Giveaway Game

Rent a car, get a koala

Hertz Chairman Frank Olson calls the practice "stupid and destructive," but his company is doing it. National Car Rental President Bemiss Rolfs admits that the strategy is "idiotic," but his firm is going along too. Both Hertz, the No. 1 rental-car company, and National, No. 3, have been "dragged kicking and screaming," as Olson puts it, into a gigantic giveaway game started by No. 2, Avis, last September. The giants of the rental-car business are courting customers with a growing array of gifts, from toy koala bears to vacations at resort hotels. This costly contest comes at a time when the industry's profits, pounded by a recession that has cut into travel budgets, have plunged from more than $250 million in 1979 to less than $50 million last year.

With their new promotions, Hertz, Avis and National are reluctantly resorting to a tactic pioneered by Budget Rent a Car, the scrappy No. 4 company that has been chipping away at the dominance of the big three. Since 1978, Budget has handed out such premiums as calculators and pen-and-pencil sets. The giveaways and price discounting helped Budget boost its share of the market from about 7% in 1976 to 16% last year, close behind the 17% held by National.

Budget's challenge hit hardest at No. 2. Despite years of "trying harder," Avis saw its market share drop from 32% in 1973 to a low of about 23% last March far behind the 39% claimed by Hertz. Avis showed a record $73 million profit in 1979, but a $35 million loss for the fiscal year that ended last June.

To win back business, Avis began in September to give away travel bags and "certificates" that could be accumulated for bigger prizes. Customers who rented five times, for example, could choose a garment bag, a microcassette recorder or a travel clock radio. Within a month, Avis' competitors started entering the fray. National offered watches and stereo radios with headphones. Budget retaliated with a full line of luggage.

Hertz was the last holdout. Since October, it had a program that allowed frequent renters to build up points toward free hotel accommodations and plane trips, but the company resisted giving gifts to all comers. Says Craig Koch, a Hertz general manager: "We made an honest attempt not to get into the premium thing and to let some of our market share go for three or four months. But Avis wouldn't quit." When Avis claimed that its market share had risen six points, to 29%, Hertz jumped in, adding merchandise prizes to its travel bonuses. A customer who rents a Hertz car 40 times for four days or longer, for example, will build up enough credits to earn all of the following: a Texas Instruments home computer, four 16-oz. crystal beer mugs, 18 nights of free hotel accommodations, free rental of a Cadillac or Lincoln for 14 days and two round-trip plane tickets to a major city in the continental U.S., Hawaii, Bermuda, the Bahamas or the Caribbean. Avis has countered with such prizes as color TVs, cruises on the Queen Elizabeth II and free tickets on TWA flights worldwide.

The battle has become an expensive and probably futile exercise. Giveaways have eaten into profits without boosting the number of people who want to rent cars. Hertz's Olson contends that market shares will end up unchanged. Grumbles Rajiv Tandon, a National vice president: "Nobody's making money out of this."

Ironically, Budget, the originator of the giveaway gimmick, has now decided to end its campaign. Says Budget President Morris Belzberg: "I like to think that American business is made up of entrepreneurs and original thinkers." He adds: "I think it's shameful when a whole industry follows like sheep." Budget is going back to touting prices instead of prizes. Starting this week, it will offer Lincolns for $39.95 a day with unlimited mileage at most major airports, which is less, Budget claims, than its rivals have been charging for compacts. Once again, Hertz, Avis and National may be forced, kicking and screaming, to follow Budget's lead. This file is automatically generated by a robot program, so viewer discretion is required.