November 17, 2009

 

 

 

Management Travel

Letter to the Editor

 

This letter is in response to the article released on November 5, 2009 by Jay Campbell, entitled, “Avis Budget Readies Capability for No-Show Fees.”

The initiative that Avis Budget is taking to require credit card information for bookings to cover no-show fees is a huge step in bringing the car rental industry up to the standards of the rest of the travel industry. The car rental industry is the only major travel segment that DOES NOT ask customers to guarantee their reservations with a credit card.

 

No-show rates have been shown to be as high as 30 percent in some locations. We strongly believe this is because there is no penalty imposed on the renter for not cancelling. Aside from the internal cost of operations incurred by the car rental company, there are third-party hard costs associated with each reservation, such as GDS segment fees, that have a direct impact on the car rental company’s bottom line. Why is it that we, as an industry, do not recoup these fees?

 

Our ability to service the customer properly is directly impaired by these no-shows. You will never hear from a customer who chooses not to pick up their car, but will most certainly here from the customer when a car is not available because the “anticipated” no-show customers actually arrived for a car.

 

New web technology has brought out companies that monitor reservations and rebook the consumer when others drop their rates. Let’s put this in perspective: For each vehicle a rental car company rents, assuming 80-percent utilization, a three-day length of rental, and a 30% no-show factor, hard costs for no-shows can easily be $60 per year for this vehicle. If you operate 2,000 vehicles, that cost is $120,000 a year; 20,000 vehicles costs $1.2 million. These are HARD COSTS. This does not even consider the soft costs, or more importantly, customer service issues from fleeting problems related to no-shows.

 

When you book a flight, you pay in full at the time of reservation. If you cancel any fare (except the most expensive unrestricted ticket), you get a CREDIT for future use. In other words, the airline keeps your money.

 

When you reserve a hotel online, you have one of two choices: You can book the non-refundable discounted Internet rate, or you can simply reserve a room. Under the Internet rate, if you do not show up, you lose your money. If you book the regular rate, all you have to do is call before 6pm and cancel to avoid a fee.

 

The car rental industry should do exactly the same thing. If you cancel your reservation, there is no fee. But if you do not show up within three hours after the time of the reservation, you are charged the first day, at a rate set by the individual company. The three hours comes from the GDS system requirements. You must hold a reservation for three hours after the scheduled arrival time for any travel product.

 

November 17, 2009

 

 

 

EarthTimes

Letter to the Editor

 

This letter is in response to the Press Release issued on November 5, 2009 by the Coalition Against Discriminatory Car Rental Taxes, entitled, “Growing Coalition Continues to Speak Out on Behalf of Florida Car Rental Customers.”

The aspect of doubling car rental excise taxes in Florida to help fund the rail system is not only alarming, but if enacted, will deter tourism, one of the largest industries and employers of the state. What the Florida Legislature is suggesting is that non-resident consumers should bear the financial burden of a budgetary shortfall, which is simply not acceptable.  The fact is the local government should be looking for ways to enact a tax policy that will spread the burden to all who benefit from the rail system.

 

Moreover, these car rental excise taxes are unfair and create a huge financial burden on a large volume of local residents, particularly young adults who cannot afford to operate their own vehicles, as well as local businesses. The local resident whose primary vehicle is being serviced will also be subject to such taxation.

 

As we have stated before, the underlying problem is NOT what the fees are relative to the rental car facility, but the constant compounding by state and local officials of taxation that has nothing to do with car rental or our customers. These non-constituent imposed taxes are local government’s way of collecting taxes from the non-voting public, and sadly, the tourist pays the bills and has no voice.

 

We have witnessed many examples in the past two years in this difficult economy where government obligations are not being adequately funded due to reduced revenue streams. A funding of this rail system will very likely fall into this same situation. Then the government will tax others - not to fund the rail system, but to meet the government obligation. 

 

If the answer is taxation, tax the rider, the person utilizing the service. The reason this is not being considered is it has already been said projected usage will drop if the fare is too high. In other words, the rail system is not sustainable on its own without a permanent subsidy.

 

Florida has a serious budget crisis taking place. The last thing the state needs is another project that has the very real potential of becoming another obligation.

 

Respectfully submitted,

 

 

 

Robert M. Barton, President

American Car Rental Association