Hedge Fund Manager Takes A Bold Stand Against Long Lines At Airports

Prominent investor Whitney Tilson did not like his experience with the Hertz counter at the San Francisco airport, so he did something about it. Here's a look at how a few complaint emails from a "well-known shareholder" gets results.

Whitney Tilson

Look enraging/familiar?

It's an all-too-familiar scene to travelers: you get off a long flight, wind your way through the various airport nightmares, and finally arrive at the car rental counter, only to discover an endless line and one or two people manning the booth.

It's infuriating, sure. But what can you do?

It turns out you can do a lot, if you happen to be a very extraordinary specimen: a hedge fund manager. And not just any hedge fund manager, but one whose funds hold a decent-sized stake in the car rental company you just happen to be wasting your extremely valuable time waiting in line for.

This was the exact scenario at the San Francisco Airport Hertz counter when Whitney Tilson, a well-known value investor and part-time shade thrower showed up. What follows is a step-by-step guide based on an email Tilson sent to his industry peers, on how to stand up for justice at the car rental counter and get results. Real results. As in, a CEO-getting-fired kind of result.

1. First, you must be a hedge fund manager like Tilson for this to work, preferably an activist who can buy up a lot of shares in a company you might want to change someday. A good example is Olive Garden.

2. Encounter insane Hertz line, as Tilson did at SFO in early August. Document it extensively.

Whitney Tilson
Whitney Tilson
Whitney Tilson

3. Then, make a video in which your daughter walks the entire 43-second(!) long line, just to show how bad things really are. Make a fun cameo at the end of the video, looking annoyed.

View this video on YouTube

Does anyone have the email address for Mark Frissora, the CEO of Hertz? I've owned the stock for more than a year and it's up ~20%, but I'm thinking of dumping it after my experience on Friday. I flew into San Francisco and had a rental for four days. When I went to make my booking a week or two ago, the prices were very high, so I tried Hotwire, which doesn't tell you which company you're renting with until you've made a nonrefundable booking, but it was half the price I was finding on the regular sites, so I went with it. I expected to be booked at some third-rate place, but was delighted to see that I got Hertz, where I'm a Gold member. When I went to pick up my car, my name wasn't on the Hertz Gold board, so I went to the Hertz Gold counter and they said that since I'd booked on Hotwire, they couldn't help me and told me to go across the hall to the regular Hertz counter. I could not believe what I saw there: the line went on and on and on and on. You have the watch this video to believe it: http://youtu.be/abKwMrZNt8o. It took my daughter 43 seconds to walk from the start of the line to the end! I've never seen anything like it for at any car rental company – and certainly not Hertz, which is supposed to be the premium brand! There were well over 100 people in line and it was at least a 90-minute wait, so people were furious – I almost felt sorry for the couple of Hertz agents going down the line, asking if anyone had made a regular reservation – if so, they told them to go to the Dollar or Thrifty counters to get a car immediately (both are owned by Hertz). But, like me, nobody had – we had all prepaid, so we were stuck. (Though I got lucky – after about 15 minutes, I went back to the Gold counter and a nice agent took care of me.) This wasn't the first time this had happened – the agents said it was like this every Friday in the summer. This is absolute madness! In order to drive short-term revenues, Hertz is discounting heavily – and then providing a horrifically bad customer experience. If Hertz wants to destroy its brand as quickly as possible, this is exactly how to do it. And I don't think it's an accident – it's deliberate. Which makes me think Hertz management is desperately trying to make its numbers, regardless of the long-term impact. The reason I'm thinking of dumping the stock is that this reminds me of how RJR destroyed the Winston cigarette brand, which was the #1 brand from 1966-1976. The reason it lost the top spot was, to make its short-term numbers, RJR stuffed the channel, which resulted in old, stale cigarettes, a dramatic loss of market share, and Marlboro taking over the top spot (which it still holds). I don't want to over-react to one data point, so I'd welcome any comments.

5. Of course, your high-powered hedge fund friends, who are also likely invested in Hertz (it's a big favorite among the hedge fund set) will agree with you. Document their responses. Build your army.

Here are some of the responses Tilson wrote that he received.

"I have had similar negative experiences on holiday with my kids. Hertz didn't have an SUV that we rented and paid for…we had to wait forever in line …finally I screamed at the agent (in Miami) and went to Alamo, got an SUV in 5 seconds and the woman gave me a refund….Something has gone awry." —Anonymous Tilson Supporter

"I had an unpleasant experience in Kansas City, but I hadn't paid for it; so, I went to Enterprise." —Anonymous Hertz Hater

"I hear you. I had a similar experience at Hertz recently too, and thank god I got a Hertz gold person to help me as I am a gold member and the car wasn't waiting as I had booked it normally. Avis does a great job but also has long lines. Avis is my biggest position and I bought Hertz too as pricing through the roof should help raise all boats. I'm hoping that the accounting issues are behind them but I agree that my experience was awful last time." —Anonymous Avis Supporter

"The same thing happened to me at the Denver airport with Hertz the last TWO times I attended a conference in Vail. A two-hour wait in 2013 and a 90-minute wait in 2014. Do you remember the old Jerry Seinfeld routine about car rental reservations: http://youtu.be/4T2GmGSNvaM? I think this is a sign that the industry has become too consolidated. As consumers we have to put up with this and the RAC companies have all the power." —Anonymous Seinfeld Fan

"Avis tries harder. And the management is better." —Anonymous Straight Talker

6. Email the CEO once you have his address and you're armed with your comrades grievances. Threaten to sell your shares. Make sure he knows who you are. Hold nothing back.

From: Whitney Tilson

Sent: Tuesday, August 05, 2014 12:49 AM

To: 'mfrissora@hertz.com'

Subject: Feedback from a shareholder and (currently disgruntled) customer

Dear Mark,

I am among your smallest shareholders, but also perhaps among your best known thanks to my public profile (Google me) and, in particular, the presentation I gave a little over a year ago at the Value Investing Congress, in which I recommended your stock (see pages 50-63, attached).

I am writing to share with you such a terrible experience I had with Hertz last Friday that I'm considering dumping the stock. The details are in the email (below), which I sent this afternoon to a few dozen friends in the investment business (some of whom are among your largest shareholders).

In addition, further below I have included many of the replies I received, which I also think you will find interesting, especially in light of the fact that these are all very wealthy people – dream customers (also note that I'm not cherry picking only the negative comments – this is all of them).

I hope that my concern – namely, that you are destroying your great brand in an attempt to make your numbers in the short-term – is unfounded, and would welcome a conversation to put my mind at rest.

Sincerely yours,

Whitney Tilson

Managing Partner

Kase Capital

7. Get a fast response from someone close to the CEO, stating that he is "working with the team" to make sure this gets addressed both locally and nationally. Which, of course isn't enough.

Dear Scott, Thanks for getting back to me, but rest assured that this isn't an outlier. I just returned my car an hour ago at SFO -- at noon on a Tuesday -- and the line was 90% as long! People were camping in the hallway -- the only thing missing were tents. Lest you think I'm exaggerating, I stopped and took pictures and a video that I will send you tomorrow when I get home. I then went upstairs and the line at Avis was maybe 1/10th as long, and there was no line at any other counter. Call you team in SF and have them walk over there right now to verify what I'm telling you. What on earth is going on?! A premium brand like Hertz shouldn't even be on discount sites like Hotwire, much less swamping them to the point where hundreds of people every single day are swearing never to rent from Hertz again. Best regards, Whitney

9. Get an actual executive to call you to reassure you that you are right, and that they will fix it. Tilson had a "nice" chat with Hertz' Senior Director of Service Excellence, who said his emails received "a great deal of attention at the highest levels."

Via giphy.com

10. Go back to the SFO Hertz to find virtually no line a few months later.

Whitney Tilson

11. Oh and in the interim, the CEO was asked to step down at Hertz.