Several signs indicate that car rental is on the up. The Guild of Travel Management Companies’ (GTMC) figures for 2013 show an 8 per cent year-on-year increase in car rental transactions, while one top consultancy says that preliminary findings showing the global car rental market was worth €50 billion in 2013, a rise of 11 per cent on 2012.
The British Vehicle Rental and Leasing Association says its members reported a strong 2013, with sales increasing on 2012 levels. “Business is growing in all sectors, particularly corporate business which is now matching leisure sales in volumes,” says the association’s chief executive Gerry Keaney.
Carlson Wagonlit Travel’s 2014 Travel Price Forecast predicts small price increases across most markets around the world – apart from a few slight dips in Europe, including Italy and Spain. One way companies can mitigate against price rises is by ensuring that policy is clear and adhered to. Unusually, travel managers have few complaints on that score: “We have compliance 99 per cent of the time and, only occasionally, when what we have asked for is not available, have we had to upgrade,” says Cherry Salvesen, PA to the directors of engineering firm Cullum Detuners.
Tailoring car size to the number of people on a trip is part of Cullum's policy, and duty of care is another aspect of it. “Usually, there are at least two people travelling together on long-haul trips, so they share the driving,” says Salvesen. “In the UK, they have transfers home or to the office and are not allowed to drive.”
Realistic policies
Many travel buyers have similar restrictions written into policy, and as Portman Travel senior vice-president John Dick points out: “It’s important to make sure travel policy is realistic and appropriate to the needs of the business. We can also log details of any challenges there are with the policy, share that with clients and modify it.”
Cap Gemini books car rental through its agency, BCD. “They keep compliance really high,” says senior purchasing manager Roger Peters. The firm uses Europcar everywhere bar the US, where it contracts Avis, and does not have a hard and fast policy, but takes care to mitigate risk. This contrasts with Amdocs, whose policy is rigorously enforced: “If they don’t book within policy, they don’t get reimbursed,” says European travel manager Emma de Lange.
Hitachi Capital Vehicle Solutions asks customers to give the reason for hire, and this is recorded in a report. “We take a consultative approach with customers and discuss results monthly to ensure the appropriate vehicle is being used for each rental,” says the company’s head of rental Kathleen Whittam. “For example, with a larger group, we can suggest a seven-seater, as this carries more people and allows for shared driving responsibilities, making it a cheaper and safer option than multiple rentals.”
Booking ahead
Booking tools also help monitor and apply compliance – those of Enterprise Rent-a-Car, Europcar, Hitachi Capital Vehicle Solutions and Thrifty can be tailored to customers’ travel programmes. Enterprise assistant vice-president Rob Ingram says: “We can write clients’ policies into the tools we offer, and add marketing messages such as: ‘Please remember to refuel the car on return.’ And drivers can click on a link that takes them to their policy.”
Compliance to policy is also an important part of duty of care, whether that is ensuring travellers do not drive after a long-haul flight or allowing them satnav, which ensures “drivers are less stressed when driving in unfamiliar towns”, says Thrifty’s corporate sales director, Caroline Gallagher.
However, the bottom line is still the driving force for travel managers, and negotiating deals proves to be a thorny – and polarising – issue. “Contracts can be a challenge,” says Portman’s Dick. “A car rental company might tell you they have given you the best rate and no one else has got it, so we encourage clients to share with us details of the offer they have, and we benchmark that against other clients’, to make sure they get a comparable deal.”
Emma de Lange is unimpressed with suppliers’ intransigence. “There is not a large choice, and if you want to give business to a global vendor, it’s like getting blood out of a stone,” she says. “When the time comes for them to come back with rates or issues regarding service delivery, I don’t find them very responsive. Maybe our spend didn’t appeal to them.”
She adds: “Prices are going up now and that is not open to negotiation – they know there is not a lot of competition. In my region, our biggest spend is in South Africa, and trying to get better rates is tough, not just in lower prices, but in that the value is not there in either mileage or add-ons, like GPS.”
And worse: “Contracts are like the old telephone directories,” she says. “They are lengthy and consist of pages and pages of nothing. I feel sorry for our legal team, who has to review them.”
An aerospace manufacturer Buying Business Travel spoke to mitigates rising costs through negotiation and requests for proposal (RFP), and the organisation’s travel manager monitors usage. “We follow up on some departments that might ask us about long-term rental: leasing might save money, particularly on medium- to long-term hires,” he says. The company’s volume of car rental use is such that it has a supplier location on many of its sites, but this is a double-edged sword. “It keeps cost down and we don’t have to wait for delivery, but it makes it too easy to rent cars.” The organisation spends €35 million on car rental, much of which is in Europe, but consistency of supply and pricing are sorely lacking. “It would be helpful if there were more suppliers, as competition may not be hot enough, and there have been a lot of mergers,” says the manufacturer.
Thinking locally
Most of the major players claim to be able to offer a global service, largely through partnerships. “Thanks to strong relationships with our global supplier partners, we are able to negotiate regional and global deals on behalf of our larger customers. However, we are best represented in the US and Europe, so we can offer particularly competitive market rates in those areas,” says Hitachi’s Whittam.
But when Alcatel-Lucent was looking for global coverage, Mike Butcher found “only two could handle that”, and they were Avis and Hertz.
Thrifty offers “significant coverage” in the UK with 94 branches. “Sometimes there is more strength in a country-by-country offering because a region that is expensive to supply would increase the rates overall,” says Gallagher.
In fact, density of local coverage is a salient matter. Portman’s Dick says: “A driver may have problems en route and will need a good local network in the country they are operating in.”
Enterprise has over 370 branches in the UK – 24 at airports – while Europcar has increased the number of its locations to more than 250 in the UK. “We have also introduced pop-up stations to cater for travellers on an ad-hoc basis and have created super-sites in five major UK cities, to support smaller rental stations should demand increase,” says managing director of Europcar UK Group Ken McCall.
And Thrifty adds staff and fleet at servicing locations to meet needs; however, Gallagher says: “Depending on the number of hires required, it may be more feasible to consider opening a new location in an area, which we will do on a case by case basis. We also offer a ‘no turndown’ service by utilising local rental companies, if this suits the end user.”
There may be less competition in the car rental sector as the market consolidates, but some of the major players are changing up a gear to meet customer demand in an apt and innovative way. After the buyers’ requirement for fair prices, dedicated service will go a long way to retain customers.
BUYERS VIEW - Buying Business Travel spoke to a travel and fleet manager for one of the major banks, who questions the business model of the car rental companies
“I think costs are going to increase as most of the core components of rental are going up. Car rental is unique in the way that it works, in that the second-hand value of the car dictates the companies’ profit and, therefore, pricing. It can sometimes make prices lower, but I think that has gone on too long. Increasing car costs and a second-hand car market that can’t go much higher mean that costs are going to rise.
“The best way to mitigate this is to look at those costs that you can influence, such as delivery and collection, out-of-hours deliveries/collections, damage, vehicle rental groups and so on.
“But car rental companies are their own worst enemies in one way: car rental costs, in reality, are far too low. As an example, a dinner suit costs about £150 to buy and £50 to rent, whereas a Ford Focus costs roughly £16,000, but I can rent one for £42 and just pay for fuel on top – where’s the sense in that?”