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Travel Weekly: Car Rental Companies Rethinking Frequent Flyer Program Participation

10 November 1997

Car Rental Companies Rethinking Participation in Frequent Flyer Miles Programs, Travel Weekly Reports

    NEW YORK, Nov. 10 -- Two car rental companies are taking a
hard look at their participation in frequent flyer mileage awards programs, in
the wake of new taxes being imposed on such perks, Travel Weekly reports.
    A 7.5 percent "frequent flyer tax," part of a larger air travel tax
package adopted by Congress this past summer, is being levied on mileage
purchased from the airlines by credit card, telephone and car rental
companies, banks and other businesses.
    The new tax isn't the only reason car-rental giants Hertz and Avis are
reconsidering their involvement; cost and saturation are also causing the
programs to lose their luster.  Car rental companies pay airlines a lot of
money for the miles, and consumers can earn mileage awards in so many other
ways that the programs have lost their effectiveness as marketing tools.
    Hertz Chairman Frank Olson has been quoted in Travel Weekly, the
industry's leading newspaper, as saying that the car rental industry is
"foolish" to pay airlines more than $100 million a year to award miles to
corporate accounts that already get substantial discounts.  This has caused
him to reconsider buying bonus miles from the airlines.
    "In short, we discount, then we add a bonus to the discount," Olson said.
"This is dumb."
    At Avis, Daryl Thrasher, vice president of travel industry sales and
marketing, describes the tax as the "straw that broke the camel's back."  He
said his company is "taking a hard look," on a partner by partner basis, at
whether to continue offering the bonus miles. "The question is, is this just
really a good thing for Avis to do anymore?"
    Thrasher also laments the widespread availability of mileage programs,
saying that a few years ago, frequent flyer programs involved only "certain
car companies in targeted areas."
    "It was possible then for rental car firms like Avis to measure their
incremental gains from participating," Thrasher said.  "The problem is that
everyone is in everything now."
    According to Travel Weekly Publisher Steve Bailey, "myriad third-party
purchasers have been scrutinizing these programs since the tax package was
adopted.
    "As the programs can be costly, the added pressure of new taxes is
prompting businesses other than car rental companies -- for example, hotel
chains, credit card or long distance phone companies -- to evaluate their
programs as well," Bailey concludes.
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SOURCE  Travel Weekly