Singapore Car Rental

Car Renters Think Small To Shrink Refueling Cost

By Elissa Hunter

SEPTEMBER 22, 2008 -- Corporate travel departments, and in some cases individual travelers, increasingly are turning down upgrades from car rental companies and remaining in smaller, more fuel-efficient vehicles in order to save money when refueling.

Such initiatives could impact fleeting, as car rental companies look to meet demand for smaller cars by adjusting supply levels accordingly.

At Austin, Texas-based Sematech, many travelers are premium members at car rental companies, which allows them upgrades "up to a car they may not want anymore because the fuel costs are higher," said manager of corporate travel and meeting services Bill Davidson.

While the travel department tries "not to make a big deal" about upgrades, some Sematech employees are requesting to remain in the vehicle class they have booked.

"We've actually had some people say, 'I don't want to be upgraded,' " Davidson said. "We have it in some people's profiles that they don't want to be upgraded despite their status."

"I've seen it more from individual travelers," said Dave Kilduff, managing director of ground transportation for Carlson Wagonlit Travel's CWT Solutions Group. "The car rental companies can't unload or sell the SUVs, so the one place they can put them is in an upgrade. The problem with that is, you're burning more gas and you'll spend more money in refueling."

The difference in refueling costs has an impact, said Neil Abrams, president of Purchase, N.Y.-based Abrams Consulting Group. "It could be millions of dollars for a Fortune 100 company in fuel costs that are potentially avoidable if they use the most fuel-efficient car and refuel the vehicle themselves," he said. "The larger the car, typically, the less fuel-efficient, and the more it's going to cost the customer."

Brad Carr, vice president of business rental development for Enterprise Rent-A-Car, National Car Rental and Alamo Rent A Car, said, "Some companies have said don't upgrade us. It's kind of the opposite of how it was a year ago."

Dollar Thrifty Automotive Group spokesperson Chris Payne said the company has seen corporate customers "sticking with what their standard car is. We've really not seen a lot of upgrading."

While individual travelers have been making the decision not to upgrade in some companies, in others the decision has come from the travel department. In August, Foster City, Calif.-based Gilead Sciences' preferred car rental supplier agreed to stop automatically upgrading renters.

"Statistically, one of the highlights of the quarterly reviews is the number of times our travelers would be driving something in a higher car category, but still be paying midsize rates," according to Rick Wakida, global travel manager for Gilead, adding that such statistics were seen as a benefit to the traveler.

"When gas hit $4 a gallon, it just made me think, what does that mean?" Wakida said, adding that if travelers were upgraded to larger cars or SUVs, "in theory our refueling expenses would be higher."

Wakida said he's hoping to gather at least one quarter's worth of data to see if the program made an impact in year-over-year fuel costs.

Such initiatives are impacting car rental companies' fleeting strategy.

Bill Knepper, senior director of business development at Advito, BCD Travel's consulting arm, said he's heard a lot of talk about upgrades but few companies are putting that talk into policy.

"It depends on how well the rental car companies do with matching their fleet to the demand, because I'm hearing a lot of corporate travelers are getting upgrades because the companies don't have enough small cars," he said.

Frank Schnur, vice president of advisory services for American Express Business Travel, said, "Next year, we'll see more smaller and compact and hybrid cars in car rental company fleets."

"They've got to better fine-tune the fleet for what their customers require," Abrams said. "If you have more people refusing the upgrades, you've got to have more cars in the classification people seem to want."

While car rental companies are trying to meet demand for small cars, they are running into obstacles. "You still have manufacturers that have been turning out larger vehicles and they can't change overnight," said Dollar Thrifty's Payne.

Enterprise's Carr said demand for smaller vehicles is coming from consumers as well. "We are trying to get an increase in smaller cars in our fleet," he said, "but it's difficult to do."