Listed below is an opinion piece written by ACRA President Bob Barton in regards to Avis Budget for taking a step toward obtaining credit card information for bookings to cover no-show fees. This piece will be featured in the Nov. 19 issue of Management.travel.
Letter to the Editor:
This letter is in response to the article released on Nov. 5, 2009 by Jay Campbell, entitled, “Avis Budget Readies Capability for No-Show Fees.”
The initiative that Avis Budget is taking to require credit card information for bookings to cover no-show fees is a huge step in bringing the car rental industry up to the standards of the rest of the travel industry. The car rental industry is the only major travel segment that DOES NOT ask customers to guarantee their reservations with a credit card.
No-show rates have been shown to be as high as 30 percent in some locations. We strongly believe this is because there is no penalty imposed on the renter for not cancelling. Aside from the internal cost of operations incurred by the car rental company, there are third-party hard costs associated with each reservation, such as GDS segment fees, that have a direct impact on the car rental company’s bottom line. Why is it that we, as an industry, do not recoup these fees?
Our ability to service the customer properly is directly impaired by these no-shows. You will never hear from a customer who chooses not to pick up their car, but will most certainly here from the customer when a car is not available because the “anticipated” no-show customers actually arrived for a car.
New web technology has brought out companies that monitor reservations and rebook the consumer when others drop their rates. Let’s put this in perspective: For each vehicle a rental car company rents, assuming 80 percent utilization, a three-day length of rental, and a 30 percent no-show factor, hard costs for no-shows can easily be $60 per year for this vehicle. If you operate 2,000 vehicles, that cost is $120,000 a year; 20,000 vehicles costs $1.2 million. These are HARD COSTS. This does not even consider the soft costs, or more importantly, customer service issues from fleeting problems related to no-shows.
When you book a flight, you pay in full at the time of reservation. If you cancel any fare (except the most expensive unrestricted ticket), you get a CREDIT for future use. In other words, the airline keeps your money.
When you reserve a hotel online, you have one of two choices: You can book the non-refundable discounted Internet rate, or you can simply reserve a room. Under the Internet rate, if you do not show up, you lose your money. If you book the regular rate, all you have to do is call before 6pm and cancel to avoid a fee.
The car rental industry should do exactly the same thing. If you cancel your reservation, there is no fee. But if you do not show up within three hours after the time of the reservation, you are charged the first day, at a rate set by the individual company. The three hours comes from the GDS system requirements. You must hold a reservation for three hours after the scheduled arrival time for any travel product.
It is time for our industry to move forward. Think about everyday life. For example, you make an appointment with your doctor; if you do not show up, they will bill you for the visit. This is the same for a lawyer, same for the dentist, etc. Years ago, the car rental companies were given thousands and thousands of cars from the manufacturers to take up excess capacity. This is no longer the case. We all must operate much tighter fleets and manage our costs much better.
This is sound policy, and one widely accepted in the travel industry and daily life. Remember, it is not a fee, unless the consumer chooses it to become one by not cancelling.
Robert M. Barton, President
American Car Rental Association