Dispelling Some Myths in the Car Rental Industry

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 magazines patterns started to form; cycles became clear; issues emerged and re-emerged. And some commonly held beliefs that I’ve heard throughout the years look more like myths with the benefit of time:

“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: “Why do tuxedos and floor sanders rent for so much, and a car for so little?” This ignores 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 and 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 today; it wasn’t like this when I started.”

This phrase has been uttered often through the years, by rental operators and editors alike. But in perusing back issues, was there really a year that wasn’t full of turmoil?

In our first year, 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 new fees tied to revenues and it pitted the big on-airport companies against the upstarts. It wasn’t pretty.

In those early 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.

From 1995 to 1997, seven of the top car rental companies were sold to new owners or went public. After that, 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.

We’re 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 nothing ever gets done.”

The evidence is to the contrary: In our first year 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 banned the sale of CDWs and limited the renter’s liability to $100 in damage costs. 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 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 predatory taxes, fees and surcharges heaped on the industry in the past 15 years.

Through the years ACRA has managed to affect positive change for the industry, and today, it is the strongest it has been in many years.

“The industry was in a much better place back then, sigh.”

Consider that 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 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 provides an unprecedented level of transparency.

“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.

This post originally appeared as a blog post from ARN's Executive Editor Chris Brown. You can see other posts from him on his Auto Focus blog.

Other articles from the January/February magazine issue can be viewed here.