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HUGE increase in rental car rates, and nothing about in on Flyertalk???

HUGE increase in rental car rates, and nothing about in on Flyertalk???

 
Old Jul 15, 2008, 12:47 pm
  #31  
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Originally Posted by icurhere2
Like $60 a day for a compact during the week? I had trouble with my coffee when that quote came up recently . . . I guess I might do hotel shuttles if it comes to that.
Then I try a last-minute booking and get a car for next week in LAS at $9.51 a day . . .
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Old Jul 16, 2008, 4:51 am
  #32  
 
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Originally Posted by icurhere2
Then I try a last-minute booking and get a car for next week in LAS at $9.51 a day . . .
At LAS, it is purely revenue management kicking in. The rate is average for rentals 30+ days out. 2 weeks out, the price drops or increases based on availability (lately it has been dropping). 1 week out, bargain basement kicks in unless bookings are very strong. It is consistent curve which works out well for the agencies since few people reprice their reservations as their pickup date approaches.

High prices are not here to stay - revenue management is here to stay.
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Old Jul 16, 2008, 7:42 am
  #33  
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Originally Posted by Mrp Alert
High prices are not here to stay - revenue management is here to stay.
I know all about revenue management - quotes for cars are higher for Monday only than they are from Monday through Wednesday.
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Old Jul 16, 2008, 6:57 pm
  #34  
 
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One-Way Rental

Any advice for renting a car one-way from Seattle to San Francisco?
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Old Jul 16, 2008, 8:19 pm
  #35  
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Originally Posted by FlyerFrank
Any advice for renting a car one-way from Seattle to San Francisco?
If you were repositioning a car out of Florida, Hertz would almost always have a phenomenal deal. I can't find anything under $350 for you, though.
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Old Jul 20, 2008, 12:46 am
  #36  
 
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It's in Sacramento too. Weekly rates have suddenly skyrocketed, almost doubled, from all companies. It's not supply and demand. No special events in town and the rental lots are glutted with available cars.
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Old Jul 20, 2008, 1:16 am
  #37  
 
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Originally Posted by Colfax
It's in Sacramento too. Weekly rates have suddenly skyrocketed, almost doubled, from all companies. It's not supply and demand. No special events in town and the rental lots are glutted with available cars.
it may not be sacramento's special event. Within NoCal they routinely truck cars to other events. Cars in SAC could easily end up at LAX, San Jose, Reno, SNA, Oakland, or SFO. The yield model would routinely raise prices to slow reservations in other areas to build up inventory, for which would be transferred to other locations.

During the Avis San jose Strike over 4th of july weekend 2005, we received 10 trucks of cars from reno, several from Sac, LAX. Most of the cars that I cleaned as a manager were from Reno.
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Old Jul 21, 2008, 5:33 am
  #38  
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Oh no! We're being screwed, too, by Segway rental companies.

A $5,350 Segway I2 rents anywhere from $150/day to $350/day! And we're complaining about $45/day rentals?

Look, folks, I like to rent cars cheaply, too. I cringe at the $750 bill I got for a six-day rental I did from Salt Lake to Denver in May. Granted, $75 of that was for a prepaid tank of gas and a good bit was the $25/day underage driver fee, but it's still a tidy sum.

But the attitude around here seems to be that the rental companies are screwing us and are involved in some giant conspiracy to swindle the traveling public out of their hard-earned dollars and fatten their profits up, when realistically, the rental companies are just trying to stay in business and are responding to market conditions.

Listen to ezmonee--he knows what he's talking about. It seems ludicrous that there are a bunch of posts claiming that "this isn't supply and demand--it's something else," but no one has been able to even put forth a theory about what that something else is--and then when some industry insiders post some thoughts and theories, they're basically ignored (the posts in this thread pretty much haven't even acknowledged any of the points I or ezmonee have made).

Normally, I'm a friendly, easygoing FTer and like to meet everyone and keep everyone happy (I don't think I've ever made a single sarcastic or negative remark in the AS or AGR fora, which I frequent the most), but it's sort of irritating that the only response to my point of view was, "Nope, don't buy that." Everyone after that just kept right on with the line that "rates are skyrocketing and this is horrible and it's not fair and no one has told us why and oh by the way it's not just market forces it must be some giant conspiracy."

Even ezmonee's expertise was basically ignored. Folks, LISTEN TO HIM! He's telling you the honest truth about what's going on!

It seems silly that everyone's in such an uproar that rental car rates are rising and is ignoring attempts to explain how costs are rising, but although people are annoyed that airline fares are rising, they understand it's a perfectly rational and understandable response to fuel costs rising. Well, fuel costs to the airline industry are analagous to fleet costs to the rental industry. Maybe you'll all get it when one or two of the major rental companies declare bankruptcy like some of the airlines have.

If you think rental rates of $200 to $300 per week are unfair and you feel like you're being scalped, well, then go start your own rental car company. It's not easy to be profitable when, for example, a small location's (with a fleet of around 1,000 cars) car payment is around $650,000 per month, maybe more. Crunching some rough numbers, I'd say that, given the average length of rental and number of rentals such a location would do per day, you'd need to rent cars at LEAST at $35 per day. When you factor in weekly rates and cheap weekend deals and the spread in rates you can get from the various car classes and all of those things, you have to offset those below-$35/day-averages with above-$35/day rentals. And that's just to cover the car payment. There's another $30,000 per month (or more) for staffing costs. We haven't even touched all of the other expenses (computer systems, data lines, airport leasing costs, facility and parking area mortgages, etc.).

I don't mean to be critical of other FTers. I don't intend this as a personal attack and don't have any one person in mind but rather am just trying to illustrate the absurdity in the overall attitudes I see in this thread. I'm not blindly trying to defend the industry, either--I understand that there are some unethical RAC operators out there and do not support their fraudulent tactics. But I feel insulted when someone throws out a broad accusation that all RAC operators are greedy and unethical or that locations of a particular company should be avoided because of a bad experience one person had at one location (and honestly, having worked in customer service for five long years, it is my impression that most (but, yes, not all) "bad experiences" are brought on by the customer's own stupidity). I feel the same way about this thread--like all rental agencies are being accused of bad business practices. That offends me. Some of us are trying to run an honest business, but if we don't respond to the market in this way, we might be gone by the next season.

Last edited by jackal; Jul 21, 2008 at 5:41 am
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Old Jul 21, 2008, 8:46 pm
  #39  
 
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Originally Posted by jackal
But the attitude around here seems to be that the rental companies are screwing us and are involved in some giant conspiracy to swindle the traveling public out of their hard-earned dollars and fatten their profits up, when realistically, the rental companies are just trying to stay in business and are responding to market conditions.
I think people here understand that car rental companies' costs are increasing and that rental rates must go up. What some of us are reacting to is that rates have suddenly jumped on the order of 70 or 80%, at least in some markets, rather than the 10 or 15 or even 20% we might have expected.

I've never had to pay more than $200/week for a compact in Sacramento, and usually less than $175. It might be $139 or $149 in a slow week and $189 or $199 when demand is high. It's been that way for years. Different companies have the best price different weeks but someone was always under $200, and usually several companies were. Now suddenly the cheapest compact is over $300.

There's no special event in town. Fewer people are flying into Sacramento than a year ago. When I rented on Saturday none of the rental companies had lines (the six biggest operate in a shared facility) and there were hundreds of available cars on the lots. So "supply and demand" by itself doesn't explain it for me.

You and ezmonee have done a good job describing the substantial costs the rental companies have to bear. But those costs have always been there. I think most renters understand that rental companies' costs are increasing and they expect and accept reasonable rate hikes. The question is why have the rates suddenly gone up so MUCH, at least in select markets?
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Old Jul 21, 2008, 11:10 pm
  #40  
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Originally Posted by Colfax
I think people here understand that car rental companies' costs are increasing and that rental rates must go up. What some of us are reacting to is that rates have suddenly jumped on the order of 70 or 80%, at least in some markets, rather than the 10 or 15 or even 20% we might have expected.

I've never had to pay more than $200/week for a compact in Sacramento, and usually less than $175. It might be $139 or $149 in a slow week and $189 or $199 when demand is high. It's been that way for years. Different companies have the best price different weeks but someone was always under $200, and usually several companies were. Now suddenly the cheapest compact is over $300.

There's no special event in town. Fewer people are flying into Sacramento than a year ago. When I rented on Saturday none of the rental companies had lines (the six biggest operate in a shared facility) and there were hundreds of available cars on the lots. So "supply and demand" by itself doesn't explain it for me.

You and ezmonee have done a good job describing the substantial costs the rental companies have to bear. But those costs have always been there. I think most renters understand that rental companies' costs are increasing and they expect and accept reasonable rate hikes. The question is why have the rates suddenly gone up so MUCH, at least in select markets?
Colfax... you stated it perfectly. When a rate of $94/week goes to over $300 overnight, someone telling me that it's just the company responding to supply and demand or that the company "is entitled to a reasonable business model" makes zero sense. And at the PDX airport, pick any floor of any of the rental companies, and there are lines and lines of cars sitting there UNrented. Although I appreciate the couple of posters trying to "explain", I do not "buy" an overnight increase of those proportions, and as Colfax accurately stated, there is no big event happening, and anyone glancing at the full garage full of rental cars, knows they are not flying out the door.
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Old Jul 22, 2008, 5:53 pm
  #41  
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This is an interesting thread. I have a couple of questions for the "conspiracy" folks:

1. Why would you expect a 10-20% rate hike versus any other amount? What is that based on?

2. If there truly so many cars just sitting on rental car lots, then wouldn't it make sense that the revenue management system of those companies would lower the rates at the last minute to sell it, like some have noted?

It makes good business sense to charge the highest prices people are willing to pay. Sometimes that means renting less vehicles at higher margins. And like some FTers have said, if the prices are truly higher than the consumers will pay, either a new company will come in and undercut the majors or the majors will see such a large decline in business that they will re-adjust their pricing. No?

I'm not trying to be rudely argumentative, just a little conversational.
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Old Jul 22, 2008, 8:31 pm
  #42  
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I dunno. Starbucks charges $1.55 for a tall. Imagine if you showed up tomorrow and it was $4.75? That's what prompted this thread. Yes, you'd think that if they just had rental cars sitting on the lot, they'd lower the rates at the last minute to move them off. Guess what, they use to do that (in PDX as an example), but now the rates remain the same regardless of when you re-check. You can walk the floors of the rental complex for the major rental cars in pdx, and see the cars lined up that are sitting there. Don't get it. You can go off site to Thrifty and also see cars, and their rates are no different. Still waiting for a plausible explanation, and no, don't do the conspiracy thing. Just the facts. Nothing wrong (cough) with $300/wk for an economy car...except it happened overnight and bears no relationship with past rental history during this time of year and is across the board with all companies. Now where's my medication...

Originally Posted by WChiCC
This is an interesting thread. I have a couple of questions for the "conspiracy" folks:

1. Why would you expect a 10-20% rate hike versus any other amount? What is that based on?

2. If there truly so many cars just sitting on rental car lots, then wouldn't it make sense that the revenue management system of those companies would lower the rates at the last minute to sell it, like some have noted?

It makes good business sense to charge the highest prices people are willing to pay. Sometimes that means renting less vehicles at higher margins. And like some FTers have said, if the prices are truly higher than the consumers will pay, either a new company will come in and undercut the majors or the majors will see such a large decline in business that they will re-adjust their pricing. No?

I'm not trying to be rudely argumentative, just a little conversational.
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Old Jul 23, 2008, 4:54 am
  #43  
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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.
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Old Jul 23, 2008, 12:54 pm
  #44  
 
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Originally Posted by WChiCC
This is an interesting thread. I have a couple of questions for the "conspiracy" folks:

1. Why would you expect a 10-20% rate hike versus any other amount? What is that based on?
10-20% wasn't based on number crunching, it's more just a feeling. Like everything is going up 10%...more that 10% if gas/oil is involved...so car rentals should go up 10% too, as part of general inflation.

It's easy to understand how the rising cost of fuel makes a plane ticket double in price. It's not as self evident how the energy crisis doubles the cost of renting a compact car, esepcially when the renter pays 100% of the fuel cost, in addition to the higher rental rate.

But I understand it's not as simple as that....as ezmonee explained there are other factors involved besides the retail cost of a compact car...higher fleet costs, lower resale values, and others...these "behind the scenes" costs affect the bottom line in ways that aren't obvious to a casual renter like me. Those factors would push rental costs up higher than the general rate of inflation. It just doesn't seem to me that altogether those factors should cause rental rates to double. But that's a feeling, not based on number crunching.

If it's true this is only happening in select markets...then I'd go with the theory that the companies are testing a new pricing model, and don't know themselves yet whether it will help or hurt. OR they're looking for a quick cash infusion to compensate for large losses from being stuck with too many rapidly depreciating large cars and SUVs. And once those large cars and excess cars are removed from inventory, which takes time, prices will return to "normal".

Just speculating.

Btw, here's what I did in Sacramento....I needed a compact for five days, pickup Saturday, return Thursday. Best price at the airport was $310/week, or $62/day average. I rented Sat and Sun from Dollar at their weekend rate of $26.55/day.

For the other three weekdays all six companies were over $80/day for a compact. Enterprise was $82 at the airport but $44 for the same car Downtown. I returned the Dollar car Monday morning, took a bus Downtown for $1.50, and rented from Enterprise there, three days for $132. Total cost before taxes $185 vs $310 for a five-day rental at the airport.
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Old Jul 23, 2008, 1:35 pm
  #45  
 
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back in 1970 in denver, it was about 25-30 dollars a day, plus 20 cents a mile, to rent a car.

through most of 2006,2007 the average cost to rent a car was 25-30 dollars a day, unlimited mileage.

c'mon guys. you act like a price increase wasn't coming....

seriously, as long as you are WILLING to pay the 300 a week rates, theres zero chance of it going down. if 20% of the traveling market decided it was cheaper to taxi-it, the prices would drop like a lead balloon even if meant operating in the red.

there IS NO new pricing model bieng tested. The truth is they have less cars to work with and what cars they do have have been procured at a greater cost, regardless of any observations on the number of cars on the lots.

Guys, when I worked in San Jose, there were at least 5 lots where I stored cars, only one of which (other than the main rental lot) was visible to the end user in any fashion. In those 4 lots not seen by customers eyes, I was able to store 3,000 cars. Or 0 cars. But typically on any given weekend (remember, avis was a weekday juggernaut, weekend leisure rentals wasnt avis' thing) there were 1,000 cars on the lots. I am willing to bet that nowadays those car counts are in the sub-150 car range and what cars they do have on lot are SUV's and minivans.

When I worked in Hawaii no matter which lot on any island there was storage lots for thousands of cars for the off season, but even so with the notable exception of specific high demand weekends there was still 300-400 cars sitting on the lots in reserve. Because of this thread I drove by the local storage lot and saw zero, none, nada cars in there.

Its important to iknow that Hawaii's tourism is DOWN right now, so for those lots to be empty means either they had less cars to begin with, or because demand was down they "turned back' a ton of cars in an attempt to save money. Either would have the effect in a pure yield based system of driving up prices.

Yield pricing goal is for the last car on the lot to be available for 1 million dollars a day. Every car reserved decreases supply, increases demand (for those of who have taken economics), and every time the supply decreases, and the price increses, the more people who rent as the supply decreases, the equilibrium point shifts.

Last edited by ezmonee; Jul 23, 2008 at 1:48 pm
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