Like most travelers, when I book a trip in North America (and this generally applies to Australia and New Zealand, South America, South Africa and a few other regions) I take out my credit card.
First I book my flight (entirely pre-paid), then my hotel (guaranteed with my credit card and subject to cancellation time and no-show fee).
Then I put my credit card away and book my post-paid car rental.
And I’ve always wondered about that. Why do car rental companies make it so easy for me to stiff them?
How do they manage their staff and inventory (fleet) if they don’t know how many reservations are going to turn into bookings, if they don’t know how many cars need to be at a given location?
In the US, car rental companies have been asking themselves these same questions for the last ten to fifteen years because the financial implications are hard to ignore:
10-30% of all post-paid reservations are no-shows, based on channel booked (direct to supplier has a lower no-show rate, large travel portals have much higher rates)
As a result, car rental companies, especially in high-demand markets, routinely overbook, risking a complete inventory sell-out, leading to additional cost of renting cars from competitors and engendering the ill-will of customers
Car rental companies are sometimes forced to upgrade customers at no charge due to sold-out classes, a lost opportunity to charge for that upgraded vehicle
Car rentals are perishable inventory units; every day a car doesn’t get booked is a day of lost revenue that can never be realized
Now at least the industry talking about it publicly.
Last fall, Avis Budget started talking to the GDSs about no-show fees.
The American Car Rental Association (ACRA), a trade body for the car rental industry, posted an open letter supporting the initiative.
Avis Budget, along with several other rental car companies and distributors, is now leading a project team in OpenTravel to add no-show related data elements to its standard XML messages.
At the Car Rental Show in Las Vegas in April, ACRA will hold a meeting to discuss this issue with suppliers and distributors, and will hold a panel discussion on this topic during the conference.
But, as reasonable as it sounds, applying a cancellation policy and assessing no-show fees seems to be fraught with contention.
The beneficiaries of a no-show policy are obviously the rental car companies, but what if only some of them implement this policy?
Would consumer behavior change if some rental car companies charged a fee but others didn’t?
And what about the intermediaries, like the big OTAs?
What if they decide not to honor the no-show policies of their rental car supplier partners by not collecting and sending credit card information to the suppliers?
The technology to support this policy is pretty straight forward, compared to the business challenges.
Add a few fields to search, availability and book messages, and add a few fields to the databases.
Modify the UI to display fees and terms, and collect a credit card number.
There is the not-so-small issue of full development calendars and allocation of scarce and expensive technology resources, but the actual work needed to be done is not cutting-edge.
It can be done. The hotel industry implemented no-show fees and policies in the 1970s, and while individual hotels can set their own policies (4pm or 6pm cancellation notification, one night or full-stay charge for no-show, suspension of fees based on weather or other conditions, etc.), policies industry-wide are consistently implemented and experienced travelers are conditioned to give a credit card number and make sure they notify the hotel if they aren’t going to show up.
As a result, the hotel industry has a no-show rate in the low single digits and can be confident in their pricing and occupancy management practices, not to mention keeping their operations costs down.
Most of the European rental car market is pre-paid all or in part.
According to Bobby Healy, CTO of Dublin-based CarTrawler, a company that provides rental car inventory to suppliers and distributors around the world, when a consumer pays for the car rental makes a huge difference in how the consumer manages the transaction.
“Levels of no-show are almost zero when any amount of cash is taken upfront, but grows to about 20% when no commitment is made to the car rental company or intermediary.
“Often reconciliation between the supplier and the intermediary is difficult due to the black hole known as no-show and of course this makes car rental a less attractive revenue generator to intermediaries.”
Craig Parmerlee, director of business development for AceRentaCar, puts it like this:
“If we never collect a penny from a no-show fee, I would be happy. We want the no-show fee to change consumer behavior such that they cancel any reservations they don’t plan to use. Simple as that.”
Like most travelers, when I book a trip in North America (and this generally applies to Australia and New Zealand, South America, South Africa and a few other regions) I take out my credit card.
First I book my flight (entirely pre-paid), then my hotel (guaranteed with my credit card and subject to cancellation time and no-show fee).
Then I put my credit card away and book my post-paid car rental.
And I’ve always wondered about that. Why do car rental companies make it so easy for me to stiff them?
How do they manage their staff and inventory (fleet) if they don’t know how many reservations are going to turn into bookings, if they don’t know how many cars need to be at a given location?
In the US, car rental companies have been asking themselves these same questions for the last ten to fifteen years because the financial implications are hard to ignore:
- 10-30% of all post-paid reservations are no-shows, based on channel booked (direct to supplier has a lower no-show rate, large travel portals have much higher rates)
- As a result, car rental companies, especially in high-demand markets, routinely overbook, risking a complete inventory sell-out, leading to additional cost of renting cars from competitors and engendering the ill-will of customers
- Car rental companies are sometimes forced to upgrade customers at no charge due to sold-out classes, a lost opportunity to charge for that upgraded vehicle
- Car rentals are perishable inventory units; every day a car doesn’t get booked is a day of lost revenue that can never be realized
Now at least the industry talking about it publicly.
Last fall, Avis Budget started talking to the GDSs about no-show fees.
The American Car Rental Association (ACRA), a trade body for the car rental industry, posted an open letter supporting the initiative.
Avis Budget, along with several other rental car companies and distributors, is now leading a project team in OpenTravel to add no-show related data elements to its standard XML messages.
At the Car Rental Show in Las Vegas in April, ACRA will hold a meeting to discuss this issue with suppliers and distributors, and will hold a panel discussion on this topic during the conference.
But, as reasonable as it sounds, applying a cancellation policy and assessing no-show fees seems to be fraught with contention.
The beneficiaries of a no-show policy are obviously the rental car companies, but what if only some of them implement this policy?
Would consumer behavior change if some rental car companies charged a fee but others didn’t? And what about the intermediaries, like the big OTAs?
What if they decide not to honor the no-show policies of their rental car supplier partners by not collecting and sending credit card information to the suppliers?
The technology to support this policy is pretty straight forward, compared to the business challenges:
- Add a few fields to search, availability and book messages, and add a few fields to the databases.
- Modify the UI to display fees and terms, and collect a credit card number.
There is the not-so-small issue of full development calendars and allocation of scarce and expensive technology resources, but the actual work needed to be done is not cutting-edge.
It can be done. The hotel industry implemented no-show fees and policies in the 1970s, and while individual hotels can set their own policies (4pm or 6pm cancellation notification, one night or full-stay charge for no-show, suspension of fees based on weather or other conditions, etc), policies industry-wide are consistently implemented and experienced travelers are conditioned to give a credit card number and make sure they notify the hotel if they aren’t going to show up.
As a result, the hotel industry has a no-show rate in the low single digits and can be confident in their pricing and occupancy management practices, not to mention keeping their operations costs down.
Most of the European rental car market is pre-paid all or in part.
According to Bobby Healy, CTO of Dublin-based CarTrawler, a company that provides rental car inventory to suppliers and distributors around the world, when a consumer pays for the car rental makes a huge difference in how the consumer manages the transaction.
“Levels of no-show are almost zero when any amount of cash is taken upfront, but grows to about 20% when no commitment is made to the car rental company or intermediary.
“Often reconciliation between the supplier and the intermediary is difficult due to the black hole known as no-show and of course this makes car rental a less attractive revenue generator to intermediaries.”
Craig Parmerlee, director of business development for AceRentaCar, puts it like this:
“If we never collect a penny from a no-show fee, I would be happy. We want the no-show fee to change consumer behavior such that they cancel any reservations they don’t plan to use. Simple as that.”