Car rental companies add airport surcharge

Renting a car will cost $1 more per day

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Car rental companies operating out of Hawaii's airports will begin charging an additional surcharge of $1 a day beginning Sept. 1.

The customer facility charge will help fund the construction of an upgraded car rental facility at Hawaii airports at no cost to the state.

Supporters, which included most major car rental operators, said these improvements are long overdue to make Hawaii a more competitive destination, and helped push the bill into law in the last legislative session.

But Hawaii's tour and travel operators say this extra charge could not have come at a worse time -- when visitor numbers are already in a slump. Some wholesale operators selling prepaid packages say they will have to foot the additional costs.

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In addition to extra fees for the first checked-in luggage on an airplane, visitors to Hawaii can now expect to pay another dollar a day for rental cars checked out from the state's airports.

Raising the rent The new customer facility surcharge for airport rental cars Surcharge: $1 a day Effective date: Sept. 1 Rental cars in Hawaii: 70,000* Estimated revenue: $10 million a year Goal: To renovate and upgrade rental car facilities at state airports * Estimate from Catrala-Hawaii; fluctuates according to season. Source: State Department of Transportation

The new charge, which goes into effect Sept. 1, is the result of a Senate bill proposing the additional charge to finance the design and construction of consolidated rental car facilities at state airports.

The bill authorizes the state Department of Transportation to establish and collect the charges for rental cars, to be put into a special fund until $25 million is reached. The DOT estimates it will collect $10 million a year, meaning the fund's target will be reached in about 2 1/2 years.

It also extends until 2011 a $3-per-day rental motor vehicle surcharge tax put in place for road construction projects.

That surcharge, which went to $3 from $2 in 1999, was supposed to drop back to $2 at the end of August but instead was extended for three years.

Jim Stone, government affairs spokesman for Catrala-Hawaii, a nonprofit trade group representing major rental car companies such as Avis and Hertz, said members felt the facility upgrade was long overdue.

However, some wholesale travel and tour operators question the timing of the extra surcharge, which they say could not have come at a worse time given the economic climate. In addition, some travel and tour operators who have pre-sold packages will be forced to absorb the extra cost.

As envisioned, the consolidated facility would be multilevel like the one in Las Vegas and offer customers one-stop shopping for all rental cars and unified shuttle services.

In addition, Stone said, more rental car companies could operate a concession stand at the airport.

"Over 75 airports across the U.S. have what they call the CFC-type charges to support facilities at the airport," Stone said of the customer facility charge. "The industry feels it's needed because it provides better customer service."

Avis, Budget, Dollar, Hertz and National operate out of Honolulu Airport. The surcharge does not apply to off-site companies such as Alamo and Advantage.

An estimated 70,000 rental cars circulate in Hawaii, according to Stone, although that number fluctuates due to seasonal supply and demand.

Supporters of the bill said it would create better rental car facilities and services at no cost to the state.

The bill cited poor conditions at a shared storage lot for vehicles at Kahului, which resulted in damage after heavy rain, as an example of the need.

Those who opposed the bill, including some rental car companies, questioned how the funds would be transferred, with no defined project or budget, and suggested that current tenants pay for needed improvements.

The bill moved through both the House and Senate quickly and had the majority of support in both chambers.

Gov. Lingle put the bill on her veto list but let it become law without a signature in July.

Dave Mills, who offers discount golf tour packages to Hawaii, including lodging, car rentals and golf combined, at Hawaii Golf Deals, is one of those operators who will have to absorb the costs.

Mills' company advertises packages with all taxes, fees and surcharges included, and thus already quoted prices to customers before the law went into effect.

"We're a niche operator, and we have an excellent niche market," said Mills. "We have the longest-duration visits. It's very common for us to have 21-night visits."

Changing his marketing collateral would be a significant expense, plus he likes to tell customers upfront what all the costs would be, Mills said.

There is no way he can pass the extra surcharges to customers that already have been quoted a price and paid their deposits, he said. It is also difficult to pass the charges to future customers, given that he has already reduced his margins to remain competitive.

Kehau Amorin, special-projects manager for Panda Travel, said this is not the right time to impose an additional surcharge on customers.

Visitors already are cutting back on car rentals due to the cost of gas, she said, and opting for compacts instead of SUVs. Amorin said the new surcharge definitely will have an impact as fall, a traditionally slow period, approaches.

"To add another $1 plus taxes, that's going to be huge," she said. "Any time you add additional fees, it just makes it more difficult to sell Hawaii as a destination."

The Tax Foundation of Hawaii also opposed the bill, saying the state already collects $40 million in user concession fees from the car rental industry.

"The question is, Is this really necessary at this time?" said foundation President Lowell Kalapa. "It adds to the cost of doing business in Hawaii, whether it be absorbed by the business or passed on to the consumer, which makes us less competitive."

But Aaron Medina, general manager of Hertz in Hawaii, said that as visitors swelled over the last five years, rental car facilities experienced vehicle storage issues, traffic and congestion.

"I don't think anybody looks forward to adding a surcharge the customer needs to pick up," said Medina. "Ultimately it improves the customer experience. Unless we have first-class facilities, we will fall behind."