No-show fees are brought up each year at the Car Rental Show, much like the way a politician will wag his finger during his stump speech. ("And another thing, we need more public school funding..." etc.) But this year felt different.
Moderated by Sean Busking, executive director of the American Car Rental Association and led by Bob Barton, the association's president, the ACRA panel examined three hot button issues facing car rental today: car class standards, airport fees and no-show fees. These issues were tackled from different facets of the auto rental and travel industries from a policy, management, IT, marketing and customer service perspective.
The majority of the session was spent discussing no-show fees. "We are the only segment of the travel industry that does not have a fee for no shows or a system to guarantee a reservation," said Barton.
When Barton asked the audience to stand if they paid for both their hotel room and airline ticket when they made their reservations, almost everyone stood up.
The panel stressed that the industry is not looking for a revenue grab, similar to airline baggage fees, but a way to better manage utilization.
"I don't care if I ever take a dollar from a customer for a no show," said Craig Parmerlee of Ace, who is working to formulate no-show fee guidelines for Open Travel Alliance. "I just want my customer to show up for the rental so I can plan my fleet better."
Barton iterated that "clear, concise and articulate" communication and disclosure to the customer are essential.
"It would behoove the car rental industry to present the no-show initiative as a way to manage inventory and fleet to provide better service to its customers," said Valyn Perini, executive director of Open Travel Alliance. "That's how the hotel industry presented it to its guests, and it's an accepted and rational argument."
Perini said that the OTAs have a reason to play ball with car rental. "Your distribution partners want what you're selling; you're holding the gold."
As one of two rules being written by Open Travel Alliance this year and to be published in December 2010, Perini saw the potential implementation of a no-show fee by Avis Budget in 2011.
Panelist Tom Spagnola of OneTravel.com said that on his travel portals, requiring a credit card at the time of booking (though not enforcing a no-show fee) has substantially increased the probability that the reservation will show.
Bob McAdoo of Avondale Partners, a car rental analyst with roots in the airline industry, recounted similar discussions when he was with People Express in the Eighties. Smaller airlines such as Morris Air would offer a fare reduction on a nonrefundable rate. "It wasn't the large airlines that started the move to guaranteed reservations, it was the small ones."
To that end, the audience of independents and franchisees weighed in. Estella Lo, a Budget franchisee in Vancouver, recounted that she tried to implement a no-show fee during the Olympics but saw her reservations drop sharply.
An operator from Alaska brought up the issue of no-show fees and credit card charge backs. A customer disputed the no-show fee and won because Visa has no policy on it for car rental, whereas credit cards do have a policy for hotel and airline reservations.
Another operator said she reduces no shows with a simple email confirmation. "If you don't ask for an email address and send them a follow up, to them it doesn't feel like a real reservation," she said.
The no-show problem is not just limited to North America. "American car rental, this is your mission and we trust you can figure it out," said Paulo Gaba Jr. of Sixt, who is also on the board of directors of the Brazilian car rental association.
If the car rental industry "can't figure this out" and allows the media to dictate how this is communicated to the public, "it could wind up in legislation," cautioned Busking.
To close the session, Barton asked for a show of hands of those who would like to see some form of no-show fee structure implemented. Again, almost everyone in the room raised their hands.
My take is that in this new era of tight fleets and still-depressed demand, there's little room for error now when it comes to satisfying a reservation. The industry is realizing higher revenue per unit, which only means that a no show is costing that much more. The GDS record locator fee charged for a no show is not going away. RACS are less inclined to chase market share right now (let's hope that holds) and are concentrating on the profitability of the transaction. No show fees are part of that equation.
Another thought: could a Hertz/Dollar Thrifty (or Avis Budget) tie up make implementation of a no-show fee easier to manage from an IT and business process perspective, and remove a layer of competitive disadvantage? Could a computer program identify reservations made by the same customer for the same time period across four brands owned by the same company, and then do something about it?
In the ACRA panel discussion there was talk of forming a working group to further study the issue and for ACRA to take the lead on floating some standards.
It is really up to the car rental industry's (soon-to-be) Big Three to take action on this for no-show to fly-but at the very least, in this panel and in other closed door sessions, there was for once some real meat to chew on, not just lip service.
Where are all the Six Sigma Black Belts out there? To paraphrase Craig Parmerlee of Ace: "The only acceptable utilization is 100 percent."