HUGE increase in rental car rates, and nothing about in on Flyertalk???
Jul 23, 2008, 9:43 pm
#46
Original Poster
Join Date: Apr 2002
Location: Las Vegas
Posts: 1,172
Welp, let me tell ya...
Before my company or any of my employees pay $300/wk for an economy or compact car, I will buy used cars, park them in the cities in which we do business, and gladly pay the storage cost to make them available. No one gonna tell me that $300/wk rentals are flying off the shelf. R U serious?
It is entirely possible that the Thrifty yield management department has decided to pursue a new strategy of holding the rates high and letting cars sit instead of lowering rates to raise the number of bookings. Maybe they want to test the waters and see if it results in higher profits.
I haven't heard anything official or in writing, but then again, I'm not privy to those details.
If this is a new directive from upper management, would that count as a conspiracy?
I mentioned conspiracy because several of the original posts in this thread mentioned that it is happening all over and at multiple companies, and if people are demanding the answer to that, then the only possible answer I could think of is that it's a conspiracy among the RAC boards of directors or something. If it's just Thrifty at PDX or a few Thriftys, then I wouldn't say it's a conspiracy but rather just a simple policy decision or test.
Thrifty PDX was until recently a franchise. It was (within the last 2-3 years) bought by DTG corporate and is now a corporate store, so their rates and policies are managed by the corporate guys in Tulsa. So I'm not sure how localized this type of thing is.
My personal thoughts IF this turns out to be the case: I'm not sure it's a corporate directive. DTG president Gary Paxton specifically said once at a shareholder meeting that Dollar and Thrifty target the value market. They don't have the "full-service"* and business traveler/corporate account features and status programs that some of the "premium" brands (mostly Avis, National, and Hertz) have, instead targeting the leisure traveler (who is price sensitive). Paxton's rationale for this is that leisure travelers, on average, rent the cars for longer periods of time (5-7 days or more instead of 2-4 days). This helps keep staffing costs down, since the ratio of rental transactions to revenue rental days is lower--in other words, to achieve X revenue or X percentage of utilization, it can be done with fewer transactions, which allows a reduction in counter staffing, vehicle detailing staffing, lot attendant staffing, etc.
However, because DTG targets the leisure market, if they don't price lower than their competitors, they don't receive bookings. People aren't loyal to Dollar or Thrifty like they are to Hertz--I've only had a fairly small number of people tell me that they "only rent from Thrifty" (and even fewer that "only rent from Dollar"). I hear many more people tell me they "always rent from Hertz/National/Avis." The brand loyalty is less, so DTG relies on pricing.
So, I think this higher rate strategy is going to backfire on them. They'll be sitting on a bunch of cars and making $45 per day on 50% of them instead of $30/day on 90% of them. The math comes out better on the latter--unless they downsize their fleet so that 50% turns into 90% utilization. (That is happening at some locations.)
*I'm not entirely sure what, to the average leisure traveler, the "premium" brands offer over Dollar and Thrifty. The cars are typically just as new (in my experience) and rental policies are typically about the same. About the only difference I've really seen in the eyes of the general public is that, on average, the "premium" ones are more tolerant of damage to the vehicles and are less likely to pursue collecting on damage (which, if the company has to eat the cost of damage, is really bad business--losing money over damages could be enough to be the difference between a profit and a loss), but especially when you're dealing with franchises, the attitudes and policies vary more between the franchises and locations than the brands.
I haven't heard anything official or in writing, but then again, I'm not privy to those details.
If this is a new directive from upper management, would that count as a conspiracy?
I mentioned conspiracy because several of the original posts in this thread mentioned that it is happening all over and at multiple companies, and if people are demanding the answer to that, then the only possible answer I could think of is that it's a conspiracy among the RAC boards of directors or something. If it's just Thrifty at PDX or a few Thriftys, then I wouldn't say it's a conspiracy but rather just a simple policy decision or test.Thrifty PDX was until recently a franchise. It was (within the last 2-3 years) bought by DTG corporate and is now a corporate store, so their rates and policies are managed by the corporate guys in Tulsa. So I'm not sure how localized this type of thing is.
My personal thoughts IF this turns out to be the case: I'm not sure it's a corporate directive. DTG president Gary Paxton specifically said once at a shareholder meeting that Dollar and Thrifty target the value market. They don't have the "full-service"* and business traveler/corporate account features and status programs that some of the "premium" brands (mostly Avis, National, and Hertz) have, instead targeting the leisure traveler (who is price sensitive). Paxton's rationale for this is that leisure travelers, on average, rent the cars for longer periods of time (5-7 days or more instead of 2-4 days). This helps keep staffing costs down, since the ratio of rental transactions to revenue rental days is lower--in other words, to achieve X revenue or X percentage of utilization, it can be done with fewer transactions, which allows a reduction in counter staffing, vehicle detailing staffing, lot attendant staffing, etc.
However, because DTG targets the leisure market, if they don't price lower than their competitors, they don't receive bookings. People aren't loyal to Dollar or Thrifty like they are to Hertz--I've only had a fairly small number of people tell me that they "only rent from Thrifty" (and even fewer that "only rent from Dollar"). I hear many more people tell me they "always rent from Hertz/National/Avis." The brand loyalty is less, so DTG relies on pricing.
So, I think this higher rate strategy is going to backfire on them. They'll be sitting on a bunch of cars and making $45 per day on 50% of them instead of $30/day on 90% of them. The math comes out better on the latter--unless they downsize their fleet so that 50% turns into 90% utilization. (That is happening at some locations.)
*I'm not entirely sure what, to the average leisure traveler, the "premium" brands offer over Dollar and Thrifty. The cars are typically just as new (in my experience) and rental policies are typically about the same. About the only difference I've really seen in the eyes of the general public is that, on average, the "premium" ones are more tolerant of damage to the vehicles and are less likely to pursue collecting on damage (which, if the company has to eat the cost of damage, is really bad business--losing money over damages could be enough to be the difference between a profit and a loss), but especially when you're dealing with franchises, the attitudes and policies vary more between the franchises and locations than the brands.
Jul 23, 2008, 10:45 pm
#47
Formerly known as WChiCC
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I think I understand where everyone is coming from a little better now. It will definitely be interesting to see if this is a general trend or some limited-time fluctuation.
Jul 24, 2008, 11:19 pm
#48
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Before my company or any of my employees pay $300/wk for an economy or compact car, I will buy used cars, park them in the cities in which we do business, and gladly pay the storage cost to make them available. No one gonna tell me that $300/wk rentals are flying off the shelf. R U serious?
Jul 26, 2008, 9:43 pm
#49
Original Poster
Join Date: Apr 2002
Location: Las Vegas
Posts: 1,172
Welp, Thrifty just sent a new record for PDX. To rent an economy car 8/10 to 8/17 they are offering it for $389.27. If you hit their "hot deal, you get a compact for $334.00. Think I'll pass, although I would appreciate a photo of anyone signing a rental agreement on that $389.27 rate. Oh, I know, they are purposely raising rates 300% so their Chapter 11 filing will be more effective!
People pay $600 to $1,000+ per week in the summer in ANC, and they do that gladly. I haven't seen cars go out for under $75/day since early June. Of course, we are a VERY seasonal market (I'd estimate 75% of our year's visitors arrive between June and August), which increases demand and therefore rental (and hotel) rates.
Jul 28, 2008, 2:36 am
#50
Join Date: May 2005
Posts: 1,031
I have a picture of a customer signing a contract for a subcompact for one week at 629 per week. The reason why I took the pic was because All I had left on the lot at the time was a DTS and a Hummer and because his rate was close enough, he could have either as gratis upgrades.
the look on his face was priceless when they handed him the hummer keys.
the look on his face was priceless when they handed him the hummer keys.
Welp, Thrifty just sent a new record for PDX. To rent an economy car 8/10 to 8/17 they are offering it for $389.27. If you hit their "hot deal, you get a compact for $334.00. Think I'll pass, although I would appreciate a photo of anyone signing a rental agreement on that $389.27 rate. Oh, I know, they are purposely raising rates 300% so their Chapter 11 filing will be more effective!
Jul 28, 2008, 10:09 am
#51
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Jul 29, 2008, 2:55 pm
#52
Join Date: Jan 2007
Posts: 4
I don't want to "me too" but it's a slightly different perspective. We travel a lot and we can usually find the deals, either discount codes or PL/HW. HOwever, we are flying into MCI in two weeks and best we could find was $170 Thrifty, $250 avis, and since thrifty charges for a second driver the savings wasn't significant enough for me to go to thrifty.
$250? for MCI? I know the taxes there are a little crazy (also the case with Seattle, FWIW) But for the longest time i wasn't able to find anything to help us. A little creative research did, eventually.
We also made a reservation months ago for IAH for a three-day weekend this coming weekend for $86, which seemed a little pricey compared to what we could get. i'm now THRILLED we thought that far ahead. everyone is coming in at double that now.
i too wondered if this was a phenomenon. my dissonance is because there didn't seem to be a gradual price increase. it went from 'reasonable' to 'what is going on??.', imho. not being in the industry, my thought process was, "less people are flying, and less people are renting cars for the heck of it, so you'd think they'd want to keep the prices low to keep people renting cars." of course again i know nothing about the industry.
thanks for the insight.
$250? for MCI? I know the taxes there are a little crazy (also the case with Seattle, FWIW) But for the longest time i wasn't able to find anything to help us. A little creative research did, eventually.
We also made a reservation months ago for IAH for a three-day weekend this coming weekend for $86, which seemed a little pricey compared to what we could get. i'm now THRILLED we thought that far ahead. everyone is coming in at double that now.
i too wondered if this was a phenomenon. my dissonance is because there didn't seem to be a gradual price increase. it went from 'reasonable' to 'what is going on??.', imho. not being in the industry, my thought process was, "less people are flying, and less people are renting cars for the heck of it, so you'd think they'd want to keep the prices low to keep people renting cars." of course again i know nothing about the industry.
thanks for the insight.
Jul 29, 2008, 5:51 pm
#53
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Does this sounds like a strategy tried by some hotels -- instead of discounting rates to bring in lower-margin revenue, go for high rates that result in higher-margin revenue (even if the total revenue is lower somewhat)?
For rentals at airports, the car rental companies can probably get away with such a strategy a bit more than elsewhere. As those still traveling the most by air this year and renting cars at airports have greater disposable income (than the average customer last year), they can afford to spend more on average for car rentals too and so the car rentals are trying to squeeze as much out of whatever customer they get still at these locations.
For rentals at airports, the car rental companies can probably get away with such a strategy a bit more than elsewhere. As those still traveling the most by air this year and renting cars at airports have greater disposable income (than the average customer last year), they can afford to spend more on average for car rentals too and so the car rentals are trying to squeeze as much out of whatever customer they get still at these locations.
Jul 29, 2008, 9:37 pm
#54
Original Poster
Join Date: Apr 2002
Location: Las Vegas
Posts: 1,172
I doubt it's a strategy. If it is, every single rental company happened on the the "same strategy". And then I'd be accused of suggesting a conspiracy!!
Does this sounds like a strategy tried by some hotels -- instead of discounting rates to bring in lower-margin revenue, go for high rates that result in higher-margin revenue (even if the total revenue is lower somewhat)?
For rentals at airports, the car rental companies can probably get away with such a strategy a bit more than elsewhere. As those still traveling the most by air this year and renting cars at airports have greater disposable income (than the average customer last year), they can afford to spend more on average for car rentals too and so the car rentals are trying to squeeze as much out of whatever customer they get still at these locations.
For rentals at airports, the car rental companies can probably get away with such a strategy a bit more than elsewhere. As those still traveling the most by air this year and renting cars at airports have greater disposable income (than the average customer last year), they can afford to spend more on average for car rentals too and so the car rentals are trying to squeeze as much out of whatever customer they get still at these locations.
Jul 30, 2008, 7:39 am
#55
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I don't want to "me too" but it's a slightly different perspective. We travel a lot and we can usually find the deals, either discount codes or PL/HW. HOwever, we are flying into MCI in two weeks and best we could find was $170 Thrifty, $250 avis, and since thrifty charges for a second driver the savings wasn't significant enough for me to go to thrifty.
Jul 30, 2008, 8:20 am
#56
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Plenty of people make plenty of money on packaging and re-packaging many of the same concepts (whether from within the same segment of an industry or from other segments and other industries), often in quite short order, to several companies in the same industry at nearly the same time. I'm not suggesting that this is what necessarily has happened here, but enough car rental suppliers seem to have done much as the others have done before that this wouldn't require much more than even "monkey sees monkey does"
Aug 4, 2008, 1:57 am
#57
Join Date: May 2005
Posts: 1,031
"sir, this is a horrible price are you sure you want to do it? if it were me I would rather take a cab."
he said
"I need the car, a cab would be 3x this. I have no choice for what I am doing. In fact I really need a minivan, but the only thing that was available was the subcompact. my fault for booking three days ago."
I snapped the picture and told him "well...todays your lucky day..."
Aug 4, 2008, 11:50 am
#58
Join Date: Aug 2008
Posts: 1
No, something is going on.
Rented this weekend at Budget at EWR (Thrifty next to them, no change in price between the two). Chevy cobalt rental - $85 a day w/o insurance, addons, etc...! SUV not discounted.
Suspect that car residual values are crashing and the rental cars are jacking up rates to cover them. Fleet cars may not be disposable of in the current economic environment, particularly if things get worse - there will certainly be a glut of used automobiles.
Was very suprised. Cabs becoming a reasonable alternative at that rate.
Suspect that car residual values are crashing and the rental cars are jacking up rates to cover them. Fleet cars may not be disposable of in the current economic environment, particularly if things get worse - there will certainly be a glut of used automobiles.
Was very suprised. Cabs becoming a reasonable alternative at that rate.
Aug 4, 2008, 6:02 pm
#59
Join Date: Oct 2007
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More SMF stories
While I have some cheap leisure rentals coming up this month in other parts of the country that are well below $15 per day, SMF is an interesting scenario.
For 'peak' rentals, typically, I would see daily rates of $50-$60 per day, and I could bid $25 or so and get it on PL. Now, I am seeing daily rates as $70-$90 per day, and bids below $50 are getting rejected. So, something has changed dramatically in the past few months.
On the lot, I didn't see a lot of cars, but didn't see many renters either. All of the scenarios of transfering cars, much more turnbacks, less program cars, etc. etc. can all be true, but from a renter point of view, I guess it is just hard to swallow no matter how needed it is for the rental companies to survive.
Rasheed
For 'peak' rentals, typically, I would see daily rates of $50-$60 per day, and I could bid $25 or so and get it on PL. Now, I am seeing daily rates as $70-$90 per day, and bids below $50 are getting rejected. So, something has changed dramatically in the past few months.
On the lot, I didn't see a lot of cars, but didn't see many renters either. All of the scenarios of transfering cars, much more turnbacks, less program cars, etc. etc. can all be true, but from a renter point of view, I guess it is just hard to swallow no matter how needed it is for the rental companies to survive.
Rasheed
Aug 5, 2008, 4:11 am
#60
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FWIW LAS weekend rates at Avis just crashed, but are not quite as low as they were earlier this summer. Hertz is up slighlty based on increased demand, and Dollar, Thrifty, Alamo and Advantage are at the lower ends of their normal pricing.