The L.A Olympics and Daily Rental Operations

Although he laughs, Jeff Mirkin is dead earnest when he says, "It's going to be busy out there." And in referring to the upcoming Los Angeles Olympic Games, the Executive Vice President of Budget Rent A Car is echoing the sentiments of all the major car rental companies in the Los Angeles area. During the summer of 1984, daily rental operations in and around the city are expected to be unbelievably busy. "We would certainly anticipate," adds Clark Sidell, western regional vice president for the Hertz Corp., "that the entire car rental industry will be sold out during that period."

It's hard to imagine the magnitude of an event such as the Olympic Games. Conservative estimates place the numbers of people flooding into Los Angeles for the games at about four million, and air traffic controllers at L. A. International Airport say the influx of air traffic into the airport will be roughly the equivalent of 16 Super bowls back-to-back. And while an event of this size would create increased business for rental companies anywhere in the world, the impact is greatly intensified in a city such as Los Angeles. Sidell puts it this way: "This is the first time in history that the Olympics have been held in an automobile-dependent city. If you think back to other cities where the games were held, I don't think you'll find the same situation we have here. Moscow didn't depend much on automobiles; Montreal has a fantastic public transit system and all the events of the games were held in a very confined area; in Munich everything was nearby, and  they were not automobile dependent by any means. This is the first time the Olympics has been held in a place where the events are spread  as far as 100 miles apart in a city  that really does not have much  public transportation. For this reason, we quite frankly feel a certain obligation to supply as much transportation as we can."

Automobile transportation dependency is something that Los Angeles City, County, and California State governments realize since public transportation in the L.A. area exists only as bus service. The Southern California Rapid Transit District plans to operate special transit service to major Olympic sporting events, stating that a fleet of some 500 buses will provide shuttle and express service to the venues, particularly the Coliseum and UCLA, where the heaviest traffic congestion and most critical parking shortages are expected. Meanwhile, based on the assumption that increased bus service alone will not address the influx of Olympics attendees, millions of government dollars have been spent in anticipation of the upcoming games and the number of people and automobiles it will doubtlessly introduce to the area. Aging Los Angeles International Airport, for example, has been put through a major renovation to enable it to handle increased traffic, and completion of major freeway inter­ changes are being rushed to meet Olympic needs.

Similarly, the major car rental companies, including Hertz, Avis Rent A Car System, National Car Rental, Budget Rent A Car Corp., and Dollar Rent A Car Systems, have been planning for nearly two years to meet increased demands for rental products. All these companies will be increasing the numbers of available cars in their fleets and the number of personnel working during the Olympic period. But even with ample time for planning, this task has not been without complications.

"The State of California and the car rental industry are in some kind of a head-on collision," says Dollar Rent A Car Vice President Paul Carls. "Apparently since the inception of Proposition 13 a few years back, which eliminated property tax as a source of state revenue, the Highway Patrol and the state have been looking for extra ways to make dollars. So when the word leaked out that some of the big fleets were planning to import cars from out-of-state for the period of the Olympics and then take them back out-of-state again, California said no, if a car comes in­ to the state and is rented locally, it must be registered in the state. The Highway Patrol has gone to the extent of stopping rent-a-car customers who are traveling within California from California starting points on out-of-state plates and issuing tickets. We had one case where a car en route to San Francisco from San Diego with Arizona plates was stopped, and the ticket, which goes back to the car owner, cost several hundred dollars just to cover the registration." Carls adds that while the issue is being fought with the state, California is holding- firm on its requirement.

With the simplest method of in­creasing fleet sizes, transporting cars from existing out-of-state fleets, largely denied due to the cost and complications of registrations, rental companies have turned to other avenues to provide the additional cars they anticipate will be needed.

Hertz began preliminary planning for the games in December 1982. According to one source, the company will be adding in excess of 6,000 cars to its fleets. To obtain these additional vehicles, Hertz will be using various combinations of sources. "We'll be buying some extra cars, we'll be leasing some additional short-term cars for the summer, we'll be holding off some vehicle sales immediately prior to the games, and we'll be holding off turning back some of the existing short terms during the spring," Sidell says. "We'll be doing a number of things to build up the fleet to a certain degree."

At Avis,' John Hoffman, district manager of airport operations says, "We started working on this well before the summer of this year, but we really set up the program around the first of September 1983. We ran about 8,000 cars last summer, and we'll be up to about 10,000 this year. So our fleet will be up about 20 to 25 percent over the equivalent time frame of last year. Those extra cars will come mainly through our increased delivery of new cars, and by keeping over some lease vehicles we already have."

National's Los Angeles fleet will be increased from 6,000 to 9,000 in anticipation of increased demand. Although National did not specify the blend, some of the additional cars will be purchased, others leased.

"The problem in the rental industry, of course, is that automobiles are very expensive, and to spend a lot of money on cars for a one month period doesn't always make sense," Mirkin says in regards to the Budget operation. Because of this, Budget's acquisition methods will be much the same as those used by the other rental companies. "We're going to increase our fleet by 60 percent," says Budget airport operations chief Ed Pullen. "Some new cars will be purchased here in Southern California. The majority of them, however, are going to be leased." At Dollar things are more casual.

"We've made our plans," Carls says, "but it's kind of a quick study. If we were going to make drastic changes in our fleet and in our parking facilities, then it would require a lot of study. But we're not going to make any big drastic changes. We will probably increase our fleet by a couple of thousand cars total, so we're going to gear up for it, but I don't think anything is going to be super critical."

Similar to the others, Dollar will lease the additional cars it needs for the Olympic games."The automotive companies, Buick specifically, have come out with a short-term lease plan to bring cars in here for several weeks," Carls says, adding that such an arrangement eliminates the problems of buying cars, registering cars, and most importantly, disposing of cars once the critical period is over.

During the Olympic period, Buick will be offering their Century Olympia, the official car of the games, to all the major rental companies on a special short-term lease of two to three months. The actual concept of the almost unprecedented lease procedure was originated by the Guardsman Co. of New York. How­ ever, according to Bob Henderson, Buick Los Angeles area sales manager, "The numbers got so big. Guardsman came to us for assistance. There is a tremendous need for rental product for that period. Nobody really knows how big it will be."

Acquiring additional cars for the Olympic period is only one side of the dilemma rental companies must deal with. One of the major problems we'll face," Hoffman says of the Avis operation, "is what to do with all these additional cars once the Olympics are over."

Disposal is one reason short-term leasing has been favored by the major daily rental companies. "We have quite a few cars on lease that we can turn back after the games," Hoffman says, and once turned back, disposal of them becomes the responsibility of the lessor. In the case of the Buick Century Olympias, Henderson says he sees no real problem in disposing of them."I think the market is available," he says. "Just in the Los Angeles zone lone, over 125,000 cars were sold during 1983, and we are not talking about increasing that figure by a very high percentage. We're talking about some large public sales and other avenues along those lines. We don't want to dump them on the wholesale market through auction. It just wouldn't be good for everyone concerned, particularly Buick."

Buick is hoping its Olympia will become a collector's item, further enhancing its resale potential.  Whether or not it will "is a crystal ball-type answer," Henderson says. "But this is one of the reasons we made the Olympia the way it is. It is a one-of-a-kind car. It has the five circles on the seats and Olympic flavor all around. It is a collector's item in the sense that we're not going to build this car again, and also in that the Olympics might not return to the United States for another 40 years or more."

But not; all the cars will be leased, and those purchased by rental companies must either be kept or sold. At Hertz, "There will be a wealth of devices used for disposal," Sidell says."We of course have our own retail lots where we will increase the inventories, and there will be some good values there during the fall. We're already in contact with some wholesalers in states as far away as Montana, telling them definitely to plan to come down the day after the games are over be­cause there will be wholesale cars available. We also have manufacturers' programs available with American Motors and Chrysler, and we will be holding over some of the vehicles that normally would be turned over during the spring until after the Olympics are over. We also have our normal special channels: we have our fleet sales primarily to governmental agencies that we are already well established in, and we're talking to them far in advance about purchasing after the games."

Both Avis and Budget are less optimistic about selling used rental cars right after the games, citing problems such as market saturation as definite obstacles. But disposal is no problem at National, according to Los Angeles Operations Manager George Pampers. "Leased vehicles will be returned to the lessor, and our new buys will be kept instead of purchasing new 1985 models," he says.

The anticipated increase of business brought about by the Olympics will also mean increasing personnel at the rental agencies. Hertz is planning to hire at least 50 temporary employees during the busy season, Dollar says it might double its staff of counter agents, and National and Avis say they will also hire temporary staff, although they are not certain how many will be needed at  present.

While Budget plans to increase its staff in Los Angeles, they won't be hiring temporary help. "Basically what we're' going to do," Pullen says, "is bring in some trained people we have from the franchises we own across the country and give them the opportunity to come to L.A. and maybe see the Olympics themselves. It's kind of an incentive thing for people, to let them see what the other operations look like and maybe offer some suggestions on how we might improve. This makes it an overall productive venture for the whole company."

Another increase all the companies agree is needed is in the area of airport courtesy buses to take Olympic attendees from the airport to the various rental agencies. Hertz will increase the number of buses at the airport by 50 percent. "On a nation-wide basis, the number of buses that we require increases all the time," Sidell says. "Every month there is one more airport someplace that is going to busing. What we are doing is ordering the buses that would normally be ordered for our nationwide needs, work them for the two weeks here in Los Angeles, and then move them on to their regular pre-assignments." Avis is already in the pro­cess of increasing its numbers of courtesy buses. "We anticipated increases in demand at the airport anyway; we just stepped up the time frame," Hoffman says. Pullen says Budget will increase bus traffic by as much as 25 percent, and Carls says Dollar "will get four or five more courtesy buses from National Coach and distribute them among Dollar licensees after the games."

All are not in agreement, however, on just what areas will and won't be directly affected by Olympic traffic. All companies agree that the heaviest effect will be felt at Los Angeles International Airport, but "we feel that peripheral cities, Las Vegas for one, will also be crowded during this event," Sidell says. "People coming in from the East Coast, Europe, and the Pacific areas will be visiting Las Vegas due to the gambling. San Francisco due to the general charisma the city has, and we feel the Hawaii operation will also be greatly affected because visitors coming from Australia and Japan will invariably stop off there either on their way to or from the games."

Avis also anticipates high volume Olympic-related business at Las Vegas and San Francisco. National will impose Olympics' rates and restrictions at National locations in not only Las Vegas, but in Bakers- field, Ontario, Palm Springs, San Diego, and Orange County. Dollar lists Long Beach, Orange County, Burbank, and Ontario airports as heavily affected.

"Los Angeles will be directly affected by the games," Mirkin of Budget says, "and I suspect Orange County and Ontario will be as well. But I can't imagine Las Vegas will be affected unless people want to fly in there, rent a car and play there for a while, and then drive to the Olympics." However, he says there is concern in San Francisco about this very thing happening there, and "nobody in San Francisco wants his entire fleet to end up in L.A. That is going to be a major problem for all the car rental companies. You have patrons to service after the games, and if you don't have any cars in your fleet because they were all taken somewhere else, you've got a big problem."

To alleviate this problem somewhat, most of the companies, including Budget, will charge a one way or drop-off fee. National, for example, says it will charge an $85 drop-off fee for one-way rentals from Las Vegas to Los Angeles, and a $100 fee for one-ways to Los Angeles from California cities other than those where special rates and restrictions apply.

Carls says Dollar does not consider one-way drop-offs to be much of a problem, and Hoffman says Avis is not increasing drop fees anywhere in the nation during the Olympic period. Although Hertz does not intend to increase drop fees, it will monitor reservations to watch for fleet depletions in any peripheral city."We have set up a special computer program to watch that aspect of the business," Sidell says."We will be instantly aware of any abnormal buildup in reservations of that nature. The computer program is already in place, and it shows no abnormal buildup so far, but we will watch that situation very closely."

But while Hertz won't increase drop-off fees, it will increase rates during the Olympic Games by about10 percent over normal and will also require pre-payment for reservations."This pre-payment is not refundable beyond a certain date," Sidell says, adding that the specific date has yet to be decided. "We want to make absolutely certain that every person who makes a reservation with us will show up. In return, we are absolutely guaranteeing vehicle availability.

According to Hoffman, Avis will require pre-payments as well. "This is a very important point," he says. "No-shows occur in the rental business at about 30 percent a day. So, if we're going to hold the car on a reservation, we've got to make sure people are going to show up, especially during the Olympic period when we're going to be so busy. Right now, we've set up the first of April as the deadline for receiving refunds on pre-paid reservation cancellations. That's more of a protection for us to see how things go."Also during the Olympic period, "we've eliminated any special pro­ motional rates, weekend rates, and things like that. Basically we will charge the normal daily rates we have in effect now," he says.

At National, all special and pro­ motional rates will be suspended for the period of July 15 through August 12, and no reservations will be accepted from airline automated systems. Also during that period, National will not accept vouchers from travel agents or tour opera­tors. A deposit of $30 per reserved day will be required within 14 days of all reservations, and this amount, minus a $30 service charge, will be refundable only until April 30.

Mirkin says Budget "is asking for pre-payments, which are refundable up until a certain date, somewhere near the end of May. There is a seven-day minimum, and rates are definitely higher than normal."

So far, however, Dollar has not announced any special rates or in­ creases of any kind. "Our prices have not changed, and we're taking- reservations for the Olympics now at our standard rates," Carls says. "There might be some increase in rates down the line, but we're not going to vastly overcharge. There's something to be said for the guy who makes hay while the sun shines, but as of this time, we have no plans to raise our rates at all. We also haven't asked for pre-payment yet, but it is a good idea since some people double and triple book to make sure they have a car if some­ thing happens to their flight schedule."

All the rental companies are currently taking reservations, and while there are cars available for the Olympics now, "there will be no cars available in the Southern California area without a reservation during that period," Mirkin says."Not just from Budget, but from anybody else as far as I can tell." Sidell agrees that specialty and luxury car classes will sell out quickly, but adds, "some of the smaller car classes will probably be available from Hertz right up until Olympic time."

While the Herculean effort of gearing up for the Olympics period in Los Angeles is expected to result in lucrative gains for the rental companies, Sidell says it is not being done without some degree of risk. "We've already spent quite a bit of money on this," he says, "but there is a very real risk factor in the sense that something could go wrong and prevent people from at­tending the games. The Russians could pull out and take a lot of luster off the event. Or there could be a major terrorist action just prior to the games serious enough so that they would cancel the whole thing.  Despite these fears, however, we decided we should commit the extra fleet, facilities, and people," he, says. "We would only do that on the grounds that we feel there will be a reasonable return by doing so."

But fears that the games could be cancelled due to acts of terrorism are not shared by the other rental companies. "I'm very confident that our Los Angeles police force, which has not only beefed up forces but has been doing some terrorist training here for well over a year, will be able to handle things just fine." Carls says. "I think it's going to be a good atmosphere for the games and probably one of the most peaceful cities you'll ever see."

"We at Avis really haven't anticipated the possibility of something stopping the games from happening," Hoffman says. Avis does, however, feel there is some risk involved in preparing for the event. "Costs are very high," he says. "You just can't build up a fleet overnight. We're putting a lot of money in up front, and we won't necessarily be able to utilize a lot of those cars in the months prior to the games. Since you have to hold the car for maybe six months in order- to rent it for just four or five weeks, everything is very expensive for us so far. That's why we decided to raise our fleet to a reasonable level and not go hog wild and get 10,000 more cars, although we think we may be able to rent them during the Olympics."

But aside from the risks being- taken and the profit to be made from the event, Sidell sees another purpose in expanding services and product to meet the Olympic demand. "We think that this is an extremely good thing for Los Angeles, the State of California, and tourism in general. Yes, we want to make a profit out of it, but on the other hand we are trying to look five or 10 years down the road. We would very much like to see Los Angeles come out of this with a very good name for being able to handle large events and large numbers of people.  I think this would pay off large dividends in terms of conventions and the scheduling of events in L.A. and the entire state. We want to do everything possible to try and make a success out of having the Olympic Games here."