The road was once wide open for users of ground transport, but the sector is under increasing scrutiny by companies. Gary Noakes reports
EVERY COMPANY HAS ONE – the petrolhead who relishes the chance to give the hire car a burn-up on the motorway while reciting a Jeremy Clarkson-style commentary to himself – someone who perhaps secretly owns a pair of driving gloves.
Corporate Clarkson wannabes have fared well in the past in getting toys to play with, as car rental and other forms of ground transport have not been subject to the budget scrutiny that, for example, business class air travel has.
Now this sector is coming under the microscope and moreover, in this health and safety-conscious environment, duty of care is also putting the brakes on the Clarkson clones. The days of getting off an all-night flight and jumping into a hire car are over, now that care of the employee – and other road users – has to be taken into consideration.
Staff are more likely to be sat in the back seat than the driving seat, some of them wistfully thinking they were behind the wheel of the Mercedes E Class themselves, others cringing at their more modest minicab.
ON THE RADAR
When it comes to cost, attempts at scrutiny by buyers have traditionally been less than rigorous. Ground transport has been less of a priority for the bean counters for much longer than other forms of travel, but is at last receiving their attention. Not before time, as it can be as high as 10 per cent of some companies’ travel budgets, and GTMC figures show car hire transactions up 7 per cent year on year in the first quarter of 2013.
“It tends to be one of those areas that is under the radar,” says Mike Butcher, travel manager at global telecoms firm Alcatel-Lucent.
Keeping tabs on things on the ground has always been more difficult than getting a fix on air travel spend because so much of the booking is ad-hoc and last minute.
“Most large companies will not know how much they spend on that category,” adds HRG product director Brian Merry. “Some can be spending £2-3 million without realising it.” He has a point, as although Alcatel puts its car rental spend at “no more than 5 per cent”, this is on a global travel budget of £100 million.
ANCILLARY SALES
Keeping tabs on this can be difficult. GDSs have traditionally been slow to take the ground transport sector into account, as the revenue generated is not as lucrative as air travel. However, the growth of ancillary sales by carriers is changing things and encouraging GDS providers to look towards car hire and other services.
When it comes to ground transport, Alcatel relies on reports from self-booking tools via its travel management company or the rental or taxi company. The lack of GDS involvement in these areas makes accounting less transparent than in others. “If everything was linked to the GDS it would be fantastic – but alas, it’s not,” says Butcher.
Some companies are making inroads in this area, however. Carey Worldwide Chauffeured Services uses the Groundspan platform, which acts as an interface between the booker and the GDS. It recently added international content, allowing, for example, transfers at JFK to be booked and the itinerary included in the same passenger name record (PNR). “GDSs are being a little bit more active, but we are a long way from being able to connect directly,” says Mike Wilkes, Carey’s director of travel services.
Carey adds that the nature of ground transport lends itself more to the ad-hoc booking preference. “We still come from a VIP booking environment with a call centre, which a lot of our clients feel comfortable with. Sometimes with an online environment there is a leap of faith that the technology has worked. There’s still a little bit of ‘horses for courses’.”
HRG uses Groundscope ground-transport solution software, which is fully integrated with GDSs and enables booking of approved companies anywhere in the world. Firms are vetted for insurance, tax and general standards, and payment is by corporate card, meaning that a VAT receipt can be obtained.
BUDGET RESTRAINTS
When it comes to car rental, tighter monitoring means those used to hiring vehicles that in Clarkson’s laddish terminology “could snap knicker elastic at 500 paces” are having to make do with a budget category vehicle or even put the driving gloves back in the briefcase and wait for a taxi now that spending restrictions are firmer.
Butcher says that as in other areas, duty of care now has a marked effect on how ground transport is purchased. “We don’t expect someone to get off a 13-hour flight, get in a car and drive home, or fly to San Francisco and drive to their hotel,” says Butcher. “We would rather they got a taxi to the hotel and took the hire car the next day.”
Alcatel has worldwide agreements with two major companies but admits it is more difficult to keep tabs on car hire costs than air travel. “Car rental needs pre-approval for self-booking, otherwise it is monitored through expenses management. We have the ability to check whether they have taken a higher category car without justification, but we find it is pretty much self-policing,” he adds.
Another global giant, General Electric (GE), has only one agreement with a major brand for all its car hire needs. “I lose less sleep over car rental than anything else,” says travel manager Keith Mullineux. “They take our corporate card and people just book it on the self-booking tool, turn up at the airport and their credit card is charged.”
It seems there are few budding Clarksons at GE. “Eighty per cent of our rentals are classes B,C and D, which is where we have leverage,” says Mullineux. “Some have special requirements, like an SUV, but we hope they confine themselves to B,C,D. If they’re really devious they could get a BMW or a Merc, but they might find themselves out of a job when they come back.”
GE resorts to local deals only where its major contractor cannot offer anything, and renews its major supplier contract every two years, giving it a great deal of bargaining power for most of its buying.
FLEET OPTIMISATION
There are cost savings to be had on both sides. Ken McCall, managing director at Europcar UK Group, says cost pressure by business travellers had led to the creation of its ‘Help us to help you’ scheme, designed to optimise fleet usage through shorter downtimes of vehicles and identifying areas where rentals could be made more efficient and cost-effective.
Europcar found that 40 per cent of its corporate rentals were booked within 24 hours, and a quarter extended without notice. This had significant impact on availability and led to talks with corporates to examine patterns in ‘same day reservations’.
It found many cars were not being used within office hours, but were nevertheless being delivered the night before and returned the day after. As a result, it developed ‘Business Day’, offering a 5 per cent discount on the daily rate if the car is checked in and out the same day.
Another area of cost savings was identified in shared vehicles. “Our analysis for ‘Help us to help you’ also showed a considerable level of multiple rentals on the same days at around the same time,” says McCall.
The hire company used its rental management tool, Europcar.biz, to implement a sharing scheme, employing a daily future reservations report fed into the client’s intranet and travel page. The scheme has had some success: as of March this year, 52 per cent of all Europcar corporate renters travelling through one location shared their vehicle.
Vehicle sharing of another kind is also being embraced by corporates. City Car Club, the urban hire-by-the-hour brand, now boasts 30 per cent of its business from the corporate sector, with names like accountancy firm Grant Thornton onboard. City Car Club claims an average 19p per mile cost, less than half the standard fuel expense rate. It prices a 30-mile, two-hour trip at around £14, including fuel and hire charge, which it claims compares with around £40 in a cab.
City Car Club is also tweaking its operation to ensure cars are always on hand at peak times. “One of the biggest issues we have with big corporate customers is availability, such as 9-11am on Monday,” says head of marketing Vicky Shipway. “We’re now testing ‘block books’ – for example, for six months – where you pay a fee to guarantee that availability.”
HIDDEN COSTS
Keeping tabs on the price of car hire is one thing, but the excess insurance cost often appears on expenses as a surprise extra.
Insurance add-ons are one area where car hire companies can coin it in, especially from corporate customers, whose expenditure is not coming out of the hirer’s own pocket, and which is not as controlled as it could be.
Broker Icarinsurance estimates the average cost of an insurance waiver bought from a rental firm is around £17 a day, adding up to 75 per cent of the original cost to the bill. The excess covers damage or theft that is not part of the normal third party insurance. Policies can also include vulnerable parts, such as windows, tyres, windscreen and the chassis, which rental companies usually exclude.
Icarinsurance claims its average excess cost is around £3 a day. The company’s founder and chief executive Ernesto Suarez estimates that 55 per cent of hirers either decline the excess or have only partial cover via their credit cards. “Those that do buy probably think nothing of buying the expensive cover available from the rental desk as it’s company money,” he says.
Suarez says this sector of the market is relatively new but corporates were beginning to recognise it. One of his clients, Chris Hopcroft, managing director of engineering firm Strickland Tracks, estimates savings “close to 90 per cent” could be made by buying an annual policy for each team member.
Car rental firms, which are obviously keen to push their own high-margin products, are unlikely to highlight these alternatives, but as canny buyers are increasingly coming to realise, there’s more than one option within their driving-gloved grasps.
WHAT’S NEW?
ONE TRANSPORT, which has access to 40,000 taxis, private hire vehicles, coaches and couriers across the UK, now offers its Cabshare application that calculates multiple journeys, automatically arranging them with opportunities for journey sharing, and that is fully reportable via its bespoke management information.
HERTZ’S On Demand scheme is its response to hourly rental firms like Zipcar, and has already found its uses in the corporate world as companies can avoid a full-day charge. Cars can be placed at locations to suit organisations and are accessed using smartphone or tablet via an app. Hertz claims its use has led Heathrow to cut its staff fleet size by a quarter with vehicle sharing. It also supplies more than 1,000 vehicles for Lufthansa’s carpool.
CAREY WORLDWIDE CHAUFFEURED SERVICES will carry Emirates’ premium class passengers to and from Gatwick within a 70-mile radius from July with its Mercedes E Class service. Carey already has the contract for Emirates’ Heathrow flights. Carey’s Embarque budget car service now has an all-Toyota Prius Plus fleet in the UK to help cut emissions.
TRISTAR WORLDWIDE is to replace 40 per cent of its Mercedes E Class fleet with hybrid diesels next year. It is also replacing 250 Volvos with low-emission models and will offer five V60 plug-in hybrids. The company expects to have replaced most of its UK fleet with hybrid and low-emission cars within the next two years.