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Car rental firms may charge no-shows

Economic factors force the industry to consider imposing such penalties, which have long been standard for hotels and airlines.

November 28, 2009|By Hugo Martín
  • Avis Budget Group, which operates both Avis and Budget, has begun to install the technology to collect credit card information for car reservations.
Avis Budget Group, which operates both Avis and Budget, has begun to install… (Richard Derk / Los Angeles…)

If you reserve a hotel room and fail to show up, your credit card gets charged for the room. If you buy an airline ticket and don't show up at the gate before takeoff, the best you can get is credit toward a future flight.

But if you reserve a rental car and don't show up, in most cases you walk away free of any charges. That may change soon, however.

Stung by tough economic times, the rental car industry, led by Avis and Budget, is considering imposing new charges for customers who make reservations and fail to show up at the scheduled pickup time.

That's for a good reason: About 30% of the customers who make a rental car reservation never follow through with the rental, according to industry leaders.

Most car rental companies in the U.S. -- including Hertz, Dollar, Alamo, Avis and Budget -- allow customers to reserve a car online without typing in a credit card number. When a customer fails to show up, there is no way for the rental companies to penalize that person.

(If you prepay for a rental car with Hertz, Budget or Alamo, among others, you often get a discount or a price guarantee. And if you prepay and fail to appear, the car rental company can assess you a fee of as much as $50.)

But Avis Budget Group Inc., which operates both Avis and Budget, has begun to install the technology to collect credit card information for car reservations, signaling a change in the cancellation policy. That technology should be in place by December.

John Barrows, a spokesman for Avis Budget Group, confirmed that the company was adding the technology to accept credit card information to hold reservations as a way to better control inventory.

Barrows said he expected rental car companies -- either Avis and Budget or their competitors -- to eventually impose a no-show fee on customers. But when pressed, he refused to say when Avis and Budget would begin to require credit cards to make a reservation: "In terms of when and where, I can't say."

He suggested that the rental car companies might start by requiring credit cards to place reservations for specific high-demand cars, such as hybrid vehicles.

"Everybody is taking small steps in this direction," Barrows added.

Rental car industry leaders say there is a reason that Avis and Budget remain coy about a no-show fee: Competition among the major car rental companies is fierce, and no one is sure how competitors will react if Avis and Budget add a no-show fee.

After all, Southwest Airlines continues to hammer at its competitors through television commercials and print ads for adding fees to check baggage. In time for the holidays, Southwest has adopted the motto: "Only turkeys charge for bags."

Bob Barton, president of the American Car Rental Assn., applauds the move by Avis and Budget, saying it's time that the rental car industry got in line with hotels and airlines that charge customers who make reservations and fail to show up.

He said economic factors have forced the car rental industry to consider such penalties. Rental car companies can no longer rely on American car manufactures to dump excess cars onto the rental market, Barton said. With smaller rental fleets and tighter access to financing, rental car companies must squeeze as much revenue from every car, he added.

If a car sits idle because a customer made a reservation but failed to pick it up, a rental company can lose up to $60 a year per car, he said. For a rental car company with 2,000 cars, that can mean a loss of as much as $120,000 in revenue annually, Barton said.

The move by Avis and Budget sends the message that rental car companies can no longer afford to let guests skip out on a reservation, he said.

Still, Barton isn't sure whether other car rental companies will follow Avis and Budget's lead or -- much like Southwest Airlines and its ads about baggage fees -- they will bash Avis and Budget for adding a new fee.

"Now it's kind of like the industry can't agree on that," he said.

Airline offers Wi-Fi widget

More than 220 airports across the U.S. offer free wireless Internet in the terminals. (See a list at

But once you take off, the only way to guarantee that you can surf the Net while you soar the heavens is to fly an airline that has equipped every plane with Wi-Fi. Among domestic airlines, only Virgin America and AirTran Airways boast Wi-Fi service on every flight.

Most domestic airlines offer the service on fewer than half of their planes. American Airlines, for example, has Gogo Inflight Internet on 165 of its fleet of more than 900 planes, or about 18%.

Beginning this week, American Airlines is offering its customers a Wi-Fi widget -- an Internet tool that can tell you whether the plane you are flying is equipped with wireless Internet. You can find it at Simply type in the flight number and the widget tells you whether you will be able to update your Twitter page at 30,000 feet.

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