The Challenges of Implementation
There are competitive issues to consider as well. What if not all the big car rental companies decide to implement these policies? What about the intermediaries, like the big online travel agencies? What if they decide not to honor the no-show policies of their rental car supplier partners by not collecting and sending credit card information to the suppliers?
Avis Budget takes a pragmatic approach to intermediary adoption. "We think the credit card requirement may not work on every channel," said John Barrow, vice president of communications for Avis Budget. Certainly there is some segmentation of car rental customers, like those who are vested in a loyalty program like Avis Budget's Wizard or FastBreak programs, and treating segments differently is a reasonable approach.
There is precedent in the U.S. car rental industry for full- and part-prepaid models, including payment up front for long-term rentals, for discounted rates and for certain types of specialty cars. In Europe and many other parts of the world, the pre-paid model is predominant.
According to Bobby Healy, chief technology officer of CarTrawler, a company that provides rental car inventory to suppliers and distributors around the world, when a consumer pays for the car rental up front, it makes a huge difference in how the consumer manages the transaction.
"Levels of no-show are almost zero when any amount of cash is taken up front, but grows to about 20 percent when no commitment is made to the car rental company or intermediary," said Healy. "Often reconciliation between the supplier and the intermediary is difficult due to the black hole known as no-show, and of course this makes car rental a less attractive revenue generator to intermediaries."
Ready Technology
The technology to support this policy is pretty straightforward compared to the business challenges. This can be accomplished by adding a few fields to search, availability, book messages and the databases, as well as by modifying the user interface to display fees and terms and to collect a credit card number.
There is the not-so-small issue of full development calendars and allocation of scarce and expensive technology resources, but the actual technology work to be done is not cutting-edge.
The OpenTravel Alliance, which creates XML messaging standards travel companies use to exchange travel information and execute transactions, will release messages to enable the communication of no-show fees and policies in December 2010. (Participating companies include Avis Budget, Hertz, Rent-A-Wreck, Ace Rent A Car, Enterprise Holdings, Payless, Sabre, Amadeus and Travelport).
Avis Budget is working with GDS to implement this functionality in EDIFACT, the communication technology used by GDS and the big online travel agencies, although one large OTA is already grumbling about the overuse of free-text fields proposed by Avis Budget in EDIFACT. For this reason, the distribution of no-show fees and policies to the large third-party distributors may not be as smooth, or as speedy, as expected.
Barrow says Avis Budget will implement this policy in 2011 and is discussing timelines and other issues with its trading partners now.
Following the Success of the Hotel Industry
Individual hotels can set their own policies (4 p.m. or 6 p.m. cancellation notification, one night or full-stay charge for no-show, suspension of fees based on weather or other conditions, etc.). However, policies industry-wide are consistently implemented, and experienced travelers are conditioned to give a credit card number and make sure they notify the hotel if they aren't going to show up. As a result, the hotel industry has a no-show rate in the low single digits and can be confident in their pricing and occupancy management practices, not to mention keeping their operations costs down.
There is the issue of terminology, which the car rental industry has not yet solved. The hotel industry uses terms like "guarantee policy," "deposit policy," and "cancellation policy" to present information to guests.
Barrow at Avis Budget thinks the car rental industry has its work cut out for it. "This is a customer-friendly initiative," said Barrow. "Calling it a no-show fee puts it in the worst possible light. At Avis Budget, we're referring to it as a 'credit card requirement.' It allows us to provide discounts on pre-paid rentals and enhances our ability to manage our fleet to our customers' benefit."
The hotel industry was able to get its customers to change their behavior for the benefit of both the hotels and their customers. The rental car industry would be smart to follow suit.
Craig Parmerlee, director of business development for Ace Rent A Car, puts it like this: "If we never collect a penny from a no-show fee, I would be happy. We want the no-show fee to change consumer behavior such that they cancel any reservations they don't plan to use. It's as simple as that."
As executive director of the OpenTravel Alliance, Valyn Perini oversees the operations of the organization, including developing and executing strategies to standardize electronic distribution of traveler information in the travel industry.