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Tag Archives: tips

Hertz acquires rival, but travelers have more choices

And then there were three.

With this week’s news that Hertz, the nation’s second-largest rental car company, is buying Dollar Thrifty, the fourth largest player in the industry, there’s good news and not-so-good news for travelers who rent cars.

“The good news is that pricing shouldn’t change much,” said longtime industry analyst Neil Abrams. “The not-so-good good news is that you have three companies controlling 95 percent of a $23 billion domestic market.”


How those two scenarios play out, of course, depends on whether the Federal Trade Commission approves the merger — most observers believe it will — and how the remaining companies manage the size of their various fleets.

Related: Hertz to buy Dollar Thrifty for $2.3 billion

In the meantime, the move can also be seen as the latest step in a natural progression for an industry that’s been dealing with changing business models and evolving customer demographics for decades.

“This is an industry that until recently was a ‘pawn’ for other industries both upstream and downstream from it,” said George Hoffer, adjunct professor of economics at the University of Richmond.

By “pawn,” Hoffer is referring to the fact that in the late 1980s, car manufacturers started buying rental car companies — Ford once owned Hertz, while GM was a big investor in Avis — to create a ready-made (downstream) market for their cars. Several years later, the nation’s biggest car retailer, AutoNation, bought National and Alamo to ensure a steady (upstream) supply of what Hoffer calls “creampuff used cars.”

According to Hoffer, both efforts failed, although the effects can still be seen today. For one thing, once the Big Three automakers got out of the rental business, it opened the door for the influx of Hyundais, Nissans and Toyotas now available on rental car lots across the country.

At the other end of the spectrum, says Abrams, the rental car companies are currently making good money selling off their vehicles as they replace their fleets.

“They’re making so much money on the back end when disposing of older vehicles that there’s less pressure to make top dollar on (rental rates),” he said.

At the same time, the industry is recognizing that consumer demographics are changing and offering renters more options. Following the lead of industry leader Zipcar, both Enterprise and Hertz have launched car-sharing programs — WeCar and Hertz on Demand, respectively — that allow renters to access cars, mostly in urban areas, for an hour or two instead of by the day or week.

Car-sharing is still a niche market but it’s poised for big growth. According to a soon-to-be-published report from Frost Sullivan, membership in car-sharing programs in North America is expected to jump from 860,000 in 2011 to 9 million by 2020. An earlier report from the company estimates that revenues will climb to $3 billion in 2016, up from $700 million in 2010.

Much of the growth can be attributed to urban dwellers, college students and others who only need a car occasionally, usually for travel around town. And at rates that average $5 to $10 per hour, car-sharing is probably a poor choice for longer trips and multi-day rentals.

But, according to Philip Gott, senior director with IHS Automotive, car-sharing is poised to expand beyond its college student/young urban professional fan base, especially as big players like Hertz and Enterprise expand their offerings beyond college campuses and city/suburban locations.

Consider a scenario, says Gott, in which you fly into a city, pick up a car at the airport but then park it for the duration of your stay: “If you can pick it up at the airport and get rid of it at the hotel, you might only have it for an hour at the beginning of your trip and an hour at the end instead of renting it for five days.”

“The question isn’t if car-sharing is going to take off,” he told NBC News. “It’s when and how fast it’ll become mainstream.”

Rob Lovitt is a longtime travel writer who still believes the journey is as important as the destination. Follow him at Twitter.

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Attention fliers: FAA to study policies on electronic devices

The FAA will examine policies on the use of portable electronic devices while in flight. NBC’s Brian Williams reports.

It’s a routine as familiar to air travelers as taking off their shoes at security, and to some just as annoying: turn off all your favorite gadgets when the plane is preparing for takeoff or landing.

But changes may be on the way.

The Federal Aviation Administration on Monday announced it’s forming a working group to study the government’s policies on portable electronic devices — such as iPads and Kindles — as well as the rules airlines follow to decide when they can be used. 


“With so many different types of devices available, we recognize that this is an issue of consumer interest,” said Transportation Secretary Ray LaHood in a statement.

“We must set appropriate standards as we help the industry consider when passengers can use the latest technologies safely during a flight.”

Under the current rules, fliers can’t use tablets, laptops and e-readers when a plane flies below 10,000 feet because of concerns the gadgets could interfere with aircraft instruments, according to the FAA. Any potential disruption could be riskier at a lower altitude when the crew is preparing for takeoff and landing.

There are similar regulations around the world, said Kevin Hiatt, chief operating officer for the nonprofit Flight Safety Foundation and a former pilot for Delta Air Lines.

“We’ve taken a conservative approach,” Hiatt said. “It’s not an unreasonable demand based on the fact that there are so many devices out there that we don’t know exactly what each might do.”

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But Hiatt pointed out the last studies to examine the impact of portable electronic devices on aircraft instruments are old — dating back to 2006 or so, or long before many of today’s most popular gadgets came on the market. The Kindle, for example, debuted in 2007, while the iPad was introduced in 2010. The number of passengers bringing along the devices has since exploded.

Then, there’s the issue of passenger tension when told to turn off the devices. In one of the most publicized incidents, actor Alec Baldwin was kicked off an American Airlines flight last December when he didn’t power down his iPad when instructed to do so.

Not long after, the government began allowing some pilots to use iPads in the cockpit, prompting grumbling of a double standard. Hiatt noted those specific devices were thoroughly tested to see if they were safe to use on the flight deck, while testing remains to be done on all the other gadgets passengers carry.

Many flight attendants also feel they’ve been put in the position of being the enforcers of the policy, leading to more on-board animosity between travelers and crew.

“It’s time for us to either verify that we want to keep the rules in place or go ahead and modify as necessary,” Hiatt said.

“It’ll be complicated … (but) let’s get some better rules around this and some better understanding so it takes a little bit of the edge off with the passenger.”

Airlines can allow unlimited use of portable electronic devices if they can prove the gadgets are safe, but carriers haven’t been doing the testing because they would have to check each one of the hundreds of smartphones, tablets and e-readers available on the market, sources said.

It’s one of the issues the FAA’s working group will tackle. The panel — which will include representatives from the mobile technology and aviation manufacturing industries, pilot and flight attendant groups, airlines, and passenger associations — will be established this fall and meet for six months.

As the first step, officials want your input: you can weigh in on the issue in the Federal Register starting Tuesday.

The working group will not consider changing the rules that ban passengers from making calls on cell phones during flights.

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Hotels on track to take in $2 billion in surcharges

If you’ve found yourself fuming over fees and surcharges on your recent hotel bills, there’s good news and bad news.

The bad news is that fees for Internet access, fitness centers and other amenities continue to rise. According to Bjorn Hanson, who tracks hotel fees as divisional dean at the Tisch Center at New York University, U.S. hotels are set to take in an estimated $1.95 billion in 2012, an increase of 5.4 percent over last year.

The good news? They may not go much higher as hotels run out of new things to charge for — at least for now.


“The list of fees now being charged is pretty long,” said Hanson, “so there aren’t a lot of opportunities to create new fees and surcharges.”

Instead, says Hanson, the bulk of this year’s $100-million increase is a natural consequence of more people traveling — average occupancies at U.S. hotels are up 3.5 percent over last year — and more hotels are climbing aboard the fee and surcharge gravy train.

The latter development is borne out by the latest data from the American Hotel Lodging Association (AHLA). According to the trade group’s 2012 survey of more than 52,000 hotel properties, 23 percent now charge for in-room Internet access, compared to 19 percent in 2010. During the same period, the number of hotels charging a fee to use fitness facilities climbed from 21 to 25 percent.

(On a happier note, the survey also notes that fewer hotels are charging for pets or assessing resort fees.)

Not surprisingly, perhaps, guests find fees for Internet access among the most infuriating. “Expectations over Internet access are being set by other industries,” said Jessica McGregor, senior account manager at J.D. Power and Associates. “You go to a coffee shop or restaurant and, oftentimes, the Wi-Fi is free. Paying for it at a hotel goes against what people have come to expect.”

And they’re none too happy about it. According to the company’s latest survey on hotel guest satisfaction, released in July, guests who received complimentary Internet access reported an average score of 764 (on a 1,000-point scale) versus 688 for those who were charged a fee.

The 76-point gap isn’t surprising, perhaps, but as McGregor notes, it’s up 16 basis points (26 percent) from the year before. Even so, and despite that rising ire, hotels are likely to continue charging such fees, she says, viewing them as “a necessary evil” that helps them stay profitable.

In fact, says Hanson, the industry’s current profitability may be exactly what’s stopping hotels from implementing more new fees. 

“The industry is achieving very favorable average daily rate increases,” he told NBC News. “When that becomes a challenge, then they might turn to increasing fees and surcharges.”

Rob Lovitt is a longtime travel writer who still believes the journey is as important as the destination. Follow him on Twitter.

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Vacation made easy: Top travel apps, websites

Sonia Gil, host of Internet show “Sonia’s Travels,” shares some of her top picks for travel-related websites and apps to help you with everything from finding great hotel deals to learning a foreign language.

Apps that you can access from your smartphone or websites that you can get to from any computer can really change the way you travel. Sonia Gil, host of Internet show “Sonia’s Travels, shares a few of her favorites.

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Hertz to buy Dollar Thrifty for $2.3 billion

Noah Berger / AP

In a file photo a Ford Mustang is returned to an Oakland, Calif., Hertz location. Hertz has agreed to buy rival Dollar Thrifty for about $2.3 billion.

Hertz Global Holdings agreed to buy rival Dollar Thrifty Automotive Group for about $2.3 billion in a deal that puts about 95 percent of the U.S. car rental market in the hands of three companies.

The sale ends more than two years of on-off takeover talks for Dollar Thrifty involving Hertz, the No. 2. U.S. car rental company, and third-ranked Avis Group Inc that had been plagued by disagreements over price and doubts about regulatory approval.

The deal cements Hertz’s position as the number two and leaves Avis far behind in third. Privately held Enterprise Holdings, with its Alamo, National and Enterprise brands, is far and away the market leader.

Shares of the Park Ridge, New Jersey-based Hertz jumped 14 percent in premarket trade on Monday, while Dollar Thrifty shares traded up 7 percent.

Dollar Thrifty, the final big target in an industry that has consolidated rapidly, this month urged Hertz to make a compelling bid or leave it alone.

Hertz will buy Dollar Thrifty for $87.50 per share in cash, a premium of 8 percent over Dollar Thrifty’s Friday closing price of $81 on the New York Stock Exchange, and almost double a $1.2 billion offer Hertz made in April 2010.

Avis could still make a further bid. The deal does not carry with Hertz has no break-up fee and Dollar Thrifty is allowed dto solicit another offer for 30 days, a person familiar with the matter told Reuters.

Several top Dollar Thrifty shareholders told Reuters last week they would accept a takeover offer from Hertz that valued the company at more than $87 per share.

Avis’ entry into the bidding in 2010 pushed up the price for Dollar Thrifty, which was at one point during the financial crisis was offered $2 per share by Hertz.

Avis withdrew its offer after it bought Avis Europe last year for about $1 billion.

“Hertz has made a compelling offer to our stockholders that reflects the strength of our business,” Dollar Thrifty Chief Executive Scott Thompson said in a statement.

In a bid to win regulatory approval for the deal, Hertz has agreed to sell its budget brand, Advantage, to Franchise Services of North America and Macquarie Capital. That sale is conditional on completing the Dollar Thrifty purchase.

Hertz did not specify the sale price but Bloomberg news, quoting a person familiar with the matter, reported the unit would be sold for $16 million.

Advantage competes directly with Dollar Thrifty in the budget car rental market.

Franchise Services is headed by Sanford Miller, who was once the CEO of Budget Group Inc, which is now a part of Avis.

Hertz said late on Sunday it expects at least $160 million of annual cost savings from the transaction.

Lazard, Barclays, Bank of America Merrill Lynch and Deutsche Bank are financial advisers to Hertz, while J.P. Morgan and Goldman Sachs are advising Dollar Thrifty.

 

CNBC’s Kayla Tausche reports Hertz is upping its bid for Dollar Thrifty, and a look at how to play the takeover bid, with Fred Lowrance, Avondale Partners.

Copyright 2011 Thomson Reuters. Click for restrictions.