Agents currently account for 25 percent of car-rental sales, which some experts believe is short of their full potential
The economic downturn has focused travel agents’ attention on developing new revenue sources, including car rentals, which has assumed greater importance with regard to the profitability of both leisure and corporate agencies.
Car rental firms from Alamo and Avis to Enterprise, Hertz and Auto Europe continue to offer travel agents strong support, including education and training, higher commissions and strong, well-managed business-building promotions.
Despite this—and perceived problems in the speed of commission payments—there is broad consensus that total agency sales should, and could, be higher. Travel agents now account for an estimated 25 percent of car-rental sales, but many believe this falls short of their potential.
Agents, consortia leaders and car rental executives interviewed by Travel Agent agree that more agents should sell more car rentals—even in a downturn. The key reason is profit potential with commissions as high as
18 percent, and the positive impact on agents’ bottom-line performance.
One consortium that is taking an aggressive stance to expand car-rental sales is Vacation.com. The 5,000-member leisure agency group formed an exclusive partnership with Hertz two years ago.
Stephen McGillivray, Vacation.com’s vice president of marketing and public relations, says the company’s agents can earn up to 18 percent commission (depending on the program) and benefit from exclusive offers that are competitive with online agencies.
“We view car-rental sales as a critical part of every agent’s revenue stream and believe our partnership with Hertz is delivering results.
Vacation.com’s car-rental sales are in the eight-figure range, and very substantial,” McGillivray says.
John Lovell, Vacation.com’s vice president of sales and industry relations, says car-rental sales added value to every transaction and contributed to members’ profitability. “We continue to urge Vacation.com members to sell car rentals and to get involved with the Hertz program.”
Lovell says car-rental booking capabilities have been planned for EZguider, Vacation.com’s desktop booking system, but currently agents can book using AgentNet, which links to the Hertz booking site.
Lovell and McGillivray praise the quality of the Hertz program, which includes education and training of agents and effective sales incentives, as well as quarterly promotions that keep the rental offers and opportunities fresh.
Imad Khalidi, the pro-agent president of Auto Europe, agrees there are opportunities for agents. He notes that despite the downturn, agents are successfully making car-rental sales and profiting from the transactions that can pay, in Auto Europe’s case, a 17 percent commission. He notes the profit opportunities in domestic and international sales: “While the first quarter of 2009 has been awful, we are seeing sustained growth of 5 percent in June, July and August in both international and U.S. rentals. It’s picking up.”
Khalidi believes the remainder of 2009 will see a modest recovery and the probability of sustained growth in 2010 is good. “The Mexican market has been hit hard for most car-rental firms but will recover. A stronger dollar has helped European sales and aggressive promotion is paying off in the U.S.,” Khalidi says, urging agents to pay attention to car rentals. “For a no-hassle, one-minute booking, agents can benefit.”
John Werner, president and COO of MAST Vacation Partners, with 180 agency members in the Midwest, says, “Car rentals are taking a hit in a rough year, mainly because business travel is down so much this year. Car-rental sales make up a lower percentage of bookings among MAST members since so many offices are primarily leisure travel agencies and not business travel agencies. At our leisure travel offices, agents booking car rentals try to package them with a wholesaler when possible. It saves time and the commission is higher.”
Werner thinks the biggest roadblocks to growth in car-rental sales are taxes and airport fees. “Car rentals are being taxed to death as municipalities and states look for revenue,” he says. “It causes customers to think about alternative methods of transportation. When that happens and customers take shuttles and taxis, agents miss a commission opportunity.
Speaking of commissions, “car-rental companies need to clean up their act when it comes to certain practices,” says Werner. “Too often, a commission is not paid on a booking because the rental company shows a booking as a no-show when in fact, the customer did pick up the car or the customer upgraded or changed categories and the representative at the counter cancels the original booking and rebooks the customer. Agencies who audit their commission statements recover some of these lost commissions. Too many agencies don’t audit, however, and lose this revenue.”
Despite this, Werner is upbeat and believes that car-rental companies are supportive of travel agents.
Andi Mysza, president of MTravel.com and president of PATH, a host agency association, notes that many independent leisure agents are bundling car rentals as part of a tour or cruise package. “I’d say that many leisure agents focus more on wholesalers, tour companies and cruises. This is where they tend to make more dollars. So, within this, they can book car rentals within a wholesale package. Agents booking via a GDS are more apt to book car rentals and hotels individually.”
Among the biggest champions of more car-rental sales is ASTA Chair and President Chris Russo, who is working with the association’s Allied members to get the word out on the importance of car sales—and any ancillary service, including hotels and insurance—that can build agents’ business.
“Car-rental revenues can add a lot to the agency bottom-line. ASTA hopes to encourage more sales with webinars and briefings at trade shows—all designed to show agents how to sell, earn more and “supersize” the return on every sale.”
While acknowledging that travel agents now account for 25 percent of car-rental sales, Russo still believes that this total can be increased substantially. “By growing car rentals, everyone benefits—the car-rental firm, the GDS, the consortium, the agency and the agents—not to mention the client, who benefits from competitive rates and superior service.”