principal of Advito, the research arm of BCD Travel.
“We have been predicting rate increases for the last four or five years and while they haven’t happened, ancillary fees have been rising steadily.”
Holding the line
Rental car companies have been trying for years to boost rates, said Doyle Gunnell, global project manager of Ground Transportation, CWT Solutions Group. But despite continuing consolidation on the vendor side, corporate clients have been holding the line on spending.
The key to controlling spending has been steady pressure to reduce or eliminate fees for refueling, GPS, international rentals and other items.
“Like airlines, car companies are looking to ancillary fees to boost the bottom line,” Gunnell said. “We see opportunities to trim costs in these areas.”
Get specific
Car companies are using a combination of familiar fees that work well in the leisure market and new services they hope customers won’t want to do without. Corporate customers should just say no.
GPS fees are becoming a non-issue. Nearly all corporate travelers already have route-finding capabilities on their phones and don’t need a vehicle-based location system.
Nor do corporate travelers need additional insurance or extended liability coverage, Gunnell pointed out. They are already covered on the corporate side.
And it makes as much sense to exclude Internet radio and other services from car rental reimbursement to employes, just as in-room movies are excluded from hotel reimbursements.
When it comes to car contracts, travel managers should be negotiating the total rental cost, said Gunnell.
That makes it easier on the compliance side to simply tell travelers not to accept any add-ons and to refuse to reimburse add-ons.
Data changes the game
One key to setting – and enforcing – a no add-ons policy is data reporting.
Just as hotels once reported only global spending rather than folio detail, car companies still report total costs.
Its up to travel managers to require complete reporting as part of the corporate contract. Once all the fees are broken down, it is easy to pull out the inappropriate items.
Bypass the counter
A second key is making sure corporate travelers never, ever, go to the rental counter.
The reason is simple. Counter agents are trained to deal with the leisure market. And a good percentage of leisure travelers just don’t know they can do without all the extras and options that jack up a reasonable daily rate.
“As part of your corporate deal, ensure that all of your travelers are enrolled in your vendor’s top-tier rewards program,” Gunnell said. “That one step means your travelers avoid the counter, get their vehicles faster and get every available upgrade.
“Those two elements—complete reporting from car vendors and top-tier membership for travelers—will insulate you from fees and surprise cost increases.”
What’s ahead
How much longer car spend will remain flat is an open question.
Car companies are adopting airline-like ancillary fees and they are trying hard to adopt airline-like capacity restraints.
“Car fleets are still oversized, but starting to settle down,” Gunnell said. “Inventory is in constant fluctuation and it is easy for vendors to add or reduce inventory as needed.
“They are getting better at using management tools, historical data and projections to modify fleets in individual markets. They will learn to stop over-fleeting.”
New models
New business models may work to moderate future rate hikes. Car sharing services like ZipCar, now owned by Avis, can be an alternative to local rentals in some markets.
Enterprise has CarShare, Hertz has Hertz 24/7 and other rental companies have similar sharing services, Gunnell said.
Avis, for example, can now shift excess rental inventory to ZipCar and boost utilization, which drives overall profitability higher. That makes the company less reliant on boosting corporate rental rates to increase revenues.
Sharing can be more of a problem on the customer side because availability depends on the last share customer returning the vehicle to the right location at the right time.
Uber and Lyft have become factors in the ground spend as an alternative to taxis. But neither has moved into the car rental market—yet.
“Travel managers have to be aware of the possibilities,” Gunnell said. “Your strength is being able to leverage the marketplace, not just one vendor.
“You don’t have to accept that rate increase your current car vendor proposes. This is, and is likely to remain, a highly competitive industry.”
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