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|How Will Toyota's Recall Affect Your Rental-Car Plans?|
|Written by Kent Lupino|
|Wednesday, 03 February 2010 07:08|
Guest writer Kent Lupino speaks with trade analysts and researches price fluctuations around the country
Vacationers wanting to get away and business people traveling to their next meeting over the next several weeks shouldn't get too upset if they have to drive off the rental lot with a less than desirable make and model. At least they'll have a car, and it probably won't be a Toyota.
Last week the four largest rental operators in North America all announced that they would stop renting Toyota vehicles that could be affected by sticky accelerator pedals.
John Healy, a trade analyst at Northcoast Research, told Automotive Traveler that rental-car customers don't have too much to worry about: "Most rental locations run at about 70- to 80-percent utilization on a daily basis, so they'll fill the gaps with other cars in their fleets. As long as you can manage the fleet well, there shouldn't be that big of an impact." While predicting a return to normalcy in two weeks, he did admit that short-term business operations will be more of a challenge for the companies with a larger percentage of affected vehicles.
So what percentage of the vehicles at the nation's major rental companies are Toyota cars and trucks? And how will the nation's travelers feel in the long run about picking up the keys to a Toyota at the rental counter?
Enterprise Holdings--which owns and operates the Alamo, Enterprise, and National car rental brands--announced on Monday that they had removed 50 percent of the approximately 35,000 recalled vehicles from its North American rental fleet over the weekend. As the largest rental-car operator in the U.S., with more than 6,000 locations and operating more than 840,000 vehicles, the total number of recalled vehicles represents just 4 percent of the company's fleet.
"Fortunately, we are uniquely positioned from coast to coast with an extensive airport and neighborhood network that gives us unparalleled flexibility and agility in situations such as these," Matt Darrah, executive vice president of North American operations for Enterprise Holdings, said in a written statement. "This means we not only can quickly and efficiently move vehicles from city to city, but also back and forth between airports and nearby neighborhood branch offices to minimize customer inconvenience and delays in getting them into another replacement vehicle."
"Avis and Budget share a single fleet of approximately 300,000 vehicles," says John Barrows, vice president of communications for Avis Budget Group Inc. "Of these, approximately 20,000 are Toyotas affected by the recalls. These Toyotas are dispersed over thousands of Avis and Budget locations, so, as we stated in the press release we issued on Wednesday, with Toyotas comprising only a very small percentage of our fleet, we expect to be able to fulfill all projected customer demand, and customers can make reservations with complete confidence for any rental occasion."
Over at the Dollar Thrifty Automotive Group, meanwhile, only about 1.5 percent of the 106,000 vehicles operated by the company are included in Toyota's recall, so the impact to their operations should be minimal.
The second-largest U.S. operator, Hertz, is being a bit less forthcoming than its competitors--possibly because it operates the highest percentage of Toyota vehicles. In a brief release issued last Wednesday, the company announced only that it will temporarily stop renting vehicles named in the recall. No other details were provided.
Estimates of how many Hertz vehicles are affected vary from just under 10 percent to just under 20 percent. Hertz's 2008 annual report (the most recent available) states that Toyota vehicles make up 13 percent of its fleet worldwide. Regardless of the exact number, the experts interviewed for this story all agree that it is higher for Hertz than anyone else in the business. Overall, Hertz operates about 280,000 vehicles in the United States.
Michael Shedor is a 17-year veteran of the rental-car business and a former general manager for Hertz, where he oversaw operations at 62 staffed airport and local market locations in four states. In the world of rental cars, he says, manufacturer recalls are par for the course.
"It happens all the time," he says. "I don't see it being a big problem beyond the first or second week. Cars are moved where they need to be moved." He does add, however, that some customers may need to make concessions: "The two major classes, mid-size and full-size, will be the two main categories affected. People who have preferences in these two categories may have difficulty finding vehicles."
The Toyota Corolla is considered a mid-size vehicle and the Toyota Camry a full-size. Shedor explains that during the course of normal operations, cars are constantly being added and removed anyway. Now rental companies will simply continue adding vehicles without removing any in order to make up for the Toyotas sidelined by the recall.
Healy, on the other hand, does believe that companies will see some contraction in supply. So, what about short-term prices? "There may be a slight impact on price for customers," he says.
Peter Rasmussen, current vice president of the car rental division at Travel Holdings Inc. and a former executive at both Budget and Hertz, agrees that short-term prices will probably increase--but notes that it may be the business traveler who sees it more than the family vacationer. Locations where business travel is particularly robust are more susceptible to hikes due to supply shortages, he says.
While many factors can affect rental prices, average daily rates appear to have increased at some locations over the last four days. Data collected using the travel portal Expedia showed that daily rates for both mid-size and full-size cars have increased an average of 46 percent at New York's JFK airport across all four of the companies and their respective brands mentioned above. Yet prices at LAX for the same rental period and vehicle classes remained almost unchanged.
At the Miami and Denver airport locations, results have been mixed depending on the vehicle class. Mid-size cars at MIA saw only a 3-percent increase, while full-size cars rose 10 percent. Data from DEN showed a 23-percent increase for mid-size cars and a 16-percent increase for full-size.
Besides short-term price hikes, and after all affected vehicles have been repaired, travelers may have other concerns when stepping up to the rental counter.
"The question will be whether or not consumers will be comfortable with a Toyota rental car," says Michelle Krebs, a senior analyst at Edmunds.com, a website that provides automotive news, analysis, and information. "And the next question is: Will the rental-car companies order more Toyotas again? There's no shortage of companies willing to fill their slot in the rental fleets."
Indeed. But Rasmussen warns against ruling out Toyota long term: "Obviously, this is a big blow for Toyota. But on the other hand, we have to weigh that against years and years of great product quality."
Will that historical track record be enough though? "You know, when people walk up to the counter, it's very possible that a lot of customers won't want a Toyota," Rasmussen says. "And you can rest assured that rental-car companies aren't going to risk their reputation by offering cars that are perceived as being unsafe. But time does have a tendency to heal."
In the meantime, anyone planning to pick up a rental car over the next few weeks should be thankful for the bountiful herd of GM, Chrysler, and Ford livestock populating the rental lot. Longer waits and higher fees should be the exception, and nobody will have to get stuck with one of those awful Toyotas.
After two decades in sales and marketing, self-described "lover of all things automotive" Kent Lupino takes up his pen to cover news in the world of cars. His interests vary widely, from NHRA top-fuel dragsters to vintage Alfa Romeos. "They both have wheels," he explains.
Getting the Best Rate
Short term, getting the best rate still involves strategies we've advocated for years: visiting each company's own website along with third-party websites like Expedia, Travelocity, Hotwire, and Orbitz. And don't forget about aggregators like our favorite, Kayak. For last-minute reservations, we suggest trying Bill Shatner's favorite website, Priceline, where you can "Name your own price!"
What will be interesting to watch is whether Toyota vehicles not affected by the recall will end up in the blind-bidding, name-your-own-price websites... and what happens when you get to the rental counter, having reserved a non-Toyota vehicle, and you're told that all that's available is a Toyota. How will the rental agent handle the situation? Will they offer you an added discount, or will they be willing to let you walk away?
– Richard Truesdell