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Car Rental Firms Go Full Throttle on Recoupment

Caveat renter: In the last few years, companies have started assessing fees to cover their costs for leasing airport space or building facilities.

June 03, 2001|CHRISTOPHER REYNOLDS | TIMES TRAVEL WRITER

So I've been worrying a lot about recoupment lately and ...

What's that? Not up on recoupment? Don't worry. Recoupment didn't even merit its own entry in the Webster and American Heritage dictionaries I consulted.

But if you look closely at rental car advertisements or scan rental agreements, you'll see that recoupment is rampant.

In general, the term means recovery, reimbursement, the gaining back of an equivalent.

In the rental car business, "airport recoupment fees" and "concession recoupment fees" are the phrases companies use to account for those extra costs on your bill.

You might think these expenses have something to do with taxes or government mandates. And given the way local and state governments have been levying such tariffs in recent years (often to pay for new sports stadiums), it's logical to assume that. But some recoupment fees are different.

Besides state taxes and vehicle pass-through fees--that is, a government levy that the rental car company passes along directly, such as the prorated vehicle registration fee of $1.93 per day in California--rental companies frequently charge separate fees to cover their investment in leasing airport space or the money they've spent in building facilities, or both.

And, of course, expenses are higher for a superior location. That's the way the world works.

But by creating separate categories for these expenses, the rental car companies can make the rates appear lower than they are. In an industry in which consumers spent $19.4 billion last year, that sort of edge can mean a lot.

(In some cases, rental companies can also exclude these fees when they calculate commission payments to travel agents. On a typical transaction, that could save a rental car company and cost the travel agent about $1 for every $100 in rental fees.)

This proliferation of new categories is a fairly recent development. Until the last five years or so, rental companies absorbed various airport-related expenses when setting rates, said Chris Payne, a spokesman for Thrifty Car Rental. But once a few companies adopted the new practice, the entire industry followed. "When you're in an industry that's so low margin" and a competitor makes a move like that, Payne said, "you have to do something."

Last year Avis quoted me a base rate of $41 daily for a car in Denver. But then there was $1.60 per day to cover Avis' cost in building its facilities (Avis called it a "facility fee") plus 10% more to cover Avis' cost in leasing the land on which the facilities were built. (The company called that a "concession recovery fee.") Then there was a local tax of 13.05%, calculated on a total cost that includes the other fees.

Thus a $41-a-day car became a $53-a-day car. Avis isn't unique; it's following standard industry practices in Denver.

And Denver isn't unique either. In March, Albuquerque's international airport opened a new 35-acre rental car facility that nine companies share. When I called National Car Rental to ask about rates there for late June, a reservations clerk quoted a base rate of $42.90 per day for a compact car, plus fees.

What fees exactly? To begin with, the 9.89% "concession recoupment fee." That "pays their rent for being in that building," airport spokeswoman Maggie Santiago later explained. "It's not a tax. It's a cost of doing business." (Some rental company spokespersons call the "rent" comparison an oversimplification but acknowledge that concession fees are a cost of doing business that companies are free to pass along or absorb.)

Then came the "customer facility fee" of $1.53 day. (That, Santiago said, was assessed by the city to pay for shuttle bus expenses and road improvements around the new rental car facility.)

Next came the state taxes: 5.81% in retail tax, a 5% tax levied on short-term rental cars, plus a third tax of $2 a day. The out-the-door cost of that $42.90-a-day car: about $56.

Why so many added fees? "As airports are running out of room in terminals, they're running the rental car companies off to other shared facilities," said Payne of Thrifty. And when these new facilities are built, he said, airports press rental car companies to foot the bill, and the companies pass along their costs.

In a 1998 survey of rental car fees at airports in 50 major U.S. markets, the Travel Industry Assn. of America found that airport concession fees averaged 9.75%. And in recent years, local governments have been extracting larger concession payments from rental car companies operating on off-airport sites under airport agency control.

The confusion about these fees deepens when you begin comparing fees of different rental car companies or different airports.

"Everybody calls these things by a different name," said Allison Striegel, spokeswoman for the Budget rental car chain. Even between corporate-owned and franchise locations doing business under the same brand name, she said, there can be terminology differences.

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