As rental firms and their customers adapt to a tougher market, older fleets and car sharing are becoming commonplace, reports Felicity Cousins.
Last month The Independent said the car industry was in “intensive care” as a result of the dismal global economy. Neil McCrossan, chief executive of Nexus Vehicle Rental, explains how this will affect the car rental scene for business travellers: “Manufacturers will be doing less business with rental companies at the traditional rate, so I think you’ll see older, smaller fleets,” he says. “Travellers may also see unfamiliar vehicles as rental companies buy opportunistically.” Anita Jarratt, business travel manager at Europcar, confirms the state of play. “The downturn is having a major impact on new car sales and the fallout will be keenly felt by rental companies,” she says. Although manufacturers have traditionally worked closely with car rental firms and used them to showcase new lines in a sort of extended test drive – Ford owned Hertz and Volkswagen owned Europcar until a few years ago – at the moment there is something of a stand-off between the two sides. Manufacturers are not releasing as many new cars into the market and when the older cars go over the agreed mileage limits as a result, they are not buying them back. Andy Lewis, head of marketing and e-commerce at Budget Rent-a-Car, says the company will be topping up its current fleet rather than replacing it all at once. “No one in the industry knows how much demand there is this year,” he says. “Manufacturers can simply stop producing cars if they like for, say, four months, so we have to keep an eye on what we are ordering. The last thing we want to do in this climate is commit to a large fleet without using it.” Neil Cunningham, general manager at UK Hertz, adds: “There are fewer people travelling so there are fewer people renting. We’ve been keeping cars for longer. It used to be six to eight months but now you are seeing cars that are 18 months old. They are still perfectly good cars that are well maintained and serviced – they’re just older. It’s been like this in the US for the past few years and is a direct result of the credit crunch.” Lewis agrees. “It used to be the case that every six months, or around 12,000 miles, a fleet would be replenished, but this year it will probably be seven or eight months and up to 18,000 miles,” he says. Although business travellers will start to see older cars with more miles on the clock, Cunningham stresses that this will not affect the service customers receive. “I mapped the satisfaction scores in our customer survey against the age of the cars and found there was no direct relationship,” he says. One aspect that will change this year is cost. McCrossan at Nexus says pricing will go up and travellers will have to book further in advance to get availability. Budget’s Lewis agrees. “Business travellers will be paying a slightly higher rate this year as they tend to book at the last minute,” he says. Just as travellers are becoming more cost-conscious and looking more closely at their travel patterns, Jarratt at Europcar believes rental firms will have to adapt to a different model too. “We need to understand how people are travelling,” she says. “We are encouraging customers to look outside the traditional daily rental and to look at hourly rentals. For business travellers particularly, renting by the hour or car sharing or renting from one airport to another is an option.” Europcar has locations at 53 UK airports and London Heathrow’s T5 is its biggest branch, with 4,500 cars. If you are not looking for a car at the airport but are instead in a city centre, a recent phenomenon is car-sharing clubs. Two of the largest in the UK are Streetcar and City Car Club, with about 50,000 members combined. The idea is that you pay an annual fee and then pick up and drop off cars when you need them, paying by the hour. These firms are based predominantly in London but have been such a success that they have spread to several other city centres across the UK, including Edinburgh, Birmingham, Brighton Bristol and Oxford. Andy Lewis at Budget says: “We were involved in one of the first clubs in 1999 in Edinburgh but at the time there was not much interest. Now there has been an acceleration of interest among individuals, but business users sometimes need a car immediately and these clubs cannot guarantee availability. I think with the environment throwing up questions of car ownership, and car-sharing clubs being exempt from the congestion charge, this could be the right time for them.” Avis also dabbled in the car-sharing idea, launching Urbigo in London in 2002, but, like Budget’s scheme, there was not much interest. Now the firm offers corporate clients a car-pooling programme – a similar idea as it effectively means a company has a vehicle on-site all the time – with a day rate starting from £15. Hertz launched its own car-sharing club, Connect by Hertz, in December last year, and has had a positive response, already attracting more than 3,000 members worldwide. The scheme is available in London, New York and Paris. “If you are a business traveller going to other cities you can share your car around the world. It’s all about convenience,” Cunningham says. McCrossan at Nexus Car Rental says: “Car sharing is a good idea. Businesses often rent multiple cars for people going to the same place but it’s quite hard to change people’s behaviour. We were saying this a while ago and companies were saying, ‘Yes, we agree, but we don’t have the resources to change’ – in times like this they have slightly different views.” Cunningham says: “Car sharing is at one end of the spectrum and rental is at the other. You rent a car to get from A to B and you car-share because you are in a city you don’t know and you need a car. If you are flying into an airport then rent a car, but if you are in inner-city London then take it from Connect.” Connect by Hertz costs £50 a year and from £3.95 per hour. If you keep the car for 24 hours you only pay for eight. The economic climate is making business travellers think harder about what they need, and therefore influencing what rental firms need to do to keep them on board. Avis has launched its own blog, wetryharder.co.uk, for customers to find out about new cars joining the fleet, offers for leisure and business travel and post discussion points. The idea is to get everyone talking so that Avis can offer its customers what they want. Lewis believes Budget is in a perfect position as a low-cost rental company to adapt to market conditions. “We have positioned ourselves as the Easyjet of car rental, which is a very positive thing,” he says. “It’s starting to be trendy to be frugal.” The no-frills approach works with car rental as most business travellers want to spend as little time as possible at the pick-up/drop-off point. Avis has a three-minute promise whereby preferred customers (anyone who signs up for it) can be compensated £20 if their keys are not with them within three minutes of asking at the desk. Hertz also has plans to streamline the process. “We are rolling out our self-service kiosks at London Stansted and across Europe,” Cunningham says. “We also have online check-in so you can do this before you get to the counter.” Car rental firms cannot get rid of serviced counters altogether, however, as by law customers still need to present their driving licence. Some people worry that as the recession bites further, green issues will be left by the wayside. Lewis says: “People expect that green means cheaper but this is not always the case. Budget has the Honda Civic, which is petrol-electric, but we have found it hard to charge a premium for this as people expect it to be less expensive. Inherently manufacturers are becoming greener and as we change our fleet every couple of years, emission levels have been reduced noticeably.” Europcar’s Jarratt agrees. “Lots of people talk about the environment being their main issue but when it is more expensive they don’t want to know. We are working with the manufacturers to identify the most economical cars to purchase and run, and are moving customers into smaller, more fuel-efficient vehicles to reduce costs.” There is hope for a greener future yet. Lewis says the electric Tesla Roadster – a US brand based on the Lotus Elite – is doing well. “Electric cars cost a lot at the moment but the technology is there,” he says. “Companies will push for everyday vehicles and five years down the line we will start to see pure electric fleets. I think in the coming years electric cars will come into their own.”
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