The ICRS panel on increasing revenues for small rental operations included (L to R) moderator Roger Zakaria, CEO of Fleet Consulting Association (FCA); Michael Meyer, president of Rate Highway, Inc.: Joshua Stock, owner of Carzi Rent a Car; and Trent Gifford, CEO and co-founder of Appzoola.
Photo: Ross Stewart / Stewart Digital Media
A car rental operation can never get enough knowledge on increasing revenues because, how much is the limit?
That question answers itself, and to spur more revenue, a session at the 2024 International Car Rental Show looked at ways operators can hit financial targets and grow revenue far beyond.
The April 17 panel titled “How to Increase Revenues as a Small Rental Company,” included moderator Roger Zakaria, CEO of Fleet Consulting Association (FCA); Michael Meyer, president of Rate Highway, Inc.: Joshua Stock, owner of Carzi Rent a Car; and Trent Gifford, CEO and co-founder of Appzoola.
Major brands account for 96% of the total auto rental market, with the independent market making up the rest.
“At the end of the day it’s all about revenue,” Zakaria said. Rental car operators can always learn more about where to increase revenues, how to minimize liabilities, and where to build assets in the company, he added.
The session presented examples of how operators can apply certain methods in their rental car businesses. Some key questions to address:
- Where do you get business from?
- Where do you get bookings from?
- How can you incrementally increase sales?
- How can you upsell?
- How can you boost revenue with new technology and contactless rentals?
“The fleet is where you make the revenue, and where you make your business,” Zakaria said. “How you make your money is how you manage the lifecycle of the fleet.”
More Bookings and Stronger Pricing
The panel shared four points to consider when pricing rental car services:
- You cannot make up for lowering rates with increases in volume.
- Increasing your rates will grow revenue.
- Pricing is the intersection of a market and customer demand.
- A rental car operator first needs to understand the competitive market: Competitors, types of products and services, lengths of rentals, and specific rates.
In finding opportunities to raise rates and revenues, rental car operators should focus on lengths of rental periods, or duration, Meyer said. Companies that offer different rate tiers based on number of days should consider which ones are profitable, such as among weekly, daily, two-day, three-day, etc. rates.
“This allows you to look at your competition and your marketplace and find opportunities to raise your rates,” Meyer said. “If you’re only pricing a two-day rate and your one-day rate is too low or your three-day rate is too low, there’s an opportunity to break those up and increase them. That’s money you’re leaving on the table by not being granular enough.”
An operation’s counter and reservation systems should be able to support adjustments in rate terms and timelines, he said.
Meyer advised rental car operators to look outward on the calendar toward holidays, special events, and seasonal periods to spot new demand opportunities. “Look for that timing in your market so you can deploy a strategy in advance.”
Many rental car companies charge more for a one-day rate than a two-day or three-day rate to steer customer demand to the more profitable options, Zakaria said. Another panelist added that one-day rentals also involve more risk, but if it attracts direct repeat customers, then it pays off.
The goal is to get solid organic bookings from your website and local marketing, and not just from OTA channels, Zakaria added, since owner-options require lower acquisition costs per customer.
How to Improve Rental Visibility
Meyer outlined three types of distribution to improve visibility:
- Maintain your own website: It’s the lowest cost way to land a reservation.
- OTAs: Online travel agencies like Expedia or Priceline maintain high bars for entry but can bring in a firehose of business, mostly from domestic travel.
- Brokers can help provide inbound travelers coming into the U.S.
To leverage these avenues, operators need the right branding. A company with one location cannot just appear on an OTA. They would be better off affiliating with a larger brand that can provide exposure on its more heavily trafficked website.
“I can get business in markets from an audience I didn’t have access to until I became an affiliate of that brand,” Meyer said. “But the affiliation is probably the fastest and easiest way to jump aboard that train.”
Joshua Stock, owner of Carzi Rent a Car, recounted that getting his company set up with an affiliate, while not easy, took about 60 days and then about 30 days to fully integrate and acclimate to it. The arrangement has paid off with a steady flow of business.
“We’re pretty obsessive about our customer experience so many of those customers that we’ve been able to bring in through the Carzi brand now come to us directly,” Stock said. “It’s a great way to acquire customers that you would otherwise not get, but not to the point where we couldn’t exist without them.”
Managing Rental Customer Service and Sales
Zakaria advised that rental car operations should retain someone on the staff who understands rate management. A rate manager will make or break you. Operations should budget for such a position.
Consultants and coaches can walk rental car operators through the complex process of evaluating competitor rates, terms, and return times.
Zakaria underscored that affiliation costs less than franchise. Most of the independent corporate environmental brands in the U.S. are also affiliates, he said, due to more favorable legal reasons.
Another revenue pillar is upselling, which Stock pursues at Carzi, a contactless car rental operation without brick-and-mortar facilities.
“We have customer service reps and it’s all text based,” Stock said, with renters being able to call on a phone if needed. “We try to upsell during the customer experience. We try to remove as much friction as possible so that the rate is as low as possible, and the customers are excited to get their vehicle.
“Our customer service reps don’t have to handle a lot of incoming minutia questions from customers and can focus on selling and giving them a great experience,” he added.
The process starts with the website allowing upsell options, he said. “We found that giving them too many options up front actually reduced our conversion on our website and reduced the amount of upsells.”
Carzi contacts customers about two days in advance to start the pre-trip check in where they can review the driver’s license, insurance, and planned timeline as part of their risk assessment. It also allows time to learn about customer needs which enables salespeople to offer upsell options based on the customer’s plans.
Customers can update their phone numbers and email to receive instructions and upgrade and product options, Stock said.
“We do a lot of marketing to our customers via email and try to reach out to them usually every three weeks. What we are doing is keeping our brand in the back of their heads and develop trust.” That way, they are likely to book again.
To minimize agent time answering questions, the company also uses an AI chatbot that prompts customers as soon as they message a question. They have found the chatbot answers about half to two-thirds of questions before a live customer service rep need to come online, Stock said.
Managing Rental Fleet Vehicles
At the core of increasing revenue is managing a rental fleet efficiently, Zakaria said.
“It doesn’t matter if you have one car, 1000, 5000, or 10,000. The bigger the fleet, the more information and tools you need to manage your fleet.”
Car rental operators should make sure to offer the right fleet mix that appeals to their specific market(s).
Zakaria underscored how the composition of a fleet can increase revenue. In one example, a customer wants a compact car, but none are available, so the car rental company offers an SUV for $10 more per day.
“One strategy is what’s called a teaser rate to put you in there. Doing the upgrades is a great opportunity for upsell depending on the market.”
Fleet operators should look for online customized access to the immediate value of each rental fleet vehicle, a projected future value, and the depreciation schedule, Zakaria said. Such information can define a unique fleet lifecycle strategy that identifies the best turnover timelines and resale values, potentially resulting in a few thousand dollars in additional profit revenue per vehicle.
“It’s important you do the timing of the fleet based on its composition. Fleet usage must be 85% or higher.”
Stock added that fleet vehicles can be part of multi-product bundles that span insurance tiers, additional drivers, and /or roadside service.
In a more targeted example, Gifford cited his previous rental car fleet in Hawaii that offered Jeeps for beachgoers with charges for removable hard tops and retractable soft tops. Given many customers were tourists, the rental car company offered coolers, lawn chairs, umbrellas, and other beach equipment that could be rented out, sparing the customers from trying to get those on their own. “That’s all the stuff you can upsell at the time of the booking, or at the time of the vehicle pickup,” he said.
Some newer products emerging include windshield coverage, tires coverage, and products covering other parts and components, said Zakaria, emphasizing these are products not insurance.
Trent Gifford, also president of the Independent Car Rental Association, advises operators of smaller rental car companies to take a bolder approach with marketing their services: “Don’t always be a follower; challenge yourself to be a leader. You have to try things to see what works.”
Photo: Ross Stewart / Stewart Digital Media
Marketing for More Business
The panelists encouraged rental car operators to constantly look for creative or underused ways when generating more revenue.
“Think about your business and how you’ve been running and operating it over the last year two years,” Gifford said, who also leads the Independent Car Rental Association, which has 1,300 members. “How have you adapted to certain market situations? Then challenge yourself to think outside of the box, which is the title here in ways to increase your brand and find new customer outlets.”
From a marketing perspective, operators should talk to their local communities and get involved in local business organizations. Market to area resorts, hotels, restaurants, and attractions.
“From a networking perspective, this is a great place to focus your attention and your time to build your brand and create recognition for yourself in that particular market,” Gifford said.
Look at your marketplace and see what others are doing as well, he said. “But don’t always be a follower; challenge yourself to be a leader in some of these areas. You have to try things to see what works. In some cases, things might not work. And that’s OK; you’ll make a business decision and move on and change your strategy slightly.”
Gifford also suggested marketing and connecting on social media which helps define and promote a brand. Social media can resonate with followers from local car rental groups in creating brand awareness in the car rental marketplace.
“Renters go to these groups looking for a vehicle to rent literally every day,” he said. “So, look for the right social groups, get involved in them, and then formulate a strategy to be able to start putting your brand out there to expand your marketplace.”
Through a website, social marketing, and media, rental car companies can create valuable first impressions that can lead into bookings.
“You start communicating with your new customers, and you create that (vital) rental experience. If that’s a positive experience, they will come back at the end of that rental period, and you will learn from their feedback and through surveys.”
Such detailed information enables operations to continuously adjust their tactics to improve customer experiences.
Another approach is to add discount codes for website bookings, Gifford said. “Give that to them when they when they return the survey. Thank them for their information and then give them a discount code depending on your market that’s good for six months or a year or more.”
Quarterly e-newsletters are an inexpensive and easy way to inform and market to current and prospective customers. A mobile app empowers customers to easily book and communicate with a car rental company, while a QR code makes it easy for them to find you.
“Once they become a customer, you have them download the mobile app and then their future bookings can be done easily from their phone,” Gifford said. “You’ve got your client in the palm of their hands.”
