Auto Rental News May/June 2011 by Kelly Bracken

CAR RENTAL MAJORS LOOKING FORWARD FOUR PROFIT IDEAS ACRA RESPONDS TO RECALL LEGISLATION

2011 CAR RENTAL SHOW

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table of contents MAY / JUNE 2011 • Volume 24, No. 4

FEATURES

DEPARTMENTS

12 2011 Car Rental Show: Gaining

Longing for the Good Ol’ Days?

Consensus, Setting Direction A reinvigorated car rental industry gathered in Las Vegas to set direction on hot-button issues such as recalls, prepaid reservations and corporate sustainability.

6 8

26 Car Rental Majors: Looking Forward The quarterly and full-year earnings calls of the three public car rental companies provide a look into the crystal ball on prepaid rentals, franchising, new remarketing channels and growth opportunities.

Industry News Zipcar IPO Beats Expectations Enterprise Quits Orbitz ● Hertz Expands Franchise Network ● ●

Car Rental Q&A “What should I do if my new fleet vehicles arrive damaged?”

22 Cheers to Irish Independence! ARN profiles County Car Rentals, the largest independent car rental company in Ireland, to understand the Irish market and how the company is thriving in a down economy.

Editor’s Corner Should car sharing get a pass on excise taxes?

18 Turning A Profit These proven cost-reduction strategies can be implemented into your car rental operations today.

Publisher’s Perspective

29 30 31 32

Product and Vendor News Auction Ad Index RentAlert ACRA responds to recall legislation.

On the Cover: ©istockphoto.com/SilverV AUTO RENTAL NEWS (ISSN 1075-9409) (USPS 011-305) (CDN IPM# 40013413) is published bimonthly with additional issues in February and December, by Bobit Business Media, 3520 Challenger Street,Torrance, California 90503-1640. PERIODICALS POSTAGE PAID at Torrance, California 90503-9998 and additional mailing offices. POSTMASTER: Send address changes to Auto Rental News, P.O. Box 1068, Skokie, IL 60076-8068. Please allow 6 to 8 weeks for address changes to take effect. Subscription Prices - United States $25 per year; Canada $30 per year; Foreign $75 per year. Single copy price - $10; Fact Book - $30. Please allow 6 to 8 weeks to receive your first issue. Bobit Business Media reserves the right to refuse non-qualified subscriptions. Please address Editorial and Advertising correspondence to the Executive Offices at 3520 Challenger Street, Torrance, California 90503-1640.The contents of this publication may not be reproduced either in whole or in part without consent of Bobit Business Media. All statements made, although based on information believed to be reliable and accurate, cannot be guaranteed and no fault or liability can be accepted for error or omission. Printed in USA

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publisher’s perspective Longing for the Good Ol’ Days? Even in the face of the best rental market in years, you can find doom and gloom if you want to—just don’t get distracted by it.

t the Car Rental Show in Las Vegas, there was a real sense of optimism for the first time in years. Our attendance was higher than it has been in a long time. The attendees and the exhibitors were all commenting that there seemed to be more energy and more hope. But there was an undercurrent of stress and a sense that doom was just around the corner. People seem to be longing for the good ol’ days when business was simpler and more predictable. It seems that quite a few people and businesses are missing out on a pretty decent business climate because they are too obsessed with what might happen or what has happened recently. The wave of bad news that washes across our computer screens on a daily basis is almost overwhelming and for many businesses it becomes paralyzing. If you want something to worry about each day, there is no shortage of topics to choose from. We have a nuclear power plant in Japan that is melting down—or maybe not. The situation is under control—then it’s not. Either way, there are more than 500 auto suppliers within the affected area that are shut down. Virtually every manufacturer is affected in some way. Then there is the Middle East, where the wave of unrest is playing havoc with the oil markets. The last time we went through this type of oil shock, prices reached $147 a barrel and consumer behavior shifted radically. All of a sudden those pickup trucks and SUVs that we all couldn’t live without became expendable as everyone lined up to buy the smallest, fuelsippingest car they could find. If that isn’t enough to get you panicked, you can obsess over the federal deficit or the $14 tril-

BY SHERB BROWN

lion dollar debt that hangs over our heads. We spent a couple months living with the threat (or maybe the hope) that the federal government was going to shut down until we reached a last minute budget deal that seems like it will carry us through the rest of this year. While all this has been going on, the rental industry has been enjoying some of the best rates and yields in years. We have also seen a used car market that could probably be best compared to the 1999 dot-com market. Prices are up across the board. The 15,000-mile program car may be a thing of the past at the auction, but dealers are lining up to buy cars with 40,000 or more miles now like there is no tomorrow. Judging from the attendees we talked to this year, the funding issues of the past couple years are largely under control. Most rental operators are finding the money they need to fund their fleet purchases without having to pledge their first born and the family farm. Rates are reasonable and don’t seem to be trending up. It really is the best of times, just as it might be the worst of times. The rental industry has changed a lot—but so has the rest of the world. The pace of change is picking up, not slowing down. The political and economic issues we all face on a daily basis are part of the new normal. In the face of all that, many companies are thriving and growing. They are using technology to improve their operations. They are right sizing their fleets. And they are capturing market share by taking care of their customers. The lesson they are teaching us is this: Don’t get too distracted by all the chaos surrounding us every day, we just might be living in the good old days right now.

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editor’s corner Should Car Sharing Get a Pass on Excise Taxes? Car sharing and car rental are both part of the solution to the public’s transportation needs. Both communities are better off fighting issues such as vicarious liability protection, excise taxes and recalls together.

New Jersey bill proposes to exempt car sharing from the state’s $5 excise tax on car rentals. This raises the issue: For taxation purposes, how do you define car sharing? Some have proposed that the rental length should be less than eight hours to qualify as a car share. Many car-sharing companies, including Zipcar, have daily rates for both weekdays and weekends, and a good percentage—in some areas more than half—of car-share customers drive more than eight hours. Should those full-day customers be taxed, as it resembles a more traditional car rental? Some would require that a car-sharing program be member based. Perhaps then Hertz’s #1 Club Gold members or National’s Emerald Isle members shouldn’t get taxed. Or do you insist on a model that bypasses a brick-and-mortar rental counter? Most traditional RACs have kiosk programs and offer the ability to choose any available vehicle from assigned parking spaces. Certainly, these excise taxes affect local citizens, because car sharing serves the local community. In traditional car rental, more than half of the industry’s $20 billion in total revenues are generated from neighborhood rentals. Those rentals certainly deserve a pass too. And what if car sharing was more aptly termed “hourly car rental” or “automated car rental?” Would legislators feel the same way about tax exemptions? (For me, the term car sharing has always been a bit of a feel-good semantic twist: are you really “sharing” a car that you pay money to use for a period of time?) I see car sharing as part of the evolution of auto rental, an offshoot of the neighborhood car rental market that took hold in the 1980s. Back then, local communities were looking for transportation solutions that were met by smaller, conveniently located branches. Later, car sharing came along to meet the needs of specific community, urban dwellers, while automating the process. Separating car sharing from car rental will become increasingly harder moving forward. Car sharing is growing out of its original urban core and into university environments, corporate campuses, government

BY CHRIS BROWN

fleets, suburbia and even airports—all areas in which traditional car rental is already part of the transportation lexicon. Avis Budget Group is implementing a new program called “Virtual Car,” in which small groups of cars are strategically placed around town, are controlled and accessed remotely and are tracked by GPS. While car sharing moves into new markets, traditional RACs are finding more ways to automate and streamline the car rental process. In other areas, car sharing is already aligned with traditional car rental. Last year, a Queens, N.Y. judge ruled that Zipcar is protected under the Graves Amendment, the 2005 federal law that shields car rental agencies against liability for accidents caused by drivers of rental cars. In Minto v. Zipcar New York, the defense argued that Zipcar is not a traditional car rental company and therefore should not be afforded Graves Amendment protections. But New York Supreme Court Justice Roger N. Rosengarten found that “This bargain—use of a car in exchange for a fee—appears little different from ‘traditional rental car’ companies, notwithstanding Zipcar’s marketing statements that contrast it with those companies.” “The court finds that Zipcar is in ‘the trade or business of renting or leasing motor vehicles’ as those words are traditionally and plainly understood.” It was Zipcar itself that argued for Graves Amendment protection. And now new legislation is upon the auto rental industry that calls for the grounding of all recalled vehicles until the problem is fixed. The American Car Rental Association (ACRA) is asking for a sensible approach to legislation. Certainly ACRA welcomes the car-sharing community into this work in progress. (Imagine bringing a dispersed car sharing fleet in for servicing all at once!) Car sharing and car rental—if we can make this distinction—already agree on the need for vicarious liability protection, a sensible approach to recalls and the eradication of politically expedient and patently unfair excise taxes. Car sharing and car rental are both part of the solution to the public’s transportation needs. Both camps are better off fighting these issues together.

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industry news Zipcar’s IPO Beats Market Expectations Zipcar, the world’s largest car-sharing company, raised $174.3 million in its long-awaited initial public offering (IPO) on April 14. Under the symbol ZIP, shares opened at $18 and rose to $28 by the close of the first day of trading, about 30 percent higher than initially sought. In an SEC filing in March, Zipcar priced its IPO at $14 to $16, which was expected to net the company $89 million to $95 million on sales of 8.3 million shares on the Nasdaq. Zipcar reported $186.1 million in worldwide revenues in 2010 on a fleet of about 8,000 vehicles, though the company has yet to turn a profit. “The success of the Zipcar IPO is certainly an indication that car sharing is attracting interest outside of the traditional transportation sectors,” said Dave Brook, publisher of a carsharing industry blog and consultant with Team Red US. “Now that they’re public they have their work cut out to grow the business even more—and start making a profit.”

Enterprise Holdings Ends Partnership with Orbitz Enterprise Holdings announced it has ended its partnership with Orbitz. com and its sister site CheapTickets. com, effective April 1, for its Alamo Rent A Car, National Car Rental, and Enterprise Rent-A-Car brands. “We are ending our negotiations with Orbitz following their decision to de-list National and Alamo,” according to Pam Nicholson, president and COO of Enterprise Holdings. In a statement from Orbitz, the company said that it was unable to find mutually agreeable terms for continued promotion of Enterprise brands on Orbitz.com and CheapTickets.com after the previous contract with Enterprise Holdings had expired. Enterprise Holdings had been in negotiations to add its flagship brand to the Orbitz site when it was informed of the company’s decision to accept only Enterprise and remove National and Alamo from its listings, according to Enterprise Holdings. Alamo and National have been listed on Orbitz.com since 2001 and were acquired by Enterprise Holdings in 2007.

Merger News As of April 18, the Federal Trade Commission had not issued an antitrust decision regarding the potential merger of Avis Budget Group and Dollar Thrifty Automotive Group. In February, Avis renewed its commitment to acquire the smaller company. “It’s an important growth opportunity for our company,” said Ronald Nelson, chairman and CEO, on the company’s fourth quarter earnings conference call. Stay tuned to www.autorentalnews.com for developments.

“Temporary” Car Rental Tax in Washington State May Be Extended Washington State House Bill 1997 proposes a permanent extension of both the 2-percent Safeco and 1-percent Kingdome car rental taxes in Washington State. This time, the money would pay for a renovation of the State Convention Center, the arts, and low-income housing. Rep. Tina Orwall, D-Des Moines, who proposed the bill, says it would create about 4,500 jobs for the building industry. In 1995, temporary taxes such as surcharges on hotel, restaurant and car rental customers were enacted to pay for the baseball field. Better-than-expected tax collections means the Safeco Field bonds are expected to be paid off by the fall. The Global Business Travel Association (GBTA) submitted a letter to the Washington State Senate Ways and Means Committee in March opposing the bill. Jane Bankester, president of Puget Sound BTA, said, “These taxes were introduced with a definite end date; extending them in perpetuity will be damaging to Washington’s business economy. The time has come for these taxes to expire.” Shane Skinner, business manager for Enterprise RentA-Car of Washington, said lawmakers should keep their promise to the people and expire the taxes. Skinner says King County has the fifth-highest rental car taxes in the nation, and the promise to end the tax should be honored. A recent Seattle Times editorial called for an end to the tax, saying that Washington state lawmakers are suffering from “a rampant outbreak of amnesia,” and that lawmakWashington State ers’ memories “have gone blank in the fog of budgeting.” Convention Center

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industry news NJ Bill Would Exempt Car-sharing from Car Rental Tax

Hertz to Expand Franchise Network

Legislation has been approved in New Jersey by the Commerce and Economic Development Committee that would exempt car-sharing programs from the $5 surcharge on vehicle rentals that was established in 2002. Supporters say this would help increase popularity of car-sharing programs, which would reduce pollution and roadway congestion as well as ease parking problems. “This is a new and innovative program that can bring savings to taxpayers and dramatically improve the quality of life for urban residents,” said Ruben J. Ramos Jr., D-Hoboken, who is sponsoring the measure in the Assembly with fellow Democrat Ralph Caputo of Belleville. However, traditional car rental companies maintain that car sharing is merely a form of car rental and therefore should not be exempt from an excise tax that singles out car rental companies. While traditional RACs oppose excise taxes that single out car rentals, they say that the rental length—an hour, a day or a week—is irrelevant to taxation issues. On the legal front, Zipcar, the largest car sharing company, is already aligned with traditional car rental regarding vicarious liability. Last year, the New York Supreme Court ruled that Zipcar is protected under the Graves Amendment, the 2005 federal law that shields car rental agencies against liability for accidents caused by drivers of rental cars. The judge in Minto v. Zipcar New York found that although Zipcar advertises itself as an alternative to traditional rental cars, the company “is in ‘the trade or business of renting or leasing motor vehicles’ as those words are traditionally and plainly understood.” The bill is now with the Appropriations Committee, which has not yet scheduled a hearing on the proposal.

The Hertz Corporation is expanding its franchisee network as part of a companywide initiative to increase its presence in the airport and off-airport car rental markets. “Hertz is expanding its franchisee network to accelerate growth in certain key U.S. car rental markets, which, we believe, can happen faster under entrepreneurial, local ownership,” according to Mark P. Frissora, Hertz Corporation chairman and CEO. Hertz franchisees operate from 278 locations in the U.S., including 47 airports. Worldwide, the company has more than 3,500 franchise locations on six continents. Initially, Hertz will be transitioning select corporate markets to franchisee operations.

Avis Named Top Car Rental Brand in Customer Loyalty For the 12th consecutive year, Avis Rent A Car has been named the leading car rental company in customer loyalty by the Brand Keys Customer Loyalty Engagement Index. The annual study examined customers’ relationships with 528 brands in 79 categories. Based on 46,000 respondents, Avis achieved high marks in each of the four drivers of brand loyalty, including: convenience; customer service and brand reputation; reliability, safety and extras; and pricing discount and options.

Hertz Adds Mitsubishi i-MiEV to UK Fleet The Hertz Corporation has signed an agreement with Mitsubishi Motors in the UK to add the pure-electric vehicle (EV) i-MiEV city car to the fleets of Hertz and car sharing club Connect by Hertz in the United Kingdom. The rollout started with two Mitsubishi i-MiEVs now available for Connect by Hertz members in London. Hertz plans to add further i-MiEVs to its fleets throughout the year across the UK, as well as offering vehicles for corporate and university pool fleets. The Mitsubishi i-MiEV has a range of more than 90 miles and can be charged up to 80 percent via a

quick charging unit in as little as 30 minutes or fully charged overnight via a standard domestic plug socket. Connect by Hertz members will be able to use the company’s 16 charging stations at London City Airport, Heathrow Airport and London neighborhood locations. The i-MiEV fleet additions are poised to take advantage of Source London, the city’s electric vehicle charging network. The program has pledged to install 1,300 publicly accessible charge points across the city by 2013, surpassing the city’s gas stations.

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industry news Auto Parts Shortages Slow Production but Impact Reduced in U.S. A report from Scotiabank, a Canadian financial institution that operates in the U.S. and Canada, shows auto parts assembly plant shutdowns in Japan will affect the global auto supply chain. That said, the report stated U.S. auto manufacturing is somewhat insulated from the effects of the parts shortage because roughly 80 percent of all auto parts used in assembling new vehicles in the U.S. and Canada are produced in North America. Japanese auto parts account for 6 percent of all auto parts purchased in the U.S. and Canada. The report also found the share of overall auto parts imported into the U.S. has fallen

Rental Car Tracking Devices Raise Privacy Concerns An Australian peer-to-peer car rental company will install GPS devices in some of its vehicles to ensure that the vehicles are safe, but a civil liberties group complains the devices intrude on drivers’ privacy. DriveMyCar Rentals, a company with more than 5,000 registered users across Australia, will initially install the devices in up to 30 percent of its fleet. The devices will allow the company to track the location of the vehicle in real time and to be notified when travelers breach the terms of their rental agreement, such as driving on dirt roads or out of city areas. The company states it is installing the devices to give “peace of mind to the vehicles’ owners.” Daniel Noble, CEO of DriveMyCar Rentals, said owners “want to know that their cars are safe.” However, Civil Liberties Australia (CLA) said the installation of GPS units and the tracking of renters is an “excessive invasion of privacy.” CLA Director Tim Vines said that after providing a photo identification, a deposit, and providing credit card information, drivers are now being told that still isn’t enough. Now, they have to be tagged and monitored, he complained. The device, plugged in to the car in either the boot or the center compartment, will send the GPS coordinates back to the company and will be used in conditions such as non-payment, if the renter cannot be reached for a period of at least two weeks, or if the owner is concerned about the car’s location, such as a flood-affected area. It will also be used to make sure travelers aren’t breaking the conditions of use by venturing into restricted areas, and they can be penalized for doing so.

to 14 percent, which is half of the level of auto parts imported in the 1990s. When it comes to parts produced in Japan, the report found automotive electronics, such as semiconductors and “infotainment” systems, in addition to the chemical resins used in automotive paints, will be affected. Japan supplies 21 percent of global semiconductors, and produces integrated circuits and sensors for automobiles, according to Scotiabank. The report added that in many cases automakers can’t find alternative suppliers due to the proprietary nature of many niche automotive parts produced in Japan.

Enterprise Employees Strike in Toronto On March 11, employees of Enterprise Holdings at Toronto Pearson International Airport went on strike to protest proposed cuts in wages and benefits. The contract under negotiation involves 93 employees, primarily for National and Alamo, who wash, prepare and shuttle rental cars at the company’s airport operation. According to United Food and Commercial Workers (UFCW) Local 175 union organizer Jehan Ahamed, Enterprise is asking for cuts in hourly wages, vacation days and sick days, as well as requiring its employees to pay 100 percent of their benefits. Ahamed said the striking workers have established picket lines at terminals one and three at the airport and at two garage locations. The picketers are turning away potential Enterprise customers and sending them to car rental competitors. “The company’s approach to the negotiations is guided by a need to align this work group with the rest of our Canadian operations in terms of cost and productivity,” Enterprise Holdings wrote in a statement.

UFCW 175 workers form a picket line outside the National and Alamo garage location on Atwell Drive in Toronto.

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201 1 CAR REN T GAINING CONSENSUS, S Amidst overflowing conference rooms, a reinvigorated car rental industry gathered in Las Vegas to set direction on hot-button issues such as recalls, prepaid reservations and corporate sustainability. BY CHRIS BROWN

he big ballroom at the Hilton kept filling up with people just before Larry De Shon’s keynote speech. Chairs were added. People lined the walls. The crowd—more than 600—hadn’t turned out like this in many years. “It reminds me of the old days,” remarked one of the old guards, referencing the early years of the show’s 16-year history. This year, there was evidence that the Car Rental Show (CRS) is once again growing beyond an independent and licensee-only affair. Along with the usual crowd of entrepreneurs, large independents, franchisees, affiliates and mom-and-pop shops, CRS 2011 drew attendees from all corners of the globe, including Canada, Ireland, Korea, India, Venezuela, Australia and the Middle East. Representatives from the automakers were there, as were the Wall Street guys, along with many new faces who showed up looking to make business or

at least see what all the fuss was about. Before De Shon took the stage, Sharon Faulkner, executive director of the American Car Rental Association, announced that Dollar Thrifty Automotive Group and Avis Budget Group had both joined ACRA the week before the conference. The announcement brings ACRA two steps closer to gaining buy-in from all the majors. And it comes at an opportune time, with the industry healthy yet facing mounting threats that need a swift response in a cohesive, decisive voice representing the entire industry. “Judging by the crowd here this morning at the show, I can without hesitation state that this is a new era of solidarity for the car rental industry,” said Faulkner. “It has always been my dream to see this industry take on a credible and meaningful role as legislation, consumer advocacy, travel issues, tax initiatives

and other public policy matters are debated by the media and elected officials at all levels. We can make a difference by being a part of a recognized, strategic industry organization that speaks with a unified voice and a consistent message.” Faulkner’s opening remarks set the tone for two days of keynote speeches, panels, seminars and expo hall activities in which the industry gathered to educate, gain consensus and set direction.

Larry De Shon:Technology Will Automate Car Rental In his opening keynote address, Larry De Shon, executive vice president of operations at Avis Budget Group, provided a look into the future of car rental through technology. De Shon showed how technology can shorten repair times, locate stranded rent-

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N, TAL SHOW: SETTING DIRECTION ers, improve customer service response and leverage ancillary sales. De Shon’s main point, however, centered on how technology is actually changing the way cars are rented. Car sharing—while still a minute piece of the overall fleet and revenue pie—has inherent technological advancements that can be used in traditional car rental to automate and decentralize the process, regardless of whether the rental is by the hour or for a week. Such systems can be used to expand a rental company’s local market presence without expanding brickand-mortar operations. De Shon gave the example of a group of cars parked at a corporate campus in designated parking areas. Company employees can reserve a car using a smart phone, which can also

unlock the vehicle. Mileage is tracked and gas consumption is measured to the 1/10th gallon. When finished, the computer locks the doors for you. Billing is seamless. This allows disparately located micro-fleets, situated conveniently for different rental situations, to be controlled by one mother store. “Now the local market store is anywhere you can park five cars,” said De Shon. However, “Don’t think that technology will do everything for the customer, like The Jetsons,” De Shon said in closing. “Technology should be used to save time, provide consistency and allow the renter to take more control of the process. Don’t overlook the unlimited potential of your personnel.”

Lee Broughton:Take the Lead — or Get Legislated In his Wednesday morning address, Lee Broughton, who heads up Enterprise Holdings’ sustainability efforts, cautioned that the car rental industry must lead the way in implementing solutions that address environmen-

tal, social and economic concerns. However, “If we take an attitude of ‘wait-and-see-whathappens,’ then we may lose the opportunity to determine our future—and the marketplace will dictate it for us,” he said. Broughton cited how for years European Union governments were looking at ways to deal with CO2 emissions from commercial airlines, while the airlines themselves did lit-

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tle to proactively address the issue. Britain has since executed a carbon emissions tax on airlines, which may force airlines to buy emissions permits—and prove to be a heavy burden for both the airline and the consumer. “You can bet that [here in the United States] the car rental industry is already in somebody’s sights,” he said. The U.S. car rental industry can make its greatest impact through the 1.6 million vehicles it puts on the road, said Broughton, in the form of fuel-efficient rental options, carbon offset programs and helping to bring alternative-fueled vehicles to the mass market. “We have a great tool called the American

“I was especially impressed that the industry as a whole is more cohesive. Finally, the majors are uniting and we may be able to effect change at the federal, state and local levels now more than ever.” Tom Thayer, Allstate Auto Rentals, Owings Mills, Md. Car Rental Association to use, so let’s use it,” he concluded. “Let’s make ACRA the hub of our industry’s sustainability efforts.”

Jack Fitzgerald: Political Action Starts Local Jack Fitzgerald is an entrepreneur’s entrepreneur. Fitzgerald came to Las Vegas in his jet—that he flew himself. Fitzgerald owns Rent-A-Wreck, Priceless and Nextcar, though these companies represent just a small percentage of his automotive empire, which took in $570 million in revenue last year. In his closing keynote address, Fitzgerald spoke off the cuff about dealership rentals, recalls and political action. Fitzgerald sees opportunities for experienced car rental operators to operate dealership rentals. “You ought to be helping car dealers manage their loaner cars and rental cars, because they really don’t know anything about that business, and you all know everything about managing fleets,” he said. “You might want to go find a good car dealer and marry him.” Regarding recalls, Fitzgerald took the National Highway Traffic Safety Administration (NHTSA) to task for not

“The mood at the show was terrific, which I attribute to less supply and steady demand. We’re making more money with fewer cars instead of overfleeting and fighting for price. I came back energized.” Dave Schwartz, founder of Rent-A-Wreck requiring that auto manufacturers keep the contact information of the individual consumers who buy their cars, as is standard procedure in the tire business, for instance. In dealing with the recall issue legislatively, Fitzgerald said efforts should begin at the grassroots level and through ACRA. “All politics are local. It comes from the precinct up, not from Washington down,” he said. “Get to know your elected officials,” said Fitzgerald, who spearheaded the Committee to Restore Dealer Rights. “If you don’t, you can be legislated out of business.”

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LAPLACA RECEIVES RUSSELL BRUNO AWARD Michael LaPlaca was awarded the 2011 Russell Bruno trophy for outstanding service to the car rental industry. LaPlaca started his career in the mid-1960s with Hertz and turned to the full-time practice of law in the mid-1970s. LaPlaca has worked with ACRA, the Car Rental Coalition and is a regular speaker at the Car Rental Show and contributor to Auto Rental News. Leslie Pujo of LaPlaca Law presented the award. “Michael became a tireless advocate for the industry as a whole, as well as for his individual clients,” she said. “On a personal note, I would like to say that Michael has been the best attorney and best mentor with whom I’ve worked.” LaPlaca shared some remembrances of Russell Bruno, a business associate and friend.

CARTRAWLER AWARD ANNOUNCED Patty Hagar of CarTrawler announced the launch of the CarTrawler Car Rental Vendor of the Year Awards, the first global awards to focus exclusively on the car rental sector. In association with Auto Rental News, the award will recognize CarTrawler’s car rental partners worldwide who achieve superior levels of service service, performance and partnership based on tangible operating data. The overall winner will be presented with the award at a gala awards ceremony in Ireland, held in November 2011.

“I was taken aback by the amount of people and the level of activity this year. Everyone I spoke with was very comfortable and confident about the business.The used car market is helping costs, and people feel good about the state of demand.” John Healy, equity research analyst for Northcoast Research

OEMs Will Continue to Control Rental Sales For the first time in a long time, the auto manufacturers convened at CRS to talk rental. Representatives from Ford, Chrysler, Toyota and Hyundai made it clear that the rental business is an integral part of their overall sales pie. However, they were quick to point out that they are now taking a more managed approach to rental fleet sales to protect residuals. Their message: Don’t expect much growth in rental sales or any super deals on new cars, though this new discipline should continue

to benefit RACs on the used car side. Fleet sales will stay a percentage of retail sales— and retail sales aren’t expected to increase dramatically.

ACRA Panel Tackles Recalls and Prepaid Reservations The American Car Rental Association convened a panel on Wednesday afternoon to break down the issues facing the industry collectively. Sharon Faulkner said ACRA is tracking 125 bills in 35 states that could impact the car rental industry—most of them negatively. “If

“The attendance and energy at this year’s show was the best in years. Consumer confidence and spending are clearly on the rise.The wide variety of attendees never ceases to amaze me:There was an operator from Miami with only four cars, and another from Australia with several hundred.There’s nothing else like the Car Rental Show—in the world.” Angela Margolit, Bluebird

you’re asleep and not letting us at ACRA help you with these things, we’re all going to get hurt,” she said. The major hot button issue was safety recalls, in the wake of U.S. Sen. Charles Schumer’s introduction of federal legislation to ground all recalled rental vehicles. During the session, Bob Barton, ACRA’s president, introduced ACRA’s position paper on recalls, which was circulated to the audience. The ACRA position paper proposes that the current rules be modified to a two-tiered system that can properly categorize each recall by the nature of the defect and the potential for harm. Barton asked why other industries that use vehicles for business, such as limos and taxis, are not part of the legislation. He pointed out that recalls are certainly a manufacturer problem as well. “If the manufacturer determines that we should ground the [recalled] vehicle, we will. But we need OEM guidance to make that determination,” he said. Avis Budget Group has discontinued its no-

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show transaction experiment; however, the hue and cry is still strong on no-show fees— especially with utilization higher than ever. The discussion is turning toward adopting a prepay model, which will give the rental customer a “guaranteed reservation,” viewed as a more consumer-friendly initiative. Barton said that ACRA has met with credit card companies to discuss how to implement a guaranteed reservations strategy that mitigates chargebacks and deals with loss of use and diminution of value. Barton told operators to expect correspondence from credit card processors regarding writing specific

SEMINAR KNOWLEDGE

■ CARSHARING: EXTENDING YOUR REACH, IMPROVING YOUR MARGINS – NEIL ABRAMS AND JULIAN ESPIRITU, ABRAMS CARSHARING ADVISORS (actual car sharing company) reservation

language into an RAC’s customer communication that characterizes the situation properly, positively and uniformly. Barton suggested a three-pronged method to address the no-show prob-

●

Average hours per reservation .................. 8.14

●

Revenue per reservation ........................ $45.78

●

Revenue per vehicle per day .................. $56.35

●

Average utilization (based on 24 hours) .................................... 41.8%

●

Average revenue per vehicle per month (RPU) ..................$1,691

lem: Give a discount to customers that put down a credit card at the time of the reservation to guarantee the reservation, with a one-day charge for a no-show; give a larger discount for prepaying the reservation with no changes allowed; or, with no credit card

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■ TENNANT GROUP ROUNDTABLE

■ RENTAL CAR SATISFACTION RECOVERS – NOW WHAT?

– JIM TENNANT

– STUART GREIF, J.D. POWER AND ASSOCIATES

Which Financial Metric is the Best Predictor of Profitability? From a study conducted by Jim Tennant of 40 car rental companies over three years, the metric with the highest correlation to profitability was fleet expense as a percentage of revenue. Personnel expense as a percentage of revenue had the lowest correlation out of 17 metrics analyzed. “Interestingly, personnel expense expressed as dollar amount per vehicle had a negative correlation. In other words those companies with higher personnel costs per vehicle were on average more profitable,” said Tennant.

Primary reason you selected the rental car company Business Price 30% Corporate policy 17% Previous experience 16% Rewards program 13% Convenience 10% Reputation 8% Package deal 2% Recommended by someone 2% Other 1%

at the time of reservation, guarantee the customer a car, but make it subject to an upgrade or downgrade depending on fleet availability with no rate adjustment. ACRA board member Frank Colonna of Triangle Rent A Car, who has successfully

Leisure 52% 1% 15% 7% 8% 9% 4% 2% 1%

FROM J.D. POWER AND ASSOCIATES’ 2011 NORTH AMERICA RENTAL CAR SATISFACTION STUDY

“The continued growth of the Car Rental Show was evidenced this year with a renewed effort and support of the major rental companies.The American Car Rental Association now represents all except one, and continues to champion issues affecting our industry.” Bob Barton, president, ACRA lobbied for the industry in his district, offered one of the most compelling reasons for a strong association. A politician once told him, “When you all get your act in one

bag, come see me.” “Politicians want to hear from an industry, not fragments within the industry,” Colonna said.

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Here are four ideas you can use today to drive profits to your bottom line.

PHOTO: ©ISTOCKPHOTO.COM/PAGAD

ESIGN

BY CHRIS BROWN

t the 2011 Car Rental Show, four members of the Tennant Group Roundtable each presented a proven cost-reduction and profit-making idea that they have implemented in their car rental operations. Seminar attendees voted for the best idea. Can they work for you?

BASE FLEET PURCHASES PRIMARILY ON PROJECTED HOLDING COSTS.

MIKE KULP KULP CAR RENTALS, GILBERTSVILLE, PENN. Kulp Car Rentals has instituted a policy of making all fleet purchases based primarily on projected holding costs of the vehicle. Our goal is to depreciate the rental fleet at the rate of one percent per month, and still sell the vehicles at a gain. In 2010 the actual monthly cost of depreciation on the 341 fleet vehicles we sold was .87 percent. Before a vehicle is purchased for the fleet, we determine that vehicle’s MMR (Manheim Market Report) value for one-, two- and three-year-old models. This is used to determine the estimated residual value of the vehicle. Based upon the current acquisition cost and estimated residual value, we will purchase the vehicle if it meets our 5-percent per-month budget. In order to maintain this depreciation rate, we purchase based upon vehicle availability and market conditions. In Nov. and Dec. 2010 and Jan. 2011

we bought more than 200 vehicles because the cars were available at the right price, not because we thought we needed that many for rental. Since the summer of 2008, we have also sold off all of our larger SUVs and bought only fuel-efficient fleet vehicles. We believe that gas prices will again climb to rates that will significantly impact the value of larger, less fuelefficient vehicles. Although we could have rented these vehicles at a higher rate than our current fleet vehicles, we did not purchase them because of our estimate of their residual value. In summary, the driving factor in fleet purchase decisions is not the vehicle’s rental rate, or the type of vehicle to rent—it is whether the acquisition cost will allow us to keep the depreciation cost within our budget.

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Proudly Serving the Southeast United States!

Please fax this proof back by ______________ on_________________________. If not received by the above date, the ad will run as is. Thank You!

URGENT ADVERTISING PROOF

FURTHER CUSTOMER CHANGES ON THIS PROOF ARE CHARGEABLE.

• AUTHORIZATION CHECK LIST •

Signature________________________________________________________________ Date_____________________

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WINNER!

JACK VERCOLLONE

BRENDA ALBRIGHT

GET “FREE” MONEY FOR TRAINING.

USE YOUR SCREEN SAVER TO MOTIVATE EMPLOYEES.

VERC CAR RENTAL, SOUTHEASTERN MASS.

DISCOUNT CAR AND TRUCK RENTALS, RIVERVIEW, NEW BRUNSWICK, CANADA

For the last 10 years, we have received more than $100,000 in training from three separate grants from our state’s (Massachusetts) Workforce Training Fund. The training was for selling extras, computer training, supervision techniques, customer service and operations management. Grant funds were matched, dollar for dollar, with company money, either cash or in kind. Our match was met by paying employees while they trained. The company chose a different trainer for each type of training. Training can be spread over two years, minimizing disruptions during busy season. The Training Fund comes from every company’s unemployment tax contribution. If you are going to have to pay it, you might as well get something back! Most states have the same or similar training grants available.

Are you pulling your hair out over employees that forget to do simple tasks? Why not take advantage of some simple technology that will cost you absolutely nothing? Use the “rolling marquee” feature on your screen saver to get a message across to your staff. Set the marquee to come on after a minute of inactivity and they’ll be aware of it all day long. When you think they’ve got the message, change it to something else. Even the most forgetful employee can’t use the “Oh, I forgot” excuse with this simple, easyto-implement reminder and motivational tool. Best of all, it’s cheaper than string on a finger! Here are some of the messages we have used: Have you sent in a lead today? Use the proper source code. ● Vehicle Licensing Fee

Remember the Fuel Purchase Option. Utilization ● Have you ASKED for the rental?

●

This screen saver has been our favorite by far.This was created by converting a Flash display to a screen saver using free software available from instantstorm.com in conjunction with the rolling marquee that is standard in Windows.

TRACK HISTORICAL FLEET DATA PER MODEL FOR BETTER COST CONTROL.

DAVID WILSON DOLLAR THRIFTY LICENSEE, NASHVILLE, TENN. Which model costs more in fleet, a Toyota Corolla or a Toyota Avalon? Is it really more cost effective to hold cars longer? By analyzing actual historical fleet data by model, we’ve found that the real-world numbers sometimes fly in the face of conventional wisdom. We keep an Excel spreadsheet of our fleet

that tracks each car’s purchase price, sale price, months owned, miles per month, ending miles, monthly and total depreciation, cost per month and cost per mile. With this data, we aggregate car costs by car sizes, hold times and total miles. By analyzing cumulative data for a particular model, we can pinpoint the optimal

time to sell that model. We’ve found in some instances that it is more cost effective to sell our big cars—which accumulate miles quicker—within a shorter hold time than our small cars. This actual data guides our fleet purchases and sales to wring the most cost savings out of each unit.

2010 TOYOTA AVALON PURCHASE PRICE

PURCHASE DATE

27,275.00 2/12/10 27,275.00 2/12/10 27,275.00 2011 TOYOTA AVALON 27,275.00 4/28/10 27,275.00 4/28/10 27,275.00

SALE PRICE

SALE DATE

AVERAGE TOTAL MONTHLY DEPRECIATION DEPRECIATION

BOOK VALUE

GAIN (LOSS)

COST # PER MONTHS MONTH OWNED

TOTAL COST

ENDING MILES PER MILEAGE MONTH

COST PER MILE

23,200.00 12/2/10 23,200.00 11/30/10 23,200.00

5,690.14 5,767.56 5,728.85

590.38 598.41 594.39

21,584.86 1,615.14 422.80 21,507.44 1,692.56 422.80 21,546.15 1,653.85 422.80

9.6 9.6 9.6

4,075.00 26,092 2,707 4,075.00 27,687 2,873 4,075.00 26,889.5 2,789.8

0.16 0.15 0.15

25,200.00 11/30/10 25,200.00 11/30/10 25,200.00

3,959.56 3,959.56 3,959.56

557.28 557.28 557.28

23,315.44 1,884.56 292.04 23,315.44 1,884.56 292.04 23,315.44 1,884.56 292.04

7.1 7.1 7.1

2,075.00 2,075.00 2,075.00

0.13 0.10 0.12

16,093 19,902 17,998

2,265 2,801 2,533

In the enclosed snapshot of Toyota Avalons, the 2010 models were held for 9.6 months and incurred an average cost of $423 per month.The 2011 models, however, were held for 7.1 months on average, yet incurred only $292 in cost per month.The 2011 Avalons’ average holding cost is much less than for our Corollas, which were held for 14 months on average at an average cost per month of $352.

20 ARN • MAY / JUNE 2011

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CHEERS TO

IRISH County Car Rentals, the largest independent car rental company in Ireland, creates opportunity in a tough economy with its own used car sales outlet and public-use gas station and car wash.

INDEPENDENCE!

BY CHRIS BROWN

n this and future issues, Auto Rental News travels abroad to discover how car rental companies operate in other parts of the world while we get the scoop on international car rental markets. In this edition, ARN talks to Bernard Loughran, managing director of County Car Rentals in Dublin, Ireland, about his company’s business model and the challenges to renting cars on the Emerald Isle.

■ ARN: HOW DID THE COMPANY START?

County Car Rentals’ business consists of 65 percent tourism, 20 percent local and repeat and 15 percent replacement, says Bernard Loughran (pictured), the company’s founder and managing director.The company generates most of its business on the Web, through its own Web site, wholesale booking channels and as an affiliate of ACE Rent A Car. arrive. County also has depots in Cork, Limerick and Dun Laoghaire Ferry port. These locations serve the local and replacement market.

BL: County Car Rentals was founded by my father in 1953 as a small part of a car dealership in Dublin. Realizing the potential of tourism into Ireland, I spun off my father’s car rental operation and expanded it to become the largest independent Irish car rental operation with a fleet of 600 vehicles.

■ WHERE ARE YOUR LOCATIONS? County Car Rentals has concentrated its five rental locations in the greater Dublin Area, including an in-terminal desk in Dublin Airport, where more than 80 percent of Ireland’s tourists

■ WHERE DOES YOUR BUSINESS COME FROM? County Car Rental’s business consists of 65 percent tourism, 20 percent local and repeat and 15 percent replacement. The majority of our tourism business is generated through the Web. County’s own Web site (www.countycar.com) generates 10 percent of this business. County is the Irish licensee of ACE Rent A Car, which gives the company access to the most popular Internet portals. ACE bookings are mainly generated

from North America. Wholesale Internet sites, including the Irish wholesaler Cartrawler, generate 65 percent of our Internet business. Significant offline business also comes from travel agents and wholesalers in Australia and New Zealand, and in Europe from travel agents in Italy, Germany and Austria.

■ WHAT DOES THE CAR RENTAL MARKET IN IRELAND LOOK LIKE? Ireland’s tourism season peaks sharply in July and August. County typically requires a 65-percent fleet increase for this period, only to rapidly de-fleet in September. Outside of this peak, local and replacement

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IRELAND’S CAR RENTAL SUPPLY AND DEMAND business is important. Pricing is very competitive and has resulted in companies expanding to gain economies of scale. There are now only nine car rental companies serving the Irish market, compared with more than 50 a decade ago. This over expansion has resulted in two companies going into financial examinership and restructurings (similar to Chapter 11). County/ACE competes with one European and seven major U.S. car rental companies in Dublin.

The car rental industry in Ireland is based around tourism, which spikes sharply in July and August, when County Car Rentals requires a 65-percent increase in fleet to meet demand.

■ WHERE AND HOW DO YOU PROCURE YOUR CARS?

JAN

Ireland does not have the same type of manufacturer’s programs as in the U.S. Vehicles are provided by local dealers who get a concession for vehicles they supply to the Irish car rental industry. Fleeting for the peak has always been an issue. In the past, car dealers supplied vehicles for short terms and had a ready supply of same-year vehicles for their used vehicle sales. The recession has put a damper on this and many dealers have gone out of business or cannot obtain financing for these short-term buybacks.

■ HOW LONG DO YOU KEEP YOUR CARS IN YOUR RENTAL FLEET? In common with all Irish car rental companies, we keep our buyback cars up to nine months and risk cars for up to three years.

■ WHAT RENTAL MODELS ARE POPULAR? Our popular models include Toyotas (Yaris, Corolla, Avensis) Fords (Fiesta, Focus, Mondeo, Galaxy) and luxury class models from Mercedes, Audi and Lexus. Car prices are more expensive than in the U.S. A Ford Focus costs nearly $30,000 (in U.S. dollars) at today’s exchange rate.

■ WHAT TYPES OF ANCILLARY SALES GENERATE REVENUE? We have ancillary sales of excess cover, GPS and presold fuel. We have a problem selling CDW to North

FEB

MAR

UTILIZATION

APR

MAY

BASE FLEET OF CARS

JUN 6 MONTH BUY BACKS

American customers, as most have bought separate cover for this, but the insurance suppliers have made no arrangement with Irish companies. Pre-bookings made outside of the U.S. include CDW. It is now illegal to charge for “Out of Age” drivers. European law has now been enacted to bar rental companies from discriminating against drivers of any age once they possess a full driving license. We now enforce a minimum of five years driving experience to cover very young renters. We also have an ability assessment for elderly renters.

■ DO YOU HAVE OTHER REVENUE SOURCES? We have developed a separate gas station and car wash in close proximity to our head office. The initial idea was to refuel and wash our fleet. We added a convenience store and today it is a profitable standalone business. County Car Rentals purchases fuel at discounted prices and the total costs of wash/valet facilities are covered as they are also open to the paying public.

■ HOW DO YOU REMARKET YOUR VEHICLES? We developed our own independent car retailer, Kill-O-Grange Motors. In Ireland, buying from a car dealer is generally more acceptable to private buyers. This retail operation is located next to our head office and operates as a separate, independent company. We dis-

JUL

AUG 3 MONTH BUY BACKS

SEP

OCT

PURCHASE RISK CARS

NOV

DEC

SALES RISK CARS

pose of 35 percent of our risk vehicles direct to the public at this retail outlet and 65 percent to trade buyers. The Irish fleet disposal system is somewhat different than the U.S. As the population and the sales volume are lower in Ireland, there are no very large auction houses. The majority of fleet cars (whether from car rental, fleet management companies or finance companies) are purchased by individual, professional private dealers. They in turn sell them to larger, main dealers who retail them.

■ HOW DO YOU MARKET AND ADVERTISE YOUR BUSINESS? We promote extensively in Europe and to the long-haul markets in Australia, New Zealand and the Far East by direct visits and participation in Irish Tourism’s overseas promotions. Local markets are promoted by looking after our valued repeat customers and by advertising and promoting to the replacement market. We also have a North American sales coordination office in Connecticut.

■ HOW DID THE RECESSION AFFECT YOUR BUSINESS? County Car Rentals took a hit very similar to the one experienced in the U.S. Luckily, we did not have any significant non-fleet assets, and we were able to adjust our fleet and staff to the changed market. Ireland is still in recession and has debts of €200 billion (nearly $300 billion) to the main European banks. They in

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Acorns Do Big Tree ittle sG L row m o Fr . Abrams CarSharing Advisors

Abrams Travel Data Services

Abrams Consulting Int’l

AdlerAbramsAdvisors

Trevor Toner, operations manager (in black) and a contingent of County Car Rentals’ customer care staff manage a fleet of 600 through five rental locations.The company also owns an open-to-the-public gas and car wash operation, a source of ancillary profits.

turn are putting pressure on Ireland for even more austerity. This has removed spending power from the domestic economy.

■ WHAT LEGAL OR LEGISLATIVE INITIATIVES ARE THREATENING YOUR BUSINESS OR THE INDUSTRY?

Abrams Peterson Advisors

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1982

Neil Abrams Associates, Inc.

ABRAMS CONSULTING GROUP, INC. Preserving the Entrepreneurial Spirit of the Auto Rental, Car Sharing, and Transportation Industries, WORLDWIDE since 1982. 3020 Westchester Avenue • Purchase, NY 10577-2525 (914) 696-5100 • Fax (914) 696-5101 email:nabrams@abramsconsulting.com • website: www.abramsconsulting.com

Our biggest headache is the un-competitive situation that has arisen with insurance companies that specify one replacement company. This is the same situation that exists in the U.S. We support the progress that has been made in New York State and other legislatures. We hope to bring similar legislation to the Irish and European system.

■ WHAT IS YOUR BIGGEST BUSINESS CHALLENGE? Our biggest challenge is financing, especially for the peak July/August season. More than 30 percent of our car dealerships collapsed in the recession and banks are not enthusiastic to support the remaining dealers for short-term lending. Car rental companies have to provide their own financing for this short-term lending, which is difficult to get.

■ WHAT DOES THE FUTURE LOOK LIKE? The future for car rental in Ireland rests with increased tourism. The government has made this a major objective in our recovery. We now have the lowest prices for car rental, airfare, hotels, meals and pubs in Europe.

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C A R

R E N T A L

LOOKING FO On their fourth quarter and full-year 2010 earnings calls, the three public car rental companies look into the crystal ball on prepaid rentals, franchising, new remarketing channels and growth opportunities. BY CHRIS BROWN

he three public car rental companies, Hertz Corporation, Avis Budget Group and Dollar Thrifty Automotive Group, hold their annual earnings calls in late winter. While the P&L scorecards grab the headlines, underneath the financial big picture, each company presents an operations analysis on what’s new, what’s working and what we might expect in the near future. Aggregated, this information is a good indicator of where the industry is headed.

The Merger As of this writing, nothing has been announced. Both Dollar Thrifty and Avis Budget expect to have greater clarity around the FTC’s official position “in the near future.” Based on statutory requirements dictated by the FTC and when both companies individually submitted their “certifications of substantial compliance” with the FTC’s Second Request, the companies had expected feedback at the end of March and the first week in April. Dollar Thrifty made it clear that there is no written or verbal agreement with Avis Budget at this time. If the companies sign a definitive agreement within the 12-month period from the announcement of the original Hertz deal, then a termination fee would be due Hertz. On Dollar Thrifty’s call, CFO Cliff Buster said he believes the deal “runs off October 1.” Look to Avis, not Dollar Thrifty, as the point on all regulatory discussions.

No-show Fees to Prepaid Rentals Avis Budget went public recently to say the company is shifting its efforts from instituting a no-show fee to enhancing its prepaid rentals model. Budget launched a prepaid option on its Web site in late 2009, followed by Avis in November of last year. Avis said it booked more than 20,000 prepaid reservations in January, its first full month of deployment. According to its earnings call, the company has begun offering prepay rates in its voice channel, one notoriously plagued by no-shows. Avis Budget says its prepay revenue will “increase significantly in 2011,” while its “noshow experience has improved remarkably” and the company is “realizing the cost savings in utilization…” Hertz has had a prepaid product in place for a year and a half domestically that has generated $100 million in gross revenues for the company. Prepaid is more than 60 percent of Hertz’s European revenues, and that includes direct consumer bookings as well as online agents and brokers. The model will be rolled out in 20 new countries during this quarter. Hertz Corporation Chairman and CEO Mark Frissora called it “one of the important elements of our growth strategy” and he expects double-digit growth this year. Dollar Thrifty is content to stay on the sidelines right now. “We are clearly the smallest of the big four players in the industry, and we certainly will follow the industry,” said Scott Thompson, president and CEO. “But

I think some of the other larger players have to lead on that particular issue.”

A Growth in Franchising Hertz is expanding its franchisee network “to accelerate growth in certain key U.S. car rental markets, which, we believe, can happen faster under entrepreneurial, local ownership,” said Frissora in a recent statement. Hertz franchisees currently operate from 278 locations in the U.S., including 47 airports. Initially, Hertz will transition select corporate markets to franchisee operations, which will convert $100 million in corporate revenue to franchise revenue. Frissora wouldn’t predict an upside on additional revenues “until we really get more intelligence around that and continue to experiment with that concept.” Dollar Thrifty sees its franchise revenue growing by double digits in 2011 as it works to expand franchise opportunities overseas. However, franchises don’t represent instant revenue, as they take time to implement and gain traction, the company maintains. Thompson said the opening up of the credit markets will have a positive effect on entrepreneurs getting financing for a franchise operation, which is preferable to the company itself providing its own capital to franchise startups.

Where Opportunity Knocks Hertz is not slowing down with Advantage. The discount brand gained 21 locations in 2010 for a total of 46 locations and

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M A J O R S :

G FORWARD FORWARD 14 affiliates worldwide. Revenue increased by $90 million. Off airport, Hertz opened 230 incremental locations in the U.S. in 2010, bringing its year-end total to 1,928. Revenues grew 13 percent. Dollar Thrifty says it sees its biggest longterm growth opportunity internationally. Avis Budget contends it is “under-penetrated” in international inbound sales and is investing marketing efforts in Europe and then Latin America and Asia. Avis Budget is experimenting with co-branded locations off airport. Co-branding realizes the benefits of lower costs for the shared infrastructure and better location sightings for the brand that moved. Some locations with the space also have truck rental. Avis Budget committed considerable resources in 2010 to reaching renters in the small business segment and grew its small business volume by 9 percent last year. The margins are high, with further upside in 2011. Avis Budget is not necessarily ready to jump into car sharing, but the company is looking at using car sharing technology in the local market. The goal is to remove the sales agent and the storefront. The company says it has a large commercial customer piloting this technology on one of its corporate campuses, with several others planned for this year. Larry De Shon of Avis Budget Group explained this initiative further at the Car Rental Show. Avis Budget has been gaining efficiencies in its shuttle trips by better estimating demand per shuttle, reducing shuttle idle time, standardizing shuttle routes and using GPS to track shuttle crews. In the area of preventive maintenance, Avis Budget now compares the efficiency of in-house technicians to third-party vendors, which led the company to revamp its approval

process for outsourced maintenance work and allowed it to prune its vendor ranks. Avis introduced portable XM radio last year, though its big ancillary revenue items are still GPS, upsells and insurance.

More Sales through Alternative Channels Hertz is committed to buying more used cars this year (20,000 to 25,000 units, up from 2,000) to be used off airport and to stock Advantage. Hertz is also looking to up the percentage of its risk fleet to 80 percent, from 65 percent in 2010. This will allow the company to further diversify its resale channels from auction and direct to dealers as well as direct to consumers through Rent2Buy. The company says these “offshore” channels will represent 65 percent of the company’s sales in 2011, up from 42 percent in 2010. Hertz’s depreciation per vehicle for next year is expected to be $294 per unit per month. At Dollar Thrifty, Thompson said that while used cars are a part of the company’s strategy, “It’s difficult to implement that strategy in a big way when the used car market is the best in the history of the used car industry.” Dollar Thrifty is working on capturing the $2,000 to $3,000 price differential between the wholesale and retail used car channels, though that does not mean pressing further into the retail space. Dollar Thrifty is running 95 percent risk. Its fleet depreciation per unit in the fourth quarter of 2010 totaled $308 per month. Subsequent to the earnings call, the company lowered its estimate for vehicle depreciation per unit to $240 to $250 per month for 2011 on a still-improving outlook in the used car market. At Avis Budget, online dealer auctions and

direct dealer sales now account for more than 30 percent of its dispositions. The company said it will be expanding its retail sales program through a national car chain. Avis Budget is disposing of cars on average at 12 to 14 months, Dollar Thrifty 18 to 20 months.

One Offs ● Thompson said that Dollar Thrifty is not in the market to acquire any smaller, independent rental car companies, neither on the premium or value brand side. ● Thompson does not see a price war emerging with Advantage or other value brands such as Fox. “When I look at the numbers from Advantage, they have been relatively disciplined in their pricing in the Spartan brand,” he said. “So I don’t see any signs of some unhealthy price war down there as I currently look at the numbers.” ● Avis Budget will be “reinforcing and reinvigorating” its multi-brand strategy it adopted when the companies merged in 2002. ● Frissora said higher fuel prices have had a very small impact on rentals and does not think it will affect rentals much moving forward. ● Frissora was asked if the seismic shift shaking up the world of online travel agencies, GDSs and the airlines presented an opportunity for car rental to reduce distribution costs. Frissora said the company’s relationships with its OTAs and airline partners are “really good.” But he said that Hertz is working on gaining revenues directly through hertz. com by enhancing functionality on the Web site to attract new customers. The company is also working with airline partners such as JetBlue and Delta to get the rental reservation further “upstream” in the airline booking process.

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R E N T A L

Q & A

Q&A Q

What should I do if my new fleet vehicles arrive damaged? Jim Marshall, U-Save Santa Barbara, Calif.

When your cars arrive at your delivering dealer or your rental location(s), you must implement a thorough inspection system of new vehicles. If there are damages and you do not catch them, you’ll pay the price when you turn back repurchase vehicles or sell risk vehicles. First, make sure you send a copy of the delivery receipt to your fleet supplier as soon as the cars arrive. The delivery receipt will help the fleet supplier if there are any disputes on damages or in-service dates for repurchase cars.

Guidelines for inspections: ● Train your people to know what to look for. Cars arrive at all times during the week, so train at least two employees as inspectors. ● If the cars are still on the truck, inspect the undercarriages. Look for improper or loose tie downs, fluid leakage and damage. ● When the cars are on the ground, inspect for dents, scratches and missing items. If you were not able to inspect the undercarriages on the truck, inspect them now. Get down on the ground with a flashlight or use a mirror on a stick. ● Note any damage on the delivery receipt with a clear and accurate description, detailing the area, type and severity of the damage. ● Make sure the delivery receipt has

the date, time and signatures of the driver and your representative. Without this signed documentation you cannot collect damages! ● Inspect vehicles dropped after hours as soon as you come in. Notify the transport company and your fleet supplier immediately if there is any damage. Some truckers have been known to drop damaged cars after hours to escape blame. ● If the vehicles are dirty or snow covered and the driver cannot wait, inspect vertical panels and interiors before the driver departs. Note damages and write “subject to further inspection” on the delivery receipt. Include the reason (excessive dirt, snow, weather, etc.). Make sure the driver signs and dates the receipt. Wash and inspect each vehicle as soon as possible. Notify the transport company and your fleet supplier immediately of any damage.

Following Up on Inspections If there was damage on the vehicle when the driver picked it up, it will be noted on the delivery receipt. Call your fleet supplier in this instance. The supplier will contact the manufacturer for instructions to correct the problem. Follow these instructions or you will have no recourse. If the manufacturer tells you to take the car to the nearest dealer ASAP, do it! Do not take it to your favorite body shop or rent it for a month first. If you are having problems getting timely service from the dealer, call your fleet supplier immediately with the contact information of the dealer. The supplier should be able to get the manufacturer to motivate the dealer to expedite the process.

C A R

Any other damage is the responsibility of the transportation company. Get the transportation company’s contact information from the driver along with a copy of his insurance information. You will need to call the transportation company and find out what is needed to get the problem fixed. Do not wait and follow their instructions. Document your calls and their responses. Most transportation companies will quickly handle the problem, but some do not want to have the additional expense. Make sure your fleet supplier is in the loop. Remember, problems are the exception and most drivers will help you any way they can. The driver does not get paid for delivering your load until any problems are solved. Remember to treat the driver with respect—he too is doing his job. If you have questions, email Mark (mark@eckhausfleet.com) or Tim (tim@ eckhausfleet.com). We are happy to help anytime.

Email your fleet-related questions to Auto Rental News care of chris.brown@bobit.com or directly to Eckhaus Fleet at tim@EckhausFleet.com. Eckhaus Fleet is one of the largest independent fleet suppliers to the car rental industry.

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products & vendor news Bluebird Enhances Rollover Contract Function According to Bluebird Auto Rental Systems, a rollover contract is defined as a long-term (more than 30 days) rental agreement and there is a need to create an invoice (or receipt for credit card billing), and post both the revenue and payment for the month it was generated. When closing the contract, the total charges would be reduced by the total amount of the monthly billings as well as the amount due, showing only what was due after the monthly payments have been deducted. With the latest service pack for RentWorks version 4, B9, this feature is fully supported with the enhancement that the rollover invoice is now a Print Program Generator (PPGEN) form. The Rollover Processing report then generates the booked revenue entries for contracts which have been marked as Rollovers. You also have the choice of printing

A/R invoices, receipts (if the rental is being billed to a credit card) or not printing anything but the report. The Daily Business Report (DBR) should reflect the monthly revenue entries and payments while the contract is open, and the remainder on the DBR for the date the contract is closed. For more information on RentWorks or any other product from Bluebird Auto Rental Systems, call (800) 304-5805 or visit www.barsnet.com.

Travelclick Acquires Rubicon Travelclick, provider of revenue-generating solutions for hoteliers, announced that the company has acquired Rubicon, a provider of competitive marHART ket intelligence to the travel and hospitality industries and the rental car market. Tim Hart, former CEO of Rubicon, will become executive vice president and head of Travelclick’s Business Intelligence division and will report to Larry Kutscher, CEO of Travelclick. “By bringing together Rubicon’s strong relationships with major hotel chains and Travelclick’s established property-level relationships, we have created a unique and powerful offering,” according to Larry Kutscher, CEO of Travelclick.

CORRECTION In the 2011 Technology Handbook, the phone number for TML Information Services was listed incorrectly. The correct contact number is (516) 327-4300. Through its risk management solution DriverCheck, TML provides car rental companies with online access to official state driving records to confirm driving privileges and avoid problem rental transactions.

Sonata Launches “MilEdge” for the Global Car Rental Industry Sonata Software, an IT consulting and software services provider, launched “MilEdge,” a car rental management system at the Car Rental Show in Las Vegas. Designed for large and medium car rental organizations and auto leasing companies, MilEdge is a PCI DSS compliant comprehensive Web-based solution developed to support all stages of car rental operations, from front counter control to back office management, thereby creating a cohesive and efficient business environment. Sonata is implementing MilEdge at Arenco Group, the largest car rental company and owner of the Dollar and Thrifty brands in United Arab Emirates with a fleet of more than 16,000 vehicles. MilEdge is comprised of modules from Customer Enquiry to Vehicle Purchase, Fleet Management, Bookings, Rental Agreements, Transfers, Replacements, Rate Management, Payment Management, Fleet Movement Tracking, Incident Management, Vehicle Service, Loyalty Management and finally sale and disposal of the vehicles. The solution also supports handheld devices such as PDAs for counter and operations users to track vehicle movements and fuel dispensing from in-house fuel stations. The Web-based application is an easily customizable solution supporting multi-organizational capabilities.

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used car prices

AVERAGE AUCTION SALE PRICE – COMMERCIAL FLEET VEHICLES MID-SIZE CAR

FULL-SIZE PICKUP

FULL-SIZE VAN

SUV

$14,000 $13,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000

0 1 0 0 0 0 0 0 R-1 PR-1 AY-1 N-10 L-10 UG-1 EP-10 CT-1 OV-1 EC-1 N-11 EB-11 AR-1 JA F D N M O JU JU A S M A

West Central Midwest Northeast Southeast

MODEL

MA P .R .

SOUTH EAST

NORTH MID WEST EAST WEST CENTRAL COAST

AUDI A4 2008 4D SDN 3.2L QUATTRO 20,700 20,500 20,800 20,950 BUICK LACROSSE 2009 4D SEDAN CXL 14,050 14,050 14,050 14,050 2008 4D SEDAN CXL 13,450 *14,850 *14,300 12,700 CHEVROLET 1500 SILVERADO 2WD V-8 2008 REG CAB 4.8L 14,550 13,400 13,400 14,600 CHEVROLET COBALT 2009 4D SEDAN LS 8,350 8,800 8,800 8,900 2008 4D SEDAN LS 7,450 7,650 7,550 7,250 CHEVROLET COLORADO 2WD I5 2008 EXT CAB 3.7L LT 9,950 6,950 7,950 8,650 CHEVROLET EQUINOX AWD V-6 2008 4D SUV LT 11,450 14,200 13,950 13,300 CHEVROLET HHR 2009 4D SUV 2.2L LT 7,800 7,550 8,000 8,000 2008 4D SUV 2.2L LT *10,000 *9,900 *10,350 *10,150 CHEVROLET IMPALA V-6 2009 4D SEDAN LS 3.5L 10,200 10,000 10,450 11,150 2008 4D SEDAN LT 3.5L 9,650 9,400 10,400 10,200 CHEVROLET MALIBU V-6 2009 4D SEDAN 3.9L LT 11,400 11,400 11,700 11,400 2008 4D SEDAN 3.9L LT 9,750 10,450 10,650 10,850 CHRYSLER 300 2009 4D SEDAN 13,100 13,550 14,350 14,000 2008 4D SEDAN 11,700 12,050 11,950 12,700 CHRYSLER SEBRING V-6 2009 4D SEDAN LTD 9,850 8,950 10,050 9,400 2008 4D SEDAN LTD *12,200 *11,650 *11,200 *10,350 DODGE RAM 2WD V-8 2008 QUAD CAB 5.7L 18,100 16,150 15,750 18,200 FORD CROWN VICTORIA 2008 4D SEDAN LX 14,400 12,000 11,750 9,850 FORD EDGE 2009 FWD 4D SE 16,600 14,900 17,300 16,550 2008 FWD 4D SE 16,400 *15,200 16,300 16,500 FORD EXPEDITION EL 2WD V-8 2009 4D SUV 5.4L XLT 22,500 22,150 22,150 22,150 2008 4D SUV 5.4L XLT 19,500 20,150 20,150 21,250 FORD EXPLORER 4WD V-6 2009 4D SUV 4.0L XLT 17,150 16,800 16,500 14,250 2008 4D SUV 4.0L XLT 15,000 16,200 15,150 13,900 FORD F-150 2WD V-8 2009 EXT CAB 5.4L XLT 17,600 14,200 14,950 17,700 2008 EXT CAB 5.4L XLT 15,100 12,750 13,750 15,550 FORD FOCUS 2009 4D SEDAN SE 11,000 10,350 11,200 11,200 2008 4D SEDAN SE 9,600 *10,350 10,800 9,500 FORD FUSION 4-CYL. 2009 4D SEDAN SE 11,200 11,150 12,850 13,050 2008 4D SEDAN SE *12,250 *11,950 12,800 11,200

20,950 14,050 12,300 14,250 8,600 7,350 8,200 13,250 7,450 *10,250 10,350 9,500 11,400 9,400 13,900 12,200 9,200 *10,850 17,600 12,000 16,950 16,900 22,150 20,400 16,700 15,200 16,900 15,900 11,350 10,000 10,650 *11,950

THE GRAPH ABOVE REFLECTS ACTUAL AUCTION PRICES RECEIVED BY SELLERS OF COMMERCIAL FLEET VEHICLES. THESE VEHICLES GENERALLY HAVE HIGH MILEAGE. THE TABLE BELOW REPRESENTS THE WHOLESALE VALUES OF MODELS REGARDLESS OF SELLER.

MODEL

SOUTH EAST

NORTH MID WEST EAST WEST CENTRAL COAST

FORD RANGER 2WD V-6 2008 2D EXT CAB 3.0L XLT 10,500 9,050 11,050 10,100 FORD TAURUS 2009 4D SEDAN SEL 12,400 11,250 11,100 12,150 2008 4D SEDAN SEL 11,250 11,100 *11,650 9,550 JEEP GRAND CHEROKEE 4WD V-8 2009 4D WAGON LAREDO 20,500 21,600 22,550 23,000 2008 4D WAGON LAREDO 17,200 15,950 15,550 17,000 JEEP PATRIOT 4WD V-6 2009 4D SUV SPORT 13,900 13,900 13,350 13,900 2008 4D SUV SPORT 12,800 12,750 12,950 12,800 LINCOLN MKX AWD V-6 2009 4D CROSSOVER 24,950 24,950 24,950 24,950 2008 4D CROSSOVER 22,150 21,000 21,450 23,400 LINCOLN TOWN CAR 2009 4D SIGNATURE LTD 21,000 20,650 20,650 20,650 2008 4D SIGNATURE LTD 18,700 18,550 18,800 19,100 MERCEDES-BENZ S-CLASS 2009 4D SEDAN S550 65,800 59,350 62,100 63,400 2008 4D SEDAN S550 49,050 45,950 46,950 47,950 NISSAN ALTIMA 2009 4D SEDAN 13,650 11,750 12,350 13,100 2008 4D SEDAN *13,700 *13,050 *14,050 *14,150 PONTIAC GRAND PRIX 2008 4D SEDAN 9,050 9,800 9,750 8,950 PONTIAC VIBE 2009 4D WAGON 9,450 9,450 10,000 9,600 2008 4D WAGON *9,600 *9,600 9,600 *9,600 SAAB 9-3 2009 4D SEDAN SPORT AUTO 14,600 14,600 14,600 14,600 2008 4D SEDAN ARC AUTO 10,950 12,050 12,450 12,100 SUBARU OUTBACK 2008 4D WAGON 2.5L LTD 18,350 18,350 17,200 17,350 TOYOTA CAMRY V-6 2009 4D SEDAN LE 14,600 14,500 14,300 14,200 2008 4D SEDAN LE 13,300 13,500 13,200 13,450 TOYOTA PRIUS 2009 4D HATCHBACK 17,950 16,800 16,950 17,050 2008 4D HATCHBACK 16,500 16,200 15,950 15,950 TOYOTA TACOMA 2WD V-6 2009 DBLCAB 4.0L PRERUNNER 21,400 20,650 21,500 21,350 2008 DBLCAB 4.0L PRERUNNER 19,050 19,000 19,000 18,900 VOLKSWAGEN JETTA 5-CYL. 2009 4D SEDAN S 13,000 11,650 12,450 12,650 2008 4D SEDAN 12,200 10,650 11,100 11,000 VOLVO S40 2009 4D SEDAN 2.4L 12,400 14,550 13,550 13,400 2008 4D SEDAN 2.4L 13,200 *14,650 13,050 11,650

10,250 12,600 10,850 22,050 17,250 13,900 12,800 24,950 23,500 20,650 18,900 65,550 48,400 13,550 *13,550 11,550 9,300 *9,600 14,600 11,550 17,050 13,150 *13,850 18,000 17,000 21,850 19,300 13,400 11,100 13,400 *14,400

*VEHICLES NOTED HAVE HIGHER (OR EQUAL) 2008-OVER-2009 VALUES BECAUSE THE AVERAGE MILEAGE OF THE 2008 MODELS GOING THROUGH THE AUCTION IS LESS THAN THE 2009 AVERAGE MILEAGE. DATA PROVIDED BY MANHEIM MARKET REPORT, A DAILY PRICE GUIDE BASED EXCLUSIVELY ON AUCTION TRANSACTIONS. THE DATA IS BASED ON SALES AT MANHEIM’S 80 NORTH AMERICAN AUCTIONS. THE MANHEIM INDEX (MANHEIM USED VEHICLE VALUE INDEX) AT WWW.MANHEIMCONSULTING.COM PROVIDES “TREND” DATA FOR THE MOST RECENT 12 MONTHS AND IS UPDATED MONTHLY WITH COMMENTARY AND SEGMENT ANALYSIS.

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ad index COMPANY

PHONE

www.autorentalnews.com

WEBSITE

PAGE

Abrams Consulting Group ................ 914-696-5100 ...................abramsconsulting.com ................25

Bluebird Auto Rental Systems .......... 800-304-5805 ...................barsnet.com...................................11

Courtney Leasing, Inc......................... 407-438-0083 ...................courtneyleasing.com....................19

Fleet Job Finder.................................... — ........................................fleetjobfinder.com .......................21

GMAC Smart Auction........................ 877-428-9882 ...................aboutsmartauction.com.............C4

GMI Insurance Services ..................... 800-722-3229 ...................GMI-Insurance.com .......................5

Vice President & Group Publisher Sherb Brown — (310) 533-2451 Executive Editor Chris Brown — (310) 533-2499 greg.basich@bobit.com Web Editor Greg Basich — (310) 533-2572 chris.brown@bobit.com

Art Director Armie Bautista Production Manager Brian Peach — (310) 533-2548

Subscription Inquiries (888) 239-2455

Chairman Edward J. Bobit President & CEO Ty F. Bobit

Lancer Insurance ................................. 800-782-8902 x3027.......lancerinsurance.com...................C3

PurCo Fleet Services, Inc. ................. 888-PURCO 88................purco.com .......................................7

Chief Financial Officer Richard E. Johnson Editorial Consultant Howard Rauch

ADVERTISING MANAGERS

Rent A Toll ........................................... 877-509-9506 ...................rentatoll.com.................................17

Sonoran National Insurance ............. 866-998-1001 ...................sonorannational.com.....................3

Thrifty Car Rental ............................... 800-532-3401 ...................thrifty.com .....................................16

TSD Rental Management Software ................................................ 800-743-1200 ...................tsdweb.com ..............................C2-1

U-Save Auto Rental ............................ 800-438-2300 x146 .........usave.com ......................................19

Associate Publisher Joni Owens joni.owens@bobit.com (310) 533-2530

Fax: (310) 533-2503

Great Lakes Robert J. Brown 1000 W. University Dr. Ste. 209 Rochester, MI 48307 (248) 601-2005 Fax: (248) 601-2004 Printed in the USA All statements made, although based on information believed to be reliable and accurate, cannot be guaranteed and no fault or liability can be accepted for error or omission. acra Au

otive Fle et tom

The Advertisers’ Index is provided as a courtesy to Auto Rental News advertisers. The publisher assumes no responsibility for errors or omissions.

MAY / JUNE 2011 • ARN

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rent ALERT

FOR UPDATES,VISIT WWW.AUTORENTALNEWS.COM

ACRA Responds to Recall Legislation Legislators in Calif. and New York State have proposed laws to ground recalled rental cars. ACRA has issued a proposal that would categorize each recall by the nature of the defect and the potential for harm. BY CHRIS BROWN

California state Assembly committee voted 6-2 on April 5 in favor of The Raechel and Jacqueline Houck Rental Car Safety Act, which would be the nation’s first law forcing rental car companies to pull recalled vehicles off the road until they are fixed. The bill is named for two women who died in 2004 while driving a rented car that was the subject of a safety recall. California Assemblymember Bill Monning, D-Carmel, proposed the bill and said that a “loophole” in the law allows car rental agencies to rent out vehicles that have recalls while new car dealers are not allowed to sell cars that are under recall. The repairs must be California Assemblymember Bill made before the recalled cars Monning can be sold. The bill comes on the heels of similar proposed legislation in New York State. U.S. Senator Charles Schumer, D-New York, announced on March 2 the Safe Rental Car Act, which would ban recalled cars from being rented in New York. Regarding the issue of safety recalls, American Car Rental Association (ACRA) President Bob Barton was quoted in the New York Times’ blog “Wheels” on April 4. Barton asserted that all fleet operators and consumers need more information from manufacturers on the significance of a recall, whether the recalled vehicle is no longer safe to operate and how quickly a recall should be carried out.

ACRA Calls for Two-tiered System ACRA has issued a proposal for changing the current safety recall rules to a two-tiered system that would categorize each recall by the nature of the defect and the potential for harm. The position paper was released at the 2011 Car Rental Show in Las Vegas. Currently, auto manufacturers are required

by federal law to provide notice to vehicle owners when the manufacturer determines that a vehicle contains a defect that relates to vehicle safety, or fails to conform to an applicable motor vehicle safety standard. The notices include “an evaluation of the risk to motor vehicle safety reasonably related to the defect or noncompliance” and a statement of the precautions, if any, that owners should take to reduce the chance that the defect or noncompliance will cause a malfunction to occur. However, federal law does not require the manufacturer to advise whether the vehicle should continue to be operated until the defect or noncompliance is remedied. In addition, current rules prohibit a dealer from selling a new vehicle subject to a recall but do not prohibit the sale of used vehicles. Under ACRA’s proposal for a two-tiered rule system, safety recalls would lead to required delivery of Safety Recall Grounding Bulletins (RGB) and Manufacturer Product Information Bulletins (PIB) to vehicle owners and posting of those bulletins on the recall section of the National Highway Traffic Safety Administration’s (NHTSA) Web site. The safety RGB bulletins would require the owner or lessee of any vehicle (commercial use or private) to immediately cease operation of the vehicle and park or have the vehicle towed, according to ACRA’s position. The bulletins would be issued when the manufacturer and/or NHTSA believe continued operation of the vehicle pending completion of the recall remedy would pose a significant risk to public safety. A manufacturer PIB notice would permit a vehicle to be operated pending completion of the recall remedy, so long as the remedy was completed within an acceptable period of time as determined by the manufacturer and NHTSA, according to the ACRA position paper. A PIB would also specify whether remedial measures should be implemented pending completion of the reim call remedy as a condition of the continued ca operation of the vehicle. o

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