There’s something funny going on with car rental prices, and Hal Gordon wants answers.
Here’s what happened to him: A few weeks ago, he checked rental rates through the Avis website for a friend, who was flying to New York from Israel.
“The website said there were no vehicles available for the dates chosen,” he says. “I checked for other countries
in the Middle East — same result. However, for UK or Venezuela — no problem. Vehicles were available.”
Gordon visited a few other sites, including Hertz.
“They doubled the price for foreign nationals,” he says. “What’s going on here?”
Good question. To find out, I first checked the Avis site, running a query for a rental from JFK in early March. I identified myself as a resident of Israel in the first search, and the site offered me a rate of $59 a day. Not bad for a set of wheels in the Big Apple.
Then I tried the same query as an American. The rate? Almost $20 per day higher — $78.
Hmm. Jacking up the rate by $20 because I’m American? Refusing to rent a car to someone from the Middle East? Sounds ridiculous.
What’s going on here?
“Car rental pricing is market-driven and very dynamic,” says Alice Pereira, a spokeswoman for Avis. “Many factors determine price, including level of demand, cost of service, currency exchange rates, and the competitive environment. Travel companies may offer promotional rates to take advantage of growing markets or other fluctuations in demand, or simply to respond to competitive pricing.”
In other words, car rental companies have the right to change their price based on who you are. And they frequently do.
So what determines the rate you pay? A driver’s nationality, the currency exchange rate and the inclusion or exclusion of the costs of damage and liability coverages that, in some countries, are required charges for foreign travelers, according to Avis.
Hertz agreed, calling these dynamic rates a “standard travel industry practice.”
“The competitive influences in each source market typically pattern the resulting non-resident rates and promotions to be among the lowest available in the destination markets,” says Paula Rivera, a Hertz spokeswoman. “However, there is no guarantee that this will always be the case and there may be instances whereby local promotions are offered to residents at lower rate levels.”
Gordon doesn’t buy it. He calls these practices “discriminatory” — which they certainly are.
In some business settings, changing a price based on who you are, or refusing to sell you a product, would be discriminatory, if not illegal.
But “dynamic” pricing is creeping into our lives beyond the travel industry. Remember your last trip to the grocery store? Maybe they offered a special price based on your “club” membership in the grocery store’s loyalty program, or a two-for-one offer — members only.
It’s every revenue manager’s fantasy to be able to charge a price that’s based on who you are, and what you’re willing to pay, and believe me, that day is coming.