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Pricing, Position in Flux at Rental Car Firms

The loss of business travelers and cutbacks, consolidation and Chapter 11 filings continue to be felt.


Just as with air fares, the Internet is helping to level the playing field when it comes to the price of renting a car.

But the rental car business remains intensely competitive, and pricing varies from market to market.

For example, using company Web sites, a traveler could rent a mid-size car at Denver International Airport, for use Monday through Friday in mid-September and with unlimited mileage, for $392 at Avis, $359 at Hertz, $335 at National, $231 at Budget and $202 at Thrifty.

Changing the parameters a bit, the same car rented at Cincinnati's airport, for use Friday through Sunday in mid-September, would cost $64 at Hertz and Avis, $81 at Thrifty and $72 at Budget. National, in the middle of the price range for the weekday rental in Denver, was lowest in Cincinnati at $44.

What does this all mean? A couple of things. Unless your firm has an agreement with a particular rental company and sends all its business there, finding the best rate can be a crapshoot. And that's appropriate, because with the possible exception of Las Vegas hotels, there may be no more competitive segment in the travel industry than rental cars.

"It really, really, truly is," said Chris Payne, manager of corporate communications at Thrifty. "And it's very much played out on a market-by-market basis."

In that respect, pricing and positioning of rental car brands have more in common with those of the airline industry: There's Hertz, Avis and National as the American Airlines and United Airlines of the rental car world, and value- oriented Thrifty, Budget and Alamo as the companies most like low-fare king Southwest Airlines.

For a time last year, none of those distinctions mattered much.

"There was a lot of crisis response," Ted Deutsch, vice president of corporate affairs at Avis, said of the post-Sept. 11 period. "For a few days, we opened our system to one-way rentals, let our cars go all over the country, dropped all charges associated with that and made it our mission to help keep people moving. Then there was cleaning up that mess for a couple of weeks, when our cars were scattered across the country.

"And then there were a few months when business kind of fell off a cliff because of air travel falling off a cliff."

"After 9/11," said Thrifty's Payne, "fleet sizes were diminished quite a bit because there were a lot of cars sitting there. That's been with all car rental companies.

"What happened was when you shrink the supply and the demand comes back ... that's why you've been seeing some price increases."

Although prices surged last winter, they since have settled back down.

"Actually, we're about comparable to where we were a year ago," before 9/11, Deutsch said. "Historically, price in the rental car industry has not even kept pace with inflation--and we're one of the few industries that can make that dubious claim.

"So the fact that you now find prices higher than they were six months ago or 10 months ago reflects more what a low we reached post-9/11 than any great increase in general."

Tremors in the industry--the sudden loss of customers, especially business customers, and the cutbacks, consolidations and Chapter 11 bankruptcy filings by National and Alamo--continue to be felt as companies adjust to what may be a new reality.

"You've seen the airline industry's numbers, and we're not immune from that," said Rich Broome, Hertz's vice president of corporate affairs. "If you break the numbers down more closely, since last October the falloff has been more on the business side. The leisure segment has been pretty resilient."

So Hertz, usually about evenly split between business and leisure customers, is looking to another segment as business travel continues to lag.

"We've made a significant investment in the off-airport market-opening locations, trying to service suburban business and the insurance replacement business as a source of future revenue. With some of the changes in the travel industry recently, it looks like it was a good idea."

Avis, like Hertz heavily dependent on business travelers, already had been shifting some of its focus to the leisure side.

"That was in the works a year, 18 months ago," Deutsch said, "and probably took on a little speed and urgency. We were kind of fishing where the fish were."

Thrifty, already aimed at the leisure market, was pretty much where it needed to be.

"There are still leisure travelers out there who want to reward themselves," Payne said, "but business travel's a whole different matter. There's still a lot of uncertainty out there--kind of a sense of just waiting for the other shoe to drop."

Which brings us back to pricing. It is one of the great mysteries of the rental car business.

For example: Why would someone pay nearly twice as much for an Avis car than for essentially the same vehicle from Thrifty?

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