Car renters come across steeper rates
By Roger
Yu, USA TODAY
May 2005
Car-rental
prices are rising, the result of growing demand from a
rebound in travel and a tight supply of vehicles.Driving
away from the rental car counter may cost about 12% more
this summer.
Expedia,
one of the largest online travel-booking sites, reports an
average daily rate for May of $28 before taxes and fees, up
12% from a year ago. And Expedia's Noah Tratt says travelers
should expect more of the same.
We're
getting a flavor of what summer's going to be like," Tratt
says.
Despite
recent increases, car-rental prices remain short of their
pre-9/11 levels. So far this year, the average daily rate
for cars booked at Web site SideStep is $30.15, vs. $35.98
in 2001.
Pushing
costs higher:
•Tighter
supply of cars.
Carmakers have cut back on their sales to the rental market,
which helps to sustain new and used car prices.
Rental
companies are in no hurry to expand anyway. In general, they
like the current equilibrium between their supply of cars
and traveler demand.
•Higher
demand.
Air travel has rebounded strongly from its post-Sept. 11
drop-off, creating more demand for available rental cars.
A rebound
in business travel has had a particularly strong effect on
prices, says Scott Deaver, the marketing chief at Cendant
Car Rental Group, parent of Avis and Budget. Last year, he
says, "Business travel was very soft."
•Fees and
taxes.
Local governments are adding or increasing taxes and fees. A
March study by online travel site Travelocity said taxes and
fees on airport rentals have increased base rates by 25.8%
in 2005, up from 24.4% in 2003.
'Business is robust'
Surveying
business conditions, Gary Paxton, CEO of Dollar Thrifty,
told Wall Street analysts in April that he's "looking for
more favorable pricing" for the industry, at least through
the end of the year.
"Business
is robust, both at airports and non-airport locations,"
agrees car-rental consultant Neil Abrams.
John Chan,
a Los Angeles-based technology consultant who rents cars
about 40 times a year, has noticed the higher prices. Cars
he rented for $35 a year ago are running closer to $40, he
says. "And the fees and taxes are also going up, like 20%.
It's ridiculous."
The
greater demand for rental cars in 2005 underscores a general
rebound in the travel industry. Airline traffic in the USA
was up 5.4% in the first quarter, according to the Air
Transport Association. Hotel and resort companies are also
seeing more customers this year. And price increases have
been common in all segments of the travel industry,
including airfares and hotel room rates. Like airlines'
recent success in keeping most of their seats filled,
rental-car companies are keeping most of their cars rented.
And that helps them get the price they want.
Dollar
Thrifty's Paxton said in April that a key contributor to
record first-quarter earnings was the fact that 84.3% of its
fleet was being rented on average at any given time during
the quarter.
Carmakers cut rental fleet allotments.
Rental
companies "can't do much better than" 85% to 90%, says Sherb
Brown, publisher of Auto Rental News.
Part of the
reason rental companies are enjoying their nearly empty lots
is a limit on the new cars available to them. Manufacturers
have cut allotments.
Rental cars
quickly find their way into the used car market, and a glut
of late-model cars from rental fleets can hold down new car
prices.
Carmakers
themselves have been in and out of the business of owning
rental companies. Chrysler, forerunner of DaimlerChrysler,
once owned Dollar and Thrifty but spun them off. Ford Motor
owns Hertz, but the manufacturer said it plans to spin it
off.
George
Pipas, a sales analyst at Ford, says carmakers are either
cutting back or keeping rental-fleet sales the same this
year. But manufacturers shouldn't be blamed for rising
prices. Rental companies have other means of obtaining new
cars, such as wholesale or retail distributors, Pipas says.
Abrams
agrees that rental companies have been conservative in
adding cars in response to growing demand. That, he said,
could mean more days with no cars available later this year. |
