Guaranteed Reservations: Are We Ready?

The hotel industry implemented no-show terms and fees during the 1970s and 1980s, and they are an accepted industry practice among travelers. So why are car rental companies late to the dance?

The financial implications are hard to ignore:

Ten to 30 percent of all post-paid reservations are no-shows, depending on the channel booked (direct to supplier has a lower no-show rate while large travel portals have higher rates).

As a result, car rental companies, especially in high-demand markets, routinely overbook, risking a complete inventory sell-out. This leads to an additional cost of renting cars from competitors and engendering the ill will of customers.

Car rental companies are sometimes forced to upgrade customers at no charge due to sold-out classes, a lost opportunity to charge for that upgraded vehicle.

Car rentals are perishable inventory units; every day a car doesn't get booked is a day of lost revenue that can never be recovered.

Throw into the mix the fact that the car rental industry has undergone a profound shift from using program vehicles to risk vehicles, and the result is less flexibility and room for error in fleet management, placement and pricing.

At the 2010 Car Rental Show, the American Car Rental Association held a panel discussion with no-show fees as a topic. ACRA President Bob Barton asked the audience to stand if they paid for both their hotel room and airline tickets when they made their reservations. Almost everyone stood up. To close the session, Barton asked for a show of hands of those who would like to see some form of a no-show fee structure implemented. Again, almost everyone in the room raised their hands.

In Open Discussion

The car rental industry is talking about it. Last fall, Avis Budget Group started talking to the global distribution systems (GDS). American Car Rental Association (ACRA) posted an open letter supporting the initiative and recently had an op-ed published in Business Travel News. Avis Budget, along with several other rental car companies and distributors, is leading a project team within OpenTravel Alliance, a trade travel association, to add no-show related data elements to its standard XML messages.

At the 2010 Car Rental Show (CRS) in Las Vegas in April, ACRA held a meeting to discuss this issue with suppliers and distributors, and held a panel discussion on this topic during the conference.

As with any new business initiative, applying a cancellation policy and assessing no-show fees can be contentious. At the CRS panel discussion, audience members recounted positive and negative accounts of requiring some type of payment, or guarantee of payment, at the time of booking.

CONTINUED:  Guaranteed Reservations: Are We Ready?
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  1. freeb [ August 11, 2010 @ 04:16PM ]

    Can't cancel a reservation booked directly with the company? No problem, with Priceline I still can't cancel, but at least the rate is much cheaper.

  2. benM [ September 29, 2010 @ 10:30AM ]

    Due to the fact that people know they do not have to pay a deposit to secure a vehicle. They go ahead and book several location same day. Hertz, Avis, Enterprise even budget or have multiple booking in the same company different location. This is a loss to the company. I am for introducing credit card deposit at the time of booking

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