Rental car industry studies imposition of fines for no-shows

Los Angeles: If you reserve a hotel room and you fail to show up, your credit card gets charged for the room. Buy an airline ticket and don't show up at the gate before takeoff and the best you can get is credit toward a future flight.

And if you reserve a rental car and you don't show up, in most cases, you walk away free of any charges. But that may change soon.

Stung by tough economic times, the rental car industry, led by Avis and Budget, is considering imposing new charges for customers who make reservations and fail to show up at the scheduled pick-up time. For good reason.

About 30 per cent of customers who make a rental car reservation never follow through with the rental, according to industry leaders.

Most car rental companies in the US — including Hertz, Dollar, Alamo, Avis and Budget — allow customers to reserve a car online without typing in a credit card number. When a customer fails to show up, there is no way for the rental companies to penalise that customer.

But the Avis Budget Group, which operates both Avis and Budget, has begun to install the technology to collect credit card information for car reservations, signalling a change in the cancellation policy. That technology should be in place by December.

John Barrows, a spokesman for the Avis Budget Group, confirmed that the company is adding the technology to accept credit card information to hold reservations as a way to better control inventory.

He said that he expects rental car companies — either Avis and Budget or their competitors — eventually to impose a so-called "no show" fee on customers.

But when pressed, he refused to say when Avis and Budget will begin to require credit cards for reservation, saying "in terms of when and where, I can't say."

Barrows suggested that the rental car companies may start by requiring credit cards to place reservations in specific high-demand cars, such as hybrid vehicles.

"Everybody is taking small steps in this direction," he added.

Rental car industry leaders say there is a reason why Avis and Budget remain coy about a "no show" fee.

Competition among the major car rental companies is fierce, and no one is sure how competitors will react if Avis and Budget add the fee.

After all, Southwest Airlines continues to hammer at its competitors through television commercials and print ads for adding new fees to check baggage. In time for the holidays, Southwest has adopted the motto: "Only turkeys charge for bags."

Association

Bob Barton, president of the American Car Rental Association, applauds the move by Avis and Budget, saying it's time that the rental car industry got in line with hotels and airlines that charge customers who make reservations and fail to show up.

He said economic factors have forced the car rental industry to consider such penalties.

Rental car companies no longer can rely on American car manufactures to dump excess cars onto the rental market, Barton said.

With smaller rental fleets and tighter access to financing, rental car companies must squeeze as much revenue from every car, he added.

If a car sits idle because a customer made a reservation but failed to pick it up, a rental company can lose as much as $60 (Dh220) per year per car, Barton said.

For a rental car company with 2,000 cars, that can mean a loss of $120,000 in revenue annually, he explained.