Car-rental agencies turn to giveaways to beat competition
Car-rental competition is taking a new turn.
A year and a half ago, the country's leading renters were in a vicious war over prices; now they're battling over premiums.
Companies like Budget Rent a Car, Avis Inc., and National Car Rental System Inc. are competing in a limited market by offering everything from tote bags to small TVs. Hertz Corporation, on the other hand, is following the trail of the airlines with ''frequent flyer'' and point-accumulation promotions that can get you free rides on American Airlines and complementary nights at Holiday Inns.
''No one was gaining from the rate war,'' says John Britton, a spokesman for Hertz, a subsidiary of RCA Corporation. Hertz, which began its promotions on Oct. 1, says the move is ''to promote customer loyalty.'' Charles Ryan, vice-president of fundamental research at Merrill Lynch, Pierce, Fenner & Smith agrees: ''The rate war only got one-time customers. With the Hertz program, you'll continue to come back to gain more points.''
Like other industries, the car-rental business has been sputtering in the past few years. High interest rates (an important factor for a business that goes heavily into debt to buy new cars) and less airport travel have slowed its speed.
Avis, a subsidiary of Norton Simon Inc., suffered a $35.2 million dollar operating loss in the car rental business in fiscal 1982, which ended June 30. Early this year, the company changed management and began an aggressive advertising campaign - nearly doubling last year's budget, to $22.5 million. Since then, Avis reports its market share of airport traffic rising from 23.5 percent to about 27 percent in September.
Harry Savage, an Avis vice-president, attributes some of this gain to its premium promotion, which it started in August. By presenting a coupon, clipped from an airline magazine or other publication, renters can pick up a tote bag at the counter when they rent a compact or larger car.
The customer also gets certificates upon rental which can add up to a pocket calculator, an AM/FM walking stereo, garment bag, or a five-inch portable TV. The offer was recently extended to Jan 31.
''Demand was extremely heavy in August and September, and we expect October to be excellent too,'' Mr. Savage says.
Another ''perk'' for Avis travelers, he adds, is the ''frequent flier'' program in cooperation with Delta, United, Western, and Trans World Airlines. When you fly one of the airlines and rent an Avis car, you accumulate ''segments.'' They work toward flight discounts and free flights.
Hertz, the No. 1 renter, also has a point-accumulation system. Customers save points based on the number of rental days: 10 points for one to three days; 20 points for four days or a weekend. ''Weekend business is slow,'' Mr. Britton says.
Computers keep tabs on the points. Hertz notifies customers of what they are eligible for when they reach certain point levels. In the first four weeks of the program, over 1,000 winners were sent notices, Britton says.
The points can add up to free flights to anywhere in the US or Caribbean (but only on American Airlines), free nights at Holiday Inns and Marriotts, and free car rental.
Hertz does not give away gifts at the counter. ''How many pieces of luggage can a frequent renter use?'' Britton asks. With revenues up 12 percent for the first nine months of this year, Britton expects the travel-related offers will improve earnings even more. Last year the company suffered a severe loss in earnings.
But a Budget Rent a Car spokeswoman says people love tangible gifts. Budget, owned by Transamerica Corporation, has been giving away gifts such as umbrellas and luggage for five years. The company, made up mostly of franchises, increased its market share of major airport traffic from 14.7 percent in 1980 to 17.7 percent in September.
''Premiums are part of the car-rental industry now. Anyone that backed out would have to have their head examined,'' says the Budget spokeswoman. Apparently no one is getting out; more are getting in. National, a subsidiary of Household Finance Corporation, started its program on Nov. 1. National hands out a digital clock the first time a customer rents. Other electronic gifts can be worked toward.
But in a down period, ''no car-rental company will tell you anything negative about their premium programs,'' says Joseph Dowling, a Drexel Burnham Lambert vice-president. Mr. Dowling, who used to follow Transamerica Corporation, says he can't imagine that a premium would have that much influence on a traveler. He says he has accumulated about 75 days of car-rental time this year and, ''when I arrive at a destination and I'm tired, I couldn't care less what they were giving away.''
But as an executive at one of ''the four'' car-rental firms put it, ''if one company offers premiums, they all have to.''