Car Rental Prices On The Rise

Corporate Travelers from small and midsize companies that manage their travel are getting a 5 percent price hike in their car rental costs now that major rental car companies have eliminated base commissions.

Following the announcements last week by Hertz and Avis to eliminate base commissions paid to travel agents for negotiated corporate or government rentals booked by U.S. and Canadian travel agents, the remaining six large car rental agencies this week matched the cut.

ANC Car Rental Corp.'s Alamo and National Rent A Car, along with Budget Rent a Car and Dollar Rent a Car all announced their new policy, citing the need to be competitive in an industry already suffering.

The commission elimination deals a financial blow to corporations that had not yet negotiated commissions out of their car deals. Experts in the industry regard it as a price increase to such corporations. Companies that have not negotiated commissions out tend to be smaller companies or tend to have looser managed travel programs.

Car rental analysts said the move is no shock for an industry seeing continued low profit margins in a weakened economy. Hertz and the other companies formerly paid a standard 5 percent base commission to negotiated accounts, and the cut is expected to save the industry an estimated $60 million.

Both ANC's brands and Budget said they needed to revise their commission policy to remain competitive. Mike Going, ANC senior vice president of worldwide sales, said the brands will keep in place preferred relationships as part of their business strategy. Otherwise, "We can't afford not to make this move," Going said. Two-thirds of National's business is transacted through travel agents and 40 percent of that business will be affected by the change. All in all, ANC expects to see $10 million in savings.

Leader Hertz last week blamed weak travel demand and a pressure to reduce costs--concerns that were echoed by the other companies, which said they also needed to keep their costs in line competitively with Hertz.

The unilateral move does not affect travel agency overrides and bonus commissions, nor will leisure and non-negotiated business rentals be affected. Hertz will see a high seven-figure savings within a total estimated industrywide savings of about $60 million, according to Hertz's estimate--should every commission dollar that would be paid within this segment be withheld.

"The industry had to do something," said Neil Abrams, president of Abrams Consulting Group in Purchase, N.Y. "The car rental industry has been under more profit pressure than its sister travel suppliers. The softening began more than a year ago."

~Additional reporting provided by Ben Chapman