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How should the car rental business innovate?
Hello there! Thank you for asking Wonder to find ways the rental car business should innovate.
I searched a mainly the past year to provide the most current data, and I have provided a number of trends and suggested innovations for you to examine. I have listed each below according to the publication, and the results are in no particular order.
An Inc Magazine report from October 2016 states that "Autonomous Cars Will End the $75 Billion Rental Car Industry as We Know It." As Uber moves to incorporate self-driving vehicles, it makes sense for rental companies and Uber to work together, the article argues, to allow Uber to maintain its current business model. "Rental car companies are experts at managing and maintain large fleets of cars spread out across a variety of geographies. They have a model for buying cars en masse, monetizing them, and then exiting them from their fleets. They also have the ability to service and maintain their fleets, which includes a large physical footprint of retail stores and repair locations - something Uber lacks entirely. ...the development platform for autonomous cars will be the sea change that reshapes the automotive industry for the next fifty years, on a similar scale to what app stores have done for smartphones over the last ten...rental-car companies don't have the technical chops necessary to compete in this fight. The best they can hope for is to hook their existing business model to the autonomous car juggernaut that's fast approaching in the rearview."
According to the report, Hertz already has a small deal with Uber and Lyft to rent their vehicles to ride-share drivers, but deals on a grander scale need to take place for rental companies to survive.
ERP Software Blog states in a February 2017 post geared toward on- and off-airport rental companies: "Our summary view is that overall car rental—hiring a passenger vehicle for business and leisure for short-term duration--has evolved intensely in recent years and will continue evolving...you’ll want to make flexibility a mantra, avoid fear of rental alternatives hurting your business, and focus on the potential that mobility trends hold out." Recommendations include:
**Consider car sharing - "car rentals with a short usage span per customer and a denser customer base," according to the article. Car sharing requires "extremely agile and accurate handling of customer records, payment, service, and vehicle allocation and monitoring," and car rental companies are already skilled at fleet management, logistics, and general rental operations. A December 2016 Seattle Times report also discusses car sharing.
**Embrace Uber, don't fear it - P2P services like Uber provide growth options, not necessarily erosion. In Europe and elsewhere, P2P is often "confined to urban areas and parallels more directly with taxis than car rental," according to the report. Car rental companies "should consider exploring opportunities to take on low-margin but high-volume transport—[they’ve] got the foundational experience" and should use the opportunity to take business models and IT innovation to the next level. A good example is a highly-publicized Hertz/Lyft partnership in Las Vegas - it could serve as a "useful starting point for exploration," according to the article.
In a June 2016 article, PR Newswire summarizes a paid report: "The Global Car Rental Industry 2016-2021: Trends, Forecast, and Opportunity." For market expansion, car rental companies should focus on developing of "new and value added service to enhance the performance of car rental services," according to the article. Another focus should be developing partnerships with consumers "to create win-win situations and low-cost solutions for customers."
Trends already impacting the industry include "enhanced user experience through digitization, introduction of green vehicles in car fleet, enhanced technologies in car rental service, and concept of self-drive instead of hiring driver," according to the report. "Some companies are opting for merger & acquisition as strategic initiatives for driving growth."
A Skift report from May 2016 states that "Car Rental Giants Are Learning Lessons From Airlines." Some of these lessons include:
**Firmer Pricing - Determining the right fleet size and deploying it efficiently are important to both air and road travel. The key is to own as few cars (or planes) as possible and ensure they are used where they are needed most. With a tight inventory, appropriate pricing will be maintained. Two examples from the report are Hertz, owner of Dollar, Thrifty, and Firefly, who "shrunk its U.S. fleet by 6 percent in the first quarter of this year, compared with the same period last year. Since the end of 2014, its fleet has decreased by almost 40,000 autos, to 460,000." Avis Budget, who also owns Zipcar and Payless, kept a relatively steady fleet of 358,000 vehicles in the Americas the first quarter of 2016.
**"Car Rental Cafeteria" - The rental brands (often side by side at the airport, like options at the food court) are best thought of like restaurants, according to the article. "Avis Budget, Hertz, and National are aimed at price-insensitive road warriors who rent frequently as part of their work (fancy steakhouse). Alamo and Budget are for leisure travelers who want more bells and whistles in the cars, like Sirius XM or navigation gear, and stuff like roadside assistance (bistro fare). Dollar and Thrifty are for leisure travelers on a budget (local diner). Advantage and Firefly are “spartan” brands, for those on a very tight budget ('You want fries with that?')."
**Using United Airlines veterans - As Hertz began acquiring other companies, it also started "collecting airline industry veterans," the article noted. These executives helped Hertz (and Alamo) to "absorb lessons already learned in the skies above."
**Turning to social media - To attract customers, Avis Budget courts Hertz customers who share unhappy experiences on social media, then plies them with discounts and other incentives.
An article from Campaign US examines the success of Avis's advertisements announcing its new app, Avis Now. The company used a "relatable family moment that viewers found cute," according to the report. Also, a focus on mobile technology helps in reaching out to Millennials. "Technological advances and the use of mobile technology are signs of a brand looking to engage with younger audiences," the article states.
Finally, a column at MediaPost from November 2016 urges auto-rental companies to look to start-ups for innovation ideas. Examples include:
**Drivy is an "Airbnb-style" start-up from France that allows users to rent out their cars to other members when they are not driving them. "Drivy cracked the Insurance conundrum (for their market at least), and is changing the game in a couple of ways: first, the range of cars is much broader. If you want a 1980’s Mini, a vintage 2CV, or VW California mobile home, you can get one. This change in the ownership of the vehicles means that Drivy is acting only as the intermediary between owner and driver, a model we know can scale rapidly. In the U.S. and Canada, Turo is already running a similar model," according to MediaPost.
**Skurt is a Los Angeles start-up that takes away the need to go to a location, allowing users to quickly book a rental car from an app while an agent delivers the car to the customer's current location. This is convenient for users, but it is also a smart business decision for Skurt. "[T]he market for off-airport rental cars, where the customer experience is poor, is at least equal to the airport market. So leveraging relationships with smaller (and cheaper) off-airport providers to improve the rental experience seems like a good move."
**Silvercar challenges the traditional model in two ways: first, customers need not worry about the kind of car they will get - it's always an Audi A4. Second, to improve convenience, their rental experience is app-driven, allowing a user to approach the booked vehicle and unlock it with the app. Other perks include free Wi-Fi, GPS, and satellite radio.
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Thank you for the opportunity to complete this timely research! I hope the trends and innovations I have provided, with their links and summaries, prove useful to you in your efforts. We appreciate you choosing Wonder for your research needs!