By Joe Brancatelli
September 5, 2012 --Any business traveler who merits having the word business before the word traveler will tell you the incredibly obvious: Having eight companies competing for your travel business is much better than having only three.

Now we're going to learn whether three firms masquerading as eight can compete as effectively in a market that is prone to commoditization and purchase decisions based almost exclusively on price.

If you haven't heard, Hertz Global Holdings has cut a deal to purchase Dollar Thrifty Automotive Group for the second time in three years. If the bargain struck late last month for $87.50 a share (or $2.5 billion) is consummated, it'll put approximately 95 percent of the nation's car-rental business in the hands of just three players. Those three will then try to convince business travelers and holidaymakers that they are really eight different brands competing against each other. It lays out like this:

  • Hertz, for generations considered the go-to brand for business travelers, would also run rental outlets under the Dollar and Thrifty names. Dollar is perceived as a rental brand for leisure travelers, and Thrifty aims at budget renters.
  • The Hertz triptych would complete against Enterprise Holdings, a privately owned firm that has built Enterprise Rent-a-Car into the behemoth of the "neighborhood" rental business. Enterprise Holdings also owns National Car Rental, which goes head-to-head against Hertz, and Alamo, known primarily as a brand for vacationers.
  • Those two giants will fight it out with the Avis Budget Group. It owns Avis, the perennial "we try harder" No. 2 to Hertz, and Budget, segmented to "appeal to value-conscious renters."

Of course, positioning and branding is marketing eyewash. Airlines, hotel chains, and car-rental firms really can't carve up the travel market into neat little market segments. And as I explained in a Seat 2B column 27 months ago, when Hertz made its first run at Dollar Thrifty, the car-rental industry's entire history is a bewildering litany of once-famous corporate owners, buyouts, bankruptcies—and absurd pricing that still permits Enterprise to offer cars as low as $9.99 a day on weekends.

This is a notably bad week to consider the travel industry's penchant for consolidation while keeping recognizable brands as retail totems. The German carrier Lufthansa was nearly grounded Tuesday by a flight-attendants strike. Besides the standard salary and benefits battle, the airline's cabin crews are frightened by the wholly German empire that Lufthansa has built. Over the years, the Lufthansa Group has gotten control of Austrian Airlines; Swiss International; Brussels Airlines; Air Dolomiti of Italy; and smaller carriers such as Augsburg, Germanwings and CityLine. Flight attendants worry that Lufthansa's reach and market strength will force them to capitulate to all sorts of new work rules and conditions.

Whether it's airlines or the car-rental business, business travelers have different concerns with market concentration and puppet retail empires. If a Big Three make all the car-rental pricing and product calls, do we buyers have any real chance at a level playing field?

The big companies naturally say yes. A car-rental executive I spoke to just before the Hertz acquisition waxed poetic about the freedom he had to make his brand unique.

"My bosses have told me all I have to worry about is renting cars to business travelers," he said enthusiastically. "I don't have to think about the vacation business. My marching orders are to make my brand the best brand for business travel. Nothing else is on my radar."

From a price perspective, the declining number of rental players has been something of a wash. Daily rental prices have risen, sometimes dramatically, in recent years. But that has more to do with the fact that the Big Three carmakers once owned some or all of the major car-rental firms and would use them as dumping ground for excess vehicle inventory. That kept daily rates unnaturally low. Rental firms today must secure vehicles at something like rational market rates, and that has sharply inflated their fleet costs.

Still, daily rental rates often remain cheaper than, say, renting a carpet shampoo machine at your local supermarket or renting a truck for a couple of hours from a big-box home-improvement store.

If the car industry's consolidation is worrisome at all, it'll probably be in the arena of innovation and basic customer-service issues. Corporate mind-sets are hard to change no matter how many brand storefronts you maintain.

For all of its dominance in the business-travel segment, for example, Hertz has infuriated some business renters with less-than-stellar service in recent years. I get more complaints about Hertz's failings than any other rental firm. Alamo has a reputation for being far-too-pushy at the counter peddling "optional" insurance products. Enterprise's post-rental vehicle inspection regimens are inconsistent. And Avis has never settled on consistent branding for its counter-bypass and elite-renter operations.

Then there's the issue of innovation--or lack of it. We talked about the difficulty of renting interesting cars a few columns back. And not one of the three giants and their eight brands offer to close the loop on rental returns. Business travelers have long wanted to drive rentals right up to an airport terminal building and walk away from the car. Not one of the firms offer the service. Instead, they force us to return vehicles to increasingly distant consolidated facilities or proprietary lots and then hop a shuttle bus.

Of course, the rental industry blames us for the stodginess of the business. The oft-repeated claim: If you'd just pay a little more for your rental so we could make a decent profit, then we'd be able to do more for you.

Which actually brings up one good thing about Hertz buying Dollar Thrifty and thinning the car-rental ranks: Now we'll only have to hear three car-rental CEOs instead of eight complaining about the rates we pay them.

ABOUT JOE BRANCATELLI Joe Brancatelli is a publication consultant, which means that he helps media companies start, fix and reposition newspapers, magazines and Web sites. He's also the former executive editor of Frequent Flyer and has been a consultant to or columnist for more business-travel and leisure-travel publishing operations than he can remember. He started his career as a business journalist and created JoeSentMe in the dark days after 9/11 while he was stranded in a hotel room in San Francisco. He lives on the Hudson River in the tourist town of Cold Spring.

THE FINE PRINT This column is Copyright © 2012 American City Business Journals. All rights reserved. Reprinted with permission. JoeSentMe.com is Copyright © 2012 by Joe Brancatelli. All rights reserved.