Car rental companies raise rates, cut workers to keep up

To many frequent renters, it's obvious that the economic slump has hit the car rental industry.

Business travelers say they're receiving cars with more miles on their odometers and less maintenance. They also say rates are rising, and there's less staff to handle check-in and checkout.

With fewer renters, rental car companies are eliminating jobs and closing some off-airport rental locations.

"These are troubling times in the industry," says Chris Brown, managing editor of trade publication Auto Rental News.

Among recent developments:

•Avis Budget Group this month eliminated 2,200 jobs — about 7% of its employees — to help reduce costs $150 million to $200 million annually. Hertz says it laid off 2,000 workers this year, and Dollar Thrifty, Enterprise, National and Alamo also reduced their workforces in recent months.

•Hertz reported that net income dropped 94% to $63 million during the first nine months this year. There also was a 2% drop in the number of days its cars were rented.

•Advantage Rent A Car, which bills itself as "one of America's fastest-growing car rental companies," announced on Dec. 8 that it filed for bankruptcy reorganization in federal bankruptcy court. The company also said that rentals are no longer available at most of its 48 U.S. locations.

•A Standard & Poor's research report released in late November said Dollar Thrifty "appears to be the most likely" of the big rental companies to file for protection from creditors in bankruptcy court. A Dollar Thrifty bankruptcy filing "might even result in a liquidation," the report said.

Dollar Thrifty declined to comment.

Rental car consultants and analysts tell USA TODAY that they don't expect any of the big brands to disappear. "It's not likely to happen," says John Healy of FTN Midwest Securities.

Car rental companies, however, "realize the frailty of the industry's health," Healy said in an industry report this month, and should continue to reduce their workforces and fleets.

The companies should also continue to "shutter underperforming locations, purchase fewer vehicles, hold vehicles longer to reduce expense and push through price increases," he said.

Auto rental companies are keeping vehicles in their fleets longer, because the used car market is weak and their resale values are low, Healy says.

Richard Leck, a management consultant in Bedford, N.H., says he's rented more than 50 times this year and several times received cars with 29,000 to 35,000 miles on their odometers.

Another frequent renter, Robert Milk, says he seldom gets a car with fewer than 20,000 miles on the odometer.

"I remember the days when over 6,000 was unusual," says the management consultant from Glen Allen, Va.

Hertz, Avis Budget and Dollar Thrifty did not answer USA TODAY questions about the economic downturn's effect on the age of their fleets.

Enterprise Vice President Pat Farrell says the average age of the company's vehicles is seven months, and they average 14,000 miles. The averages include the vehicles of National, Alamo and their parent company, Enterprise.

Until recently, the company sold its vehicles after 11 months in service and about 22,000 miles, he says.

But the economic downturn and the "difficult used car market" have caused Enterprise to hold onto cars until they have been driven an average of 26,000 miles.

Leck says that in the past few months, several cars he's rented had problems. Two cars from Hertz displayed warning lights, about a transmission problem and improper tire inflation. Other Hertz cars had a flat tire before he left the lot, an empty gas tank and an inoperative blinker. An Alamo car had an inoperative gas gauge, he says.

Milk, who rents primarily from Avis, says he's noticed "lots of road damage on cars," including cracked windshields and large dents and scrapes.

He says cars are dirtier than in the past, and he often receives cars with hazy interior windshields.

Enterprise spokeswoman Laura Bryant says every car the company rents isn't perfect, but the company prides itself on supplying clean and well-maintained cars.

In a November study of airport car renters by J.D. Power and Associates, Enterprise ranked first in customer satisfaction for the fifth-consecutive year. Hertz ranked second and Alamo third.

The study also concluded that customer satisfaction with renting cars at airports "has declined considerably" as "consumers and the travel industry face increasing financial pressures brought on by the sluggish economy."

Besides the weak economy, demand for rental cars has dropped because there are fewer airline passengers to rent cars at airports, and corporations have reduced business travel, says the Standard & Poor's report by analyst Betsy Snyder.

The car rental companies have also been hurt by their fleet-acquisition policies.

In the past, car rental companies bought most vehicles under repurchase programs that allowed them to sell the vehicles back to manufacturers in a relatively short period, Snyder says. But now the car rental companies buy about half their vehicles without such programs and must sell them on the used car market.

"It appears that things may get more bleak before they get better," says Christina Woo, a research analyst at Soleil Securities.

Auto rental consultant Neil Abrams says it's a "somewhat painful" time in the industry, but he's optimistic.

Car rental companies also experienced tough times during the past three decades, he says, but "Every time, the industry has come out smarter and stronger."