The car hire sector appears to stuck in neutral at the moment. Samantha Mayling asks what can be done to get the industry in gear
Car hire sales seem to be stuck in the slow lane, despite the best efforts of rental firms to motor ahead. Agents report increasing gripes, and a stuttering economic recovery means business travel budgets are constrained while car hire prices remain high.
2009 was a low point but Norman Gage, Advantage business travel director, says: "Over the last few years, car rental has not grown at the rate of other sectors."
Booking, payment and collection still cause headaches, so many agents view car hire as a service rather than a revenue earner - if they bother at all.
Chris Parker, director at Staffordshire agency Corporate Travel Plus, says: "What you quote and what you get billed can be vastly different. In the last eight months we have noticed a massive increase in additional charges... costing about £800-£900 a time." Innovations such as e-vouchers are a "godsend" but clients still face problems overseas with unexpected charges and language difficulties. "It is very difficult to monitor every destination. It is not the simplest product," says Parker.
Tackling these complaints is a perennial challenge for hire firms, tasked with developing improved services while bookings are suffering - but there are pockets of optimism.
Members of the Guild of Travel Management Companies (GTMC) saw car hire transactions rise for the first time in more than four years in the first quarter of 2010. They rose by 1 per cent year-on-year to 65,485 in the first quarter but were still behind other sectors - rail rose 13 per cent, air was up 9 per cent and hotel bookings were up 5 per cent.
Anne Godfrey, GTMC chief executive, says the ash crisis would affect Q2 and even Q3 results. She adds: "It will be interesting to see if there is a more blatant shift from air to surface transport in the UK.
"It is a hunch but it seems more business travellers and TMCs are looking at the complete package: door-to-door, from their house, by train, and a car at the other end.
"For some TMCs, car hire is integral; for others it is on the 'too difficult' pile. But it is also getting simpler on the GDS to book a car at the end of the journey."
Anthony Ainsworth, Avis sales director, estimates 2009 rental volumes fell by 15 per cent for corporates in the UK - although Avis saw "double-digit growth" and expects growth again in 2010.
"We're working hard to gain market share," says Ainsworth, highlighting his new account management and business development structure.
Avis's exclusive GTMC partnership enables it to work closely with members and help shape policy with working parties.
Hertz, meanwhile, anticipates US trends will soon appear here. Fabrice Quinquenel, EMEA sales vice president, says: "The US has been more positive in recent months so we hope this will accelerate over here, too."
He says the UK had particular problems with right-hand drive cars, so production cuts are more pronounced - which is likely to mean further shortages again this year.
Ralph Ruckgaber, EMEA lead car lease and car rental at IBM Germany, and ACTE's 'country champion' for Germany, says car shortages meant travellers had free upgrades to bigger cars - welcomed by the drivers but leading to increased fuel and insurance costs.
John Lewis, chief executive of the British Vehicle Renting and Leasing Association (BVRLA), advises booking in advance to cover holiday periods and unexpected peaks.
"The snow earlier this year led to a lot of accidents and a spike in demand for replacement cars, which caused a shortage in some locations," he says. He adds that the business market has "held up pretty well" thanks to the flexibility of short-term rentals.
Europcar UK has focused particularly on the SME market, offering pay-as-you-go rental rather than long contracts and removing potential barriers, such as credit checks. Anita Jarratt, business travel manager at Europcar UK, says: "Many budget airlines used by businesses fly to and from more out-of-town airports, making car rental essential. If anything, we have seen demand increase as car hire is cost-effective for businesses of any size."
Global distribution systems play a key role in simplifying booking processes and also offer an overview of trends.
Bob Lewis, Sabre Travel Network cars distribution director, reports UK bookings through Sabre were down 3-5 per cent between the end of last year and early this year.
"Unless a trip is absolutely necessary, there's pressure to cancel, postpone or combine with another trip. Longer rental lengths seem to indicate combining," he adds.
Jane Lewis, Travelport senior director for hospitality and car rental EMEA and Asia Pacific, also notes rental periods extending slightly, up to an average of 4.3 days.
Travelport is broadening the content available via Galileo CarMaster. "We are always looking to make booking and payment processes easier, and bringing in more content and other services, such as limousines, point-to-point hire, delivery-and-collection, and WebEx training for business travel agents so they don't have to leave their agencies," says Lewis.
So what can hire firms do themselves to drive more bookings?
Co-operation is vital and the Association of Corporate Travel Executives (ACTE) says 2009's economic woes meant many travel managers renegotiated existing contracts in mid-term.
ACTE president Richard Crum says: "The renegotiation of rental car rates was second only to that of renegotiated rates in the hospitality industry. By and large, travel managers reported that car rental companies were open to reasonable discussion."
However, Avis's Ainsworth says: "Prices are remaining high as the industry needs to charge a realistic price - if you're in a £10,000 or £20,000 car so you need to pay the right rate."
The recession also sparked more investment in automated services - which help cut staff costs but streamline processes for customers, too. Trends seen in other industries are becoming more common, such as online check-in and cancellation fees.
Avis introduced £40 penalty for no-shows and, as Ainsworth observes: "Most customers were under the impression it was already there and that we should be in line with other industries."
Avis and Hertz now look eastward for expansion, in emerging markets such as Russia, India and China.
Hertz's Quinquenel says domestic markets have huge potential - China has 50 cities with populations in excess of 10 million - and there are plenty of opportunities as Western companies expand.
Ainsworth says Avis is the largest rental player in China "by some way" and looking to grow further.
However, as many locations don't accept international driving licences and, coupled with language problems, it means cars with drivers are essential for Westerners.
Closer to home, another opportunity for car rental firms is the corporates' duty of care. BVRLA's John Lewis says: "The Office of Government Commerce launched a campaign to try to get public sector organisations and employees to abandon the grey fleet and use safer, more cost-effective and sustainable forms of travel.
"Vehicle rental is part of the answer as these cars tend to be much newer, and, therefore, safer and more fuel-efficient, than the average grey-fleet car."
Car clubs will be a key trend in the future, according to Mark Avery, head of business services at PricewaterhouseCoopers and chairman of the environmental ICARUS project at the Institute of Travel & Meetings.
His firm is talking with Hertz about a dedicated car club, so staff can travel by train between cities and use car club vehicles between sites. PwC recently reviewed its car hire business and opted to stay with Hertz because it is "innovative and competitive", says Avery.
Car clubs are also seen as green, although environmental concerns have slipped down many firms' agendas, but Avery believes legislation will change that. "Carbon disclosure will be more embedded into business, and emissions will be measured," he says.
Don Moore, Enterprise Rent-A-Car sales vice president, UK & Ireland vehicles, agrees. "The government is set to tighten legislative standards to ensure transport users pay their full environmental costs." He says managing a fleet is very time-consuming, so rentals offer an efficient way of running a green fleet.
Car rental firms, such as Avis and Europcar, will introduce electric cars next year and already offer carbon emission reports for clients.
Ainsworth says: "Avis is looking to buy greener vehicles, rather than specific hybrid cars, as people do not want to pay the premium."
Fuel-efficiency is increasingly dictating choice - Quinquenel claims Hertz is seeing demand rise for more diesel cars and Europcar has more business customers who are requesting smaller vehicles.
The Association of Car Rental Industry System Standards (ACRISS) has CO2 emissions charts, and there have been GDSs and car rental firm initiatives to help customers book hybrids.
John Lewis, at the BVRLA, concludes: "The rental industry is keen to be an early adopter of electric and ultra-low carbon vehicles, but it is waiting for manufacturers to meet their safety, affordability and mileage-per-charge requirements."