NEW YORK -- Fewer travelers taking to the skies has translated into
fewer customers at airport car rental counters, where the major car
companies derive as much as 90% of their business.
As a result, car rental bookings are down by as much as 20%
compared with the same period last year, according to Abrams
Consulting in Long Beach, Calif., although the car companies have
been able to weather the downturn by reducing fleet sizes.
"The drop in business hasn't been as devastating for the car
companies as it has for the hotel companies and the airlines," said
Jon LeSage, vice president and director of research at Abrams.
"The challenge for the car companies will be to figure out fleet
sizes and business plans for the peak summer season.
"It's very unclear right now whether there will be a lot of
pent-up demand for vacations or if business travel will pick up,"
LeSage said.
At Hertz, the country's largest car rental firm, a spokesman
said demand is "weak, and advance reservations have been worse in
recent weeks" due to the war with Iraq.
"The effect is most noticeable in international business, and
business rentals appear to have held up better than leisure demand,
probably for reasons we can all guess at," he said.
The elimination of flights by several of the major airlines has
been the biggest contributor to the car rental slump. By
comparison, many of the car companies report that off-airport
business is holding steady.
Up to 90% of rentals at Hertz, for example, are at airports, the
spokesman said.
Kaye Ceille, vice president of travel industry relations for the
Cendant Car Rental Group, which owns Avis and Budget, said, "If
people aren't flying -- for business or for pleasure -- our overall
business suffers. Our business is inextricably tied to air
travel."
Airport traffic accounts for about 85% of the business at Avis,
and for about 75% at Budget, Ceille said.
"We're actually in a great position to stay competitive in the
current business environment," Ceille said.
"With the addition of the Budget brand, we now have a
price/value brand as well as a service/value brand. This gives us
the unique ability to capitalize on different segments of the
business at all price points and service levels," she said.
In the first few days following 9/11, when the airlines were
grounded, car rental firms saw a significant spike in one-way
rentals.
Since then, demand from leisure travelers has outpaced that of
business travelers. During the last several weeks, however, there
appears to be more weakness on the leisure side, the Hertz
spokesman said.
Avis, Budget, Hertz and many other car rental firms waived
drop-off fees in the aftermath of 9/11, and most of the firms have
reintroduced this policy in the wake of the war with Iraq.
Under the car companies' policies, fees have been waived for
vehicles that are dropped off in different cities should air travel
be suspended. The car companies also have removed limits on the
number of vehicles rented for one-way use.
Car rental executives agreed that one of the biggest challenges
ahead will be anticipating demand during the peak summer season and
maintaining the proper fleet size to meet customer demand.
"At this point we're cautiously optimistic that our fleet size
is where it needs to be in the current economic climate," said
Ceille.
The Hertz spokesman said it is "crucial to maintain a balance in
the fleet so that we are both responsive to the current weakness in
demand but retain the flexibility to meet either a strong surge in
demand or further weakening in the near to medium term."
"We have taken proportional expense actions, including
fleet-related actions, but we are positioned to make adjustments to
changes in demand," he said.