Hertz to Raise Rental Prices; Soaring Fleet Costs Blamed

Hertz Corp. said it will raise car rental rates by $5 a day to counter soaring fleet prices.

Avis Rent A Car System and Alamo Rent A Car said they will follow Hertz, the nation’s largest car rental agency. Others are expected to do the same.

Hertz and some of its competitors raised rates last September by $3 or $4 a day. Price wars have chipped away at the gains.

The fiercely competitive industry will again try to pass on higher fleet costs, which have risen by 30% a year since 1992. Vacation and business travelers will feel the pinch as Hertz raises its average daily rate of $45.

“The whole industry is in the same cost situation. We wouldn’t have taken the increase if we didn’t think they would follow,” said Craig Koch, president and chief operating officer of Hertz, which is headquartered here.

The $14-billion industry--dominated by Hertz, Avis, Budget and Enterprise--relies on Detroit’s three largest auto makers to supply them with the bulk of their rental cars.

During the recession, auto makers gave rental agencies cut-rate prices to clear out inventories. But better times have tightened supplies and driven up prices for the past three years.

“We certainly feel that it’s imperative for rates to go up, given the circumstances with the manufacturers’ price increases,” said Demetria Mudar, a spokeswoman for Avis, which is based in Garden City, N.Y.

“We think it is great news, the move that Hertz has announced.”

Travelers, on the other hand, don’t think it’s good news.

Computer Sciences Corp., an international computer services company, is one of Avis’ top 50 customers and consequently pays below-market rates.

“We spent about $6 million last year in rental car fees. A $1-a-day increase would have a $500,000 impact on us,” said Mayra Milian, corporate travel manager for Computer Sciences in El Segundo.

Hertz’s increases take effect immediately. Only U.S. rental rates are affected.

Sandy Richards, a spokeswoman for Alamo, said the company will raise rates in some markets but not across the board.