With high gas prices, more thrifty car renters think small
With high gas prices, more thrifty car renters are going energy-efficient.
— -- John Fischer, owner of a consulting firm in Houston, booked a midsize rental car with Avis for his trip to Orlando last month.
So he was surprised when the agent gave him a free — but unwanted — upgrade to a Hummer H2. "My gas bill was the same as my rental car bill for the four-day rental," he says.
In a reflection of how rising fuel prices are affecting all aspects of travel, demand for small and midsize rental cars is rising rapidly even as rental companies struggle to keep them on their lots. The shortage means rental companies must steer customers to larger vehicles, usually waiving the upgrade fees — but forcing consumers to pay more in gas.
"Four dollars (a gallon) has been the tipping point," says Chris Payne, a Dollar Thrifty Automotive spokesman. "Many customers don't want larger cars now."
Bookings for compact and economy cars rose 11% and 15%, respectively, in the second quarter, compared with a year earlier, according to Sabre Holdings, which owns Travelocity.
In contrast, bookings for the category of cars that includes SUVs fell 45%. Bookings for full-size cars remained flat, while intermediate and luxury categories fell 1.7% and 26%, respectively.
Even as they struggle to keep fuel-efficient cars on their lots, rental companies are running into financial obstacles in their quest to buy more small cars.
Until a couple of years ago, car manufacturers used to sell to rental companies at little profit "just to get the assembly line going," says Stephen Fitzgerald, Sabre's vice president of hotel and car distribution. This mutually beneficial relationship also allowed rental companies to sell their cars back to the manufacturers in less than a year to keep the rental inventories fresh.
But car manufacturers, whose business is in turmoil, have reduced capacity and are no longer making cars to just dump to the rental market. That means higher purchase costs for rental companies. The acquisition cost for Dollar Thrifty has risen 50% in the last two years, Payne says.
