October 08, 2008 • Cleveland - Will the results of the presidential election influence the price you pay for car rentals, hotel rooms or other aspects of corporate travel?
That's the question Oracle Corp. pondered when a senior vice president of a potential bidder "asked if we would hold off the bid process until after the elections," Oracle global travel operations manager Rita Visser told
The Beat Live here last month.
Visser acknowledged that Oracle's procurement team thought it was "odd to be talking about politics in the middle of an RFP," but asked the supplier to explain the rationale. "They said, 'Depending on who gets elected into office will determine what happens with our minimum wage situation,' " and they were challenged to " 'present an offering to you and make ourselves whole, depending on what happens in November.' "
Visser said she contacted other suppliers invited to bid on this commodity and heard similar responses. One said, " 'We are glad someone brought it up, because we didn't know how we were going to present a bid to you that was due in September" given that " 'how we do business in January may drastically change.' "
Labor issues, including minimum wage, are among the differences between presidential candidates John McCain and Barack Obama. During his political career,
McCain voted against minimum wage increases 19 times, while Obama promised to increase the minimum wage if elected.
Asked about the impact of a potential minimum wage hike to his labor costs, BCD Travel Americas president Danny Hood said, "I know there are some parts of our industry--I think the car rental area, maybe some hoteliers--where" minimum wage increases impact labor costs, "but it probably wouldn't affect us that much."
As part of a three-step increase--the first since 1997--signed into law by President George W. Bush, the hourly federal minimum wage increased to $5.85 in July 2007, $6.55 in July 2008 and is slated to rise to $7.25 in July 2009. However, at least 29 states have implemented "living wage" or minimum wage requirements that exceed the federal rules.
Asked to explain the impact of minimum wage increases on their businesses, an Enterprise Rent-A-Car spokeswoman declined, while representatives from Avis Budget Group and The Hertz Corp. failed to respond to interview requests.
With more than 20 years of experience in the car rental industry, Neil Abrams, founder of Abrams Consulting Group, said the political play was "an interesting spin on the situation. The two biggest costs for car rental companies are cars and people," Abrams explained. "Labor represents 16 percent to 18 percent of revenue."
But many car rental customer service representatives, runners and greeters are covered by collective bargaining agreements negotiated by unions, such as the Teamsters, Abrams noted. "That's not to say that they're not minimum wage employees, but it would be unusual" to have minimum wage employees covered under collective bargaining agreements, he noted. A spokesman for the Teamsters confirmed that his union represents "thousands of car rental employees," but said others are covered by the International Association of Machinists and Aerospace Workers and the United Auto Workers unions.
"This is all very speculative," Abrams said, questioning whether a potential 10 percent increase in the minimum wage would have an upward pull on labor rates of other classifications.
No matter how impactful potential minimum wage changes could be, Abrams said the "market climate is very scary" for car rental companies right now. Market volatility, a tightened credit market and a soft used-car market are among the issues, not to mention the decline in stock price of publicly traded car rental companies.
CWT Solutions Group ground transportation managing director David Kilduff echoed the concerns about the pressures that car rental firms face. More immediate than a potential minimum wage increase, Kilduff said, is the potential for vendors to "take a loss" as they sell their existing fleets--including SUVs and vans--and buy new, smaller, fuel-efficient vehicles that customers want.
Despite the challenges, Kilduff advised clients to negotiate now in a market that he described as "competitive." In its 2009 forecast, CWT predicted flat ground transportation costs, compared with 2008; BCD Travel consulting arm Advito said it expected rental car rates in 2009 to increase by 3 percent to 4 percent, mainly in the United States, as rental car firms add service fees and lift rates.
As for a supplier asking for an extension to the RFP deadline due to the presidential election, Kilduff said, "Never heard of anybody coming in with that excuse. Certainly these are unusual times."
Another labor issue in the campaign is the candidates' opposing positions on the process to request union representation, noted Tom Wilkinson of TRW Consulting during a briefing at The Beat
Live on the candidates' positions on major issues for travel management.
Obama in March 2007 co-sponsored the Employee Free Choice Act, which would "amend the National Labor Relations Act to establish an efficient system to enable employees to form, join or assist labor organizations, to provide for mandatory injunctions for unfair labor practices during organizing efforts, and for other purposes." The legislation passed the U.S. House of Representatives 241-185, but stalled in the U.S. Senate.
McCain and others maintain that the Employee Free Choice Act allows, rather than minimizes, intimidation. In May 2007, McCain co-sponsored the Secret Ballot Protection Act, which would "amend the National Labor Relations Act to ensure the right of employees to a secret-ballot election conducted by the National Labor Relations Board." According to a statement from Sen. Lamar Alexander (R-TN), another co-sponsor, the Secret Ballot Protection Act was offered "as a counter" to the Employee Free Choice Act, which he said "would allow a workplace to be unionized simply by the gathering of signatures from a majority of employees. You don't have to be a labor lawyer to know that the peer pressure and outright intimidation are often factors in unionization campaigns."
