Herd Follows Hertz in Raising Rates

“Gentlemen, start your rate increases.” That was the implicit message from Hertz, which last week announced it was raising its car rental rates by $3 per day. Other rental companies, including Avis, Dollar and Budget, immediately followed the industry leader, matching the jump.

The increases hit individual leisure travelers rather than “contract accounts”--businesses that have accounts with the rental companies. Leisure rental rates, propelled by spring travel, usually rise about now, but not by this much, industry observers said. Hertz refused to discuss its reasoning for the price hike. But its competitors were not so taciturn.

Stewart Brown, Dollar’s vice president of revenue management, said he had been expecting a 3% to 4% rate rise this March versus March 1998, but “Hertz has changed the nature of the game.” He now puts the figure at 10% to 12%. At Budget, spokeswoman Kimberly Mulcahy explained that after a decade of stagnant rates amid rising costs, followed by only modest rate hikes in the last two years (2% to 3% for Budget in 1998), companies “are taking advantage of the opportunity to move up rates” after Hertz’s action.

One hopeful note for consumers: Car rental rates typically fall during slower travel periods, cutting back on earlier gains.