Rental Car Rates Expected to Rise for Third Year in a Row

Business travelers who rent cars are about to take another hit in the pocketbook.

Rates are likely to go up again, mainly because the prices Detroit charges for new fleet cars have risen again, for the third year in a row, the rental car industry reports.

A recent survey from Runzheimer International, a Wisconsin-based consulting firm, pegs the probable increase in rental rates at 10% to 15%--a jump it says is considerably larger than business travelers are likely to encounter for air fares, hotel rooms or meals.

On top of that, there is evidence that gasoline prices are edging up. They did not fall following the summer travel season as they usually do, and market factors along with regulatory changes may result in more increases this winter.

Joe Russo, vice president for government and public affairs at Hertz Corp., says there will be another 30% increase in fleet costs--the prices the companies pay for their new cars--across the industry this autumn, the third in three years.

“And the industry has seen a contraction in available supply, particularly from General Motors--all of which means tremendous pressure on prices to move up,” he said.

“So we can anticipate higher car rental rates, starting this fall. I don’t have a number, but to put it in perspective fleet costs account for about a third of (car rental company) costs--the other components include insurance, staffing, facilities and so on,” he said.

“But no one in the industry is escaping it,” he said.

“The question is will it (the increase) stick. In the past, prices moved up but were somewhat peeled back market by market depending on competitive factors, the mix of leisure and business travel and how much traffic the airlines were attracting,” Russo added.

Another on-the-road expense is also rising.

Bob Diener, whose company books hotel rooms through volume purchases--what the industry calls a “consolidator”--reports that some room rates have risen by as much as 10% to 15% recently because hotel occupancy rates are up.

“Because most of the discontinued (room rate) programs were offered for midweek travel, the business traveler is going to feel the brunt of these price increases,” he said.

Diener’s company, Dallas-based Hotel Reservations Network books rooms at rates it says are as much as 60% off the listed prices in more than 20 U.S. and European cities.

Steve Cornwell, president of Express Reservations in Boulder, Colo., a company specializing in New York and Los Angeles hotel rooms at discount rates, agrees that prices are firming up in both cities.

He said in the case of New York City, business is picking up because of an improved economy and the fact that room taxes--which were the stiffest in the country--are being rolled back. In the case of Los Angeles, the damper placed on travel by earthquakes and civil disturbance has eased.