Auto Focus

Dispelling Some Myths in the Car Rental Industry

Nostalgia is a seductive liar.

December 19, 2012

SHARING TOOLS        | Print Subscribe

In 2013, Auto Rental News celebrates 25 years of publication. Anniversaries are always a good time to take stock of where you’ve been and where you want to go. So I descended into the bowels of the building to the musty stacks of back issues for an education.

In perusing 25 years’ worth of articles, news items and editorials patterns started to form; cycles became clear; issues emerged and re-emerged, and emerged again. And some commonly held beliefs that I’ve heard throughout the years look more like myths with the benefit of time.

I’ll stab holes in these:

ADVERTISEMENT

“Car rental rates aren’t equal to the value of the service.”
It’s been a favorite pastime in editorials and letters to the editor in this magazine: “How can we rent such an expensive asset for so little? Have you seen the rates for a tuxedo or floor sander?” If you really think renting tuxedos is your thing, have at it, but you’re not looking at the big picture. Compared to 25 or 15 years ago, sophisticated yield management systems today are keeping cars out on rent more often. Rates are adjusted on the fly to match supply with demand. You’re no longer flying blind to the market around you.

A better analysis would be to track your revenue per month through the years and adjust it for inflation. Even more importantly, make sure your expense ratios are in line and that your fleet costs don’t get out of whack. The good news is that today you have tools to better control these things — while you’ll never control the rental rate of a tuxedo.

“There is so much turmoil in this business today; it wasn’t like this when I started.”
This phrase has been uttered often through the years, by rental operators being interviewed for an article and by editors assessing the events of the day. (“This year was one of the most tumultuous in the industry in a long time,” I’ve wrote on more than one occasion.) But in perusing back issues, was there really a year that wasn’t full of turmoil?

In our first year of publication, the big story was the push by the airports to assess fees from off-airport rental companies picking up airline passengers. Off-airport companies suddenly had a new fee structure tied to revenues and it pitted the big on-airport companies against the upstarts. It wasn’t pretty.

In our first few years we devoted countless articles to the licensing or all-out ban on the sale of collision damage waivers (CDW) as countless state legislatures took up the cause. “CDW is being attacked so heavily and by so many groups of people, that it appears that its future may be short-lived,” one editorial read.

From 1995 to 1997, seven of the top car rental companies were sold to new owners or went public. Moving forward, issues such as vicarious liability, caps on a renter’s damage responsibility and the rise of excise taxation threatened the very existence of many companies.

The turmoil never went away; it goes on and on. Sure, we may be busier today than ever, but we learn to adapt only that which we can handle. Expect turmoil and build change into the business plan.

“I pay my association fee, but it seems like nothing ever gets done.”
The evidence to the contrary is on the pages of ARN: In our first year we proudly reported that the American Car Rental Association (ACRA) was victorious in defeating the all-powerful National Automobile Dealer Association and its proposal to end discounts for fleet sales to car rental.

Also in 1998, the state of New York passed a bill that forced more than 300 rental car companies to close because it banned the sale of CDWs and limited the renter’s liability to $100 in damage costs per occurrence. The New York Vehicle Rental Association was instrumental in getting the bill amended.

ACRA and other coalitions fought for years to defeat unlimited vicarious liability in several states — a policy that had cost the industry more than $100 million each year in jury awards and settlements. In 2005, the federal highway bill eradicated it.

But the greatest successes may have been putting the brakes on legislation that never passed, such as the onerous and predatory taxes, fees and surcharges heaped on the industry in the past 15 years.

Yes, associations serving the auto rental industry have reinvented themselves more times than Madonna. But through the years they have managed to affect positive change for the industry. Today, ACRA is the strongest it has been in many years.

“The industry was in a much better place back then, sigh.”
Consider these points: Yugo no longer advertises in ARN as having “the best new car protection of any subcompact sold in America.” Articles no longer equate the cost and maintenance of a good computer system to a manager’s yearly salary. Rental is no longer the dumping ground for manufacturers’ overcapacity. Automation has leveled the playing field and provided an unprecedented level of transparency.

And you say, “It was better back then?” Hogwash. Nostalgia is a Norman Rockwell painting, re-creating a past that never existed. It is a seductive liar. So let’s use the past to look to the future and have this conversation after another successful 25 years.

Comments

  1. 1. Jim Tennant [ December 19, 2012 @ 11:31AM ]

    Great article, Chris. A very interesting perspective on the past 25 years and where we are today!

Comment On This Story

Name:  
Email: (Email will not be displayed.)  
Comment: (Maximum 2000 characters)  
Leave this field empty:
* Please note that every comment is moderated.

Author Bio

Chris Brown

Executive Editor

Chris Brown is the executive editor of Business Fleet Magazine and Auto Rental News. Through these publications, online newsletters, trade events and associations, Chris covers all aspects of the fleet world, including fleet management, manufacturer fleet activities, the fleet leasing industry, vehicle remarketing, rental industry news, car rental taxation and legislation.

Sponsored by

Newsletter

We offer e-newsletters that deliver targeted news and information for the entire fleet industry.



GotQuestions?

LUBRICANTS

The expert, Mark Betner from Citgo will answer your questions
Ask a question

Sponsored by

Magazine