The car rental sector is racing ahead, while offering a complex range of options. Catherine Chetwynd takes a look under the bonnet to see what makes it tick
CAR RENTAL DOESN’T OFTEN grab the corporate travel policy headlines – but maybe it should. GTMC transaction figures for 2012 saw a 7 per cent year-on-year increase for car rental, compared to an all-sector increase of just 4 per cent. Meanwhile, Carlson Wagonlit Travel’s report, Mastering the Maze: A Practical Guide to Air and Ground Savings, cites a global corporate spend of US$13-14 billion on car rental (for 2011).
Business analyst firm Datamonitor says last year’s UK corporate spend on car rental was up around 2.5-3 per cent on the £1.3 billion the previous year. And CWT’s research reveals that car rental accounts for an average of 7 per cent of overall travel budgets and “deserves more attention”.
Corporate contracts can be confusing and complicated: the daily rental rate can be constructed in a number of ways, including unlimited free mileage, or free up to, say, 250 miles followed by a mileage charge; and then there is the minefield of ancillary charges. In addition, billing often does not produce sufficient management information (MI).
“A good place for companies to start when looking at ways to maximise savings on car rental is to conduct a thorough analysis of current spend,” says American Express Global Business Travel director Sebastien Marchon. “Gaining visibility of how much is spent with existing suppliers can be used as leverage during renegotiation of supplier contracts. It can also help your organisation understand areas in which cost savings might be achieved.
He adds: “Ancillary services, like delivery and collection, GPS technology, airport fees and excess damage administration charges, are all negotiable and tend to make up 30 to 40 per cent of car rental spend, so try to achieve savings on these items rather than negotiating on the car rental base rates only.”
GPS is generally supplied free with larger vehicles and most smartphones have it, so it should not be necessary to pay for it. Similarly, any company with fleet cars is likely to have valid insurance for car rental – another cost saved.
BANKING SAVINGS
One major bank has negotiated strict conditions surrounding ancillaries to considerable effect. “We have 90 per cent of delivery and collection included, a £400 damage waiver and a £15 fuel waiver: we can return the car with £15-worth of fuel missing and not get charged – but employees don’t know that,” says the company’s travel and fleet manager. This covers the possibility of someone filling up the car with fuel several miles from the drop-off point.
The bank spends £500,000 a year on car rentals that are, on average, two days long. It has contracts with National and Europcar. It is interesting to note that the £400 waiver on damage has added just 5 pence a day to the cost of the contract but removes the need for bookers to worry about a missing wheel trim and the ensuing admin.
CWT’s report advises that 10-20 per cent of total car rental costs are ancillaries, and most of these (apart from airport charges and sales tax), are negotiable.
FUEL FOR THOUGHT
Rental fleets are generally still populated by petrol or diesel engine cars. “As the cost of fuel continues to rise, diesel is rapidly becoming a more attractive option, so having the choice of which fuel-type a hire vehicle uses is a big bonus,” says Europcar UK managing director Ken McCall. “Europcar offers a ‘diesel guarantee’ for its corporate customers, enabling them to choose a diesel vehicle in any car group they select. We are also spearheading a number of initiatives to give business users access to alternative fuel vehicles, such as electric and hybrid.”
Enterprise Rent-a-Car has trialled electric vehicles. “We used them to pick up customers, to give them exposure and see what their perceptions were,” says Enterprise director Rob Ingram. “Electric cars are not as competitive as similar sized cars and were not giving the savings clients wanted.”
However, Ingram can see electric cars being used in car share schemes once prices come down, because they lend themselves to short journeys. These programmes allow companies to rent cars by the hour, and technology plays a major role in delivering detailed MI to both supplier and customer.
At the beginning of this year, Avis Budget Group announced a deal to buy car-sharing firm Zipcar for US$500 million. Avis CEO Ronald Nelson said at the time: “By combining with Zipcar, we will significantly increase our growth potential, both in the US and internationally.”
Simon Brown, senior manager of travel services for accountancy giant Deloitte, says: “We have communicated to the business the option of the Zipcar model, though we have no preferred supplier.”
BOOKING OPTIONS
In the case of Enterprise Car Share, the driver goes online to book a car for the required period – say, between 2pm and 4pm – and receives an email to confirm the reservation. Technology in the car also receives a message to say that a registered customer is due to pick up the vehicle at 2pm. Each user has personal sign-in details contained in a smartcard, and when the traveller uses it to access the car and take the keys out of the glove box, a chip in the car recognises the user code, which allows the key to work.
“We know how often people book, how long for and how often they are not showing up,” says Enterprise’s Ingram. “We can see what time they got into the car and how far they went. The technology inside the car calculates that and it is automatically fed into our system.”
Hertz On Demand works on a similar basis, with booking available through smartphone or tablet, using Hertz’s free app. Heathrow airport has taken on a Hertz On Demand fleet of low-emission Ford Fiestas for use by selected employees on a car-share basis, allowing the airport operator to reduce its pool fleet by 25 per cent. And Europcar has a partnership with Daimler AG’s car-sharing scheme Car2go, which offers two-seat smartcars by the minute, hour or day in 18 cities, and recently opened its first UK outlet in London.
It is worth noting that even when a company has negotiated a contract with one or two suppliers, mandating use can have disadvantages. Deloitte in the UK spends around £100,000 a year on car hire, and takes advantage of a global deal managed by the US-based parent firm. “Booking is done via a link loaded on the intranet, pre-populated with our discount code. However, we don’t mandate the use of this, as there are often lower rates available with local operators,” says Simon Brown.
AUTOMATION INFORMATION
MI should be integrated into a booking tool, so that a travel buyer can see how many employees are going on a business trip, when they book the car, how many are driving, number of miles planned to cover, purpose of journey, whether it is a client visit or a trip to another office, and how costs compare to rail travel.
Enterprise clients can personalise the booking tool. “Clients can add questions such as: ‘Could employees have used videoconferencing instead of driving to a meeting?’ and useful reminders like: ‘Please remember to return the car with a full tank,’” says Enterprise director Ingram. “Company travel policy can also be posted on the site – our business-to-business booking tool is very flexible.”
Hertz and Europcar have both introduced systems to save drivers time. Hertz has installed Express Rent kiosks at Heathrow, which allow travellers to use the booths to interact in real-time with a Hertz representative through live video link, pay for their rental – even without a booking – and receive an instant PDF receipt.
Europcar is piloting its Key Ready service at London’s King’s Cross station. On booking, customers receive a secure PIN by email, which gives them access to a locker holding the vehicle key, removing the need to go to the rental counter.
And coming to the UK soon is the first VAT-compliant, dedicated car rental card from Airplus. “It will break down statements to give greater visibility – what cars have been used, where they were picked up and dropped off, mileage, driver’s name, refuelling charge, whether the driver upgraded to luxury... It will all be clearly visible on a centrally billed lodge card,” says head of strategic projects for Airplus Roger Eccleston.
“Why pay for it upfront, when you can put it on a centrally billed statement and all the information can flow electronically into the ERP [enterprise resource planning] system, with no further manual data input?” he asks. Why indeed.
GREY AREA
RUTLAND COUNTY COUNCIL has around 400 employees, many of whom need to travel regularly. Originally, the council had two pool cars to service those needs, but employees often used their own vehicles and claimed mileage reimbursement. This ‘grey’ fleet poses a duty-of-care risk for any organisation because of lack of control.
Rutland now subscribes to Enterprise Car Share, giving drivers access to eight vehicles, to replace the pool cars and grey fleet. Employees book the car online, and maintenance, servicing and cleaning is managed by Enterprise, whose ‘telematics’ in-car system monitors and reports in detail on car use, travel patterns and cost.
Two teams piloted the system, and the feedback was used to iron out problems with vehicle availability. “It was important to get feedback each day from staff using the cars,” says Dave Brown, the council’s operational director for places. Council employees are encouraged to use the Enterprise cars as first choice for short journeys and, with several employees using the same car in one day, the programme has been deemed a success.
“We’re still evaluating the programme, but so far it’s worked out very well – our grey fleet costs have been cut by around a third,” says Brown.
CAR RENTAL RFPS
REQUESTS FOR PROPOSAL (RFPs) are time-consuming and labour intensive, and, therefore, expensive for both protagonist and bidder, so prepare the document carefully.
- Know what you want, articulate it clearly and narrow down potential suppliers to a manageable number.
- Know your profile: for example, for a company that has average rentals of two days, savings on collection and delivery charges for a two-day rental will be greater than on a ten-day hire.
- Consider surveying your travellers and bookers, so that you understand their car rental needs.
- Write an RFP with business objectives and travel policy in mind to align buyers with those requirements.
- Define your questions closely to ensure you get the answers you want, and all in the same format, so that you can compare like-with-like.
- Duty of care is a crucial element of any part of a business travel programme: for example, involve your firm’s key health and safety people.
- Organise all RFP elements into categories and give them weighting, depending on company objectives – this makes it easier for you to calculate bidders’ scores and provide them with feedback at the end of the RFP process. It can also assist when negotiating better terms within the supplier contract.
- Put your spend into the RFP, so that companies know what size of account they are pitching for.
- Define the business – straightforward car rental only, car rental-plus-car share, maximum limit on collision damage waiver and so on.
- Ask potential providers how regularly they invest in technology, and what new products/services are due in the coming months.