Avis now tries harder to get a commitment

Rental car company Avis Budget Group has found a way to make money off deadbeats in North America, South America, Australia and New Zealand.

By December 15, 2009, it should be all systems go to begin charging a fee when customers reserve a vehicle but fail to show up for the car keys. The concept is similar to hotels assessing one night’s room rate to the credit card on record should the guest not appear — but it’s a first for the car rental niche. “It’s a long overdue change,” officials are saying.

Currently, the company is working to make sure its GDS partners are equipped to take credit cards in advance for that purpose. Amadeus, Sabre and Travelport spokespersons are saying they’ll have their end ready by the December deadline.

So far, the travel industry hasn’t raised an eyebrow, even though booking a rental car the traveler has no intention of claiming as part of a package to bring other element prices down is a fairly common strategy among agents and DIY online consumers. Perhaps that’s because Abrams Consulting Group is saying no-show rates for rental cars have reached 30 percent. “You’re planning your fleet around peak periods,” says Neil Abrams. “You run the risk of not renting all the cars you should have or you overbook and leave customers stranded at a cost to the company. It’s a tactical issue,” he told The Beat business newsletter.

Budget says no more to no shows

Add that to the fact Avis Budget Group saw a 14 percent decrease in third quarter revenue in 2009 compared to the same period a year ago. On the other hand, it’s third quarter EBITDA (that’s a faster way to say earnings before interest, taxes, depreciation and amortization) increased 17 percent. “We remained intensely focused on controlling expenses throughout our operations and have increased our forecast of realized cost savings for 2009 to $350-400 million,” says Ronald L. Nelson, Avis Budget Group Chairman and CEO.

The real test, however, is how well travelers accept the new rules. The risk, of course, is that other rental car companies will fail to follow and customers will give those competitors their business instead, as they like the idea of a no-commitment reservation should they find a lower price elsewhere at the last second. (Enterprise Rent-A-Car has already said this isn’t part of its business model going forward; Hertz and Dollar Thrifty haven’t committed.) Still, the rules are as friendly as possible under the circumstances: Renters can cancel the reservation up to 24 hours in advance without paying a penny. If a delayed flight is behind the failure to appear, the customer is good as long as he or she gave Avis Budget Group their flight number in advance.

Heck, according to early communications with the GDS firms, Avis and Budget may even choose not to slap a no-show fee at every location.

No word yet on whether the no-show fee will be a flat rate or the average daily rate including applicable taxes and surcharges.

Photography: Avis Budget Group