Commentary

How Car Rental Behemoths Are Combating Industry Upheaval

In what will be a momentous year for Lyft and Uber, with the former recently becoming a publicly traded company and the latter with IPO plans on the horizon, it may surprise some that incumbent car rental companies are still around and thriving. Only a few years ago, forecasters confidently predicted that the new disruptors would crush car rental as we know it.

Avis and Hertz, boasting a combined industry experience of close to 200 years, are not only still around, but excelling. Hertz grew its revenue by close to 10% in the last quarter, while Avis stock prices have been on a tear.

So, faced with the myriad of existing and impending challenges, what are legacy car rental players doing to stay relevant, and what can they teach us?

Experiment to Evolve

Experimentation is a key part of a company’s evolution, but the infrastructure must support the process of testing, validation and implementation.

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Avis has a process like this to explore potential opportunities. If concepts make the minimum viable venture stage, they are turned into pilot projects.

Learning can also come through acquisition. This has been a core part of Enterprise’s strategy; over the past seven years, it has spent over $2 billion in procurements, including regional car-share companies, like Zimride and Mobileye. The latter allowed the company to better understand the future of autonomous driving, not to mention generated a tidy profit when Enterprise sold it to Intel.

Legacy companies are too often locked into their current state without the cultural capacity to change. In order to avoid being disrupted, they must let go of this stasis, as Enterprise has done.

Optimize With and Without Technology

Car rental companies are practiced in managing and maintaining large fleets of vehicles -- which, if you consider an autonomous vehicle future, is going to be key. Avis is providing this service to Alphabet’s Waymo. In addition to maintaining and cleaning the fleet, Avis is helping Waymo test and register its vehicles. Enterprise has a similar deal with a much smaller autonomous start-up, Voyage.

As autonomous players like Apple, Google, Lyft and Uber expand, car rental companies can benefit by managing and keeping these large fleets on the road. They have also embraced big data and AI to be more competitive and optimize fleets, ensuring they have the right car, in the right place, at the right time. 

Undertaking a comprehensive SWOT analysis can help to leverage strengths and determine how technology should play a role in improving the business.

Competitors Can Be Partners

With car ownership in decline and the gig economy on the rise, rental players are embracing their ability to deliver cars to customers at the right place, time and price. Avis has seized an opportunity through its Express Drive Program to allow Lyft drivers to rent cars (not to mention, it owns Zipcar), while Hertz has similar plans with Uber.

By having a clear understanding of your business and customer base, there is often opportunity in identifying revenue sources from “frenemies” that will not undermine long-term business strategies.

Reexamine Your Customer Experience

New entrants have the distinct advantage of designing a customer experience from scratch, so incumbents must go even further to better journey-map and leverage partners.

Avis is leveraging its mobile app to connect its entire global fleet by 2020, enabling cars to be customized for users with preferred seat position, temperature, radio presets, and the potential for data enhancements to include recommendations to events or attractions.

Hertz’s Ultimate Choice offering allows Gold Members to head directly to their cars without the need to interact with staff at pickup. The company has partnered with CLEAR, the airport security company, to make exiting the facility even more seamless, and formed a partnership with Spot Hero to allow customers to directly book parking spots.

Disruptors often attack the customer experience first, so it is essential for incumbents to devote resources to improving the complete customer experience through new technology and capabilities. This may involve a blurring of digital and physical interactions, data and other technologies, but should never ignore the power of basic human interactions.

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