Rental Companies Should Be Worried About What's Gaining in Their Rear-view
For a product or service to dominate a body of customers, another must fade to the background. Think of direct and alternating current, or perhaps digital cameras and 35mm film.
It gets a little fuzzier when the topic of personal transportation arises. Some modes of transport are so much more more useful than what they replaced (cars and horses, jetliners and ocean liners) that the preceding mode is relegated to a niche category. In others comparisons, the usefulness of a certain mode remains strong only in certain areas. Think trains.
But in a car-based world, consumers now have more options than ever in how they get around when their personal vehicle is left sitting at home. A recent survey shows just how pleasant regular car renters find app-based ride-hailing services, and traditional rental companies would be foolish to not take note.
The survey, conducted by consulting firm AlixPartners, asked 2,000 Americans who rented a car in the past year about their experience — and opinion — of ride-hailing services. As you might expect, consumers are learning the appeal of getting a lift from the street corner or address of their of their choice just by opening up the Uber or Lyft app on their phone. With cheaper rates than a taxi service and no need for a pricey add-ons, ride-hailing can offer a viable alternative to renting a car at the airport.
Thanks to services like GM’s Maven or Turo, longer trips out of (or around) town can also be had without visiting the Enterprise, Avis, or Budget counter. The future holds more potential choice. Autonomous driving technology is at the core of Waymo’s ride-hailing plan, and others, like Uber and Lyft, want a piece of that action. According to AlixPartners (via The Detroit Bureau), rental companies need to change their business model in a hurry if they hope to survive the coming decades.
“Results from our survey suggest that the $30-billion U.S. car-rental industry is already undergoing a tectonic shift, with boundaries not just blurring but being obliterated between car-rental and ride-hailing and other forms of new mobility,” said Arun Kumar, a director in AlixPartners’ Automotive and Industrial Practice.
“The companies that survive this shift will be those that act now to transform themselves to be relevant in a world which seems to much prefer simply clicking on an app than standing in line at the rental counter.”
So, what did the survey reveal? Some 35 percent of respondents say they’ve replaced a rental with ride-hailing services in the past year. Of those who were aware of the existence of ride-hailing services (but have never used it), 48 percent say they’d switch if the cost falls 20 percent below that of renting.
Perhaps even more worrisome — to rental agencies, anyway — is that those who have used ride-hailing as a rental alternative seem to prefer the service. Of the rental respondents, 83 percent rate their ride-hailing experience as “very positive” or “somewhat positive.” Rental services garner a positive rating of only 72 percent.
What don’t renters like about the rental experience? Top of mind is the “laborious” rental process for 35 percent of respondents, followed closely by pricey add-on charges (34 percent). Twenty percent cited limited vehicle choice as their top gripe.
If this wasn’t enough to go on, rental companies might want to take note of this finding: Of the respondents who used a ride-hailing service, 49 percent said the greatest appeal came from its ease of use. Just a tap of the phone away.
Also, rental reputation does not necessarily translate into a more pleasant experience. From the survey:
The AlixPartners survey also finds that—despite attempts at brand-positioning by various companies in the rental-car industry over the years—consumers’ rating of their experience with what the industry generally considers “premium” and “mid-tier” brands aren’t much higher than with “value” brands—and in some cases are lower. In fact, according to the survey, on a scale of 1 to 5, with 1 being “very negative” and 5 being “very positive,” only 0.5 points separated the highest-ranked brand of the 17 largest rental-car companies and the lowest-ranked. And that highest-ranked brand wasn’t even a “premium” one.
If there’s a silver lining for rental companies, it’s that “only 18% of those surveyed currently say they’re willing to purchase a ride-hailing subscription for a set number of rides—thought by many to be that industry’s preferred business model.”
[Images: © 2017 Jack Baruth/TTAC, Turo]
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