By on July 31, 2018

Hyundai Sonata Rental with broken rear window, Image: © 2017 Jack Baruth

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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37 Comments on “Rental Companies Should Be Worried About What’s Gaining in Their Rear-view...”


  • avatar
    Sub-600

    The insurance industry might be looking at this too, many people only deal with car rentals when theirs is damaged in an accident and insurance pays for the rental. If insurance companies can save money by offering ride-hailing as part of coverage, they will.

    • 0 avatar
      TMA1

      Ugh, that’s a very bad insurance company.

      “Yeah, we know you’re used to having a car in the driveway, but we can have a smelly Altima with thumping rap music pick you up in 17 minutes. “

      • 0 avatar
        JohnTaurus

        “Oh, I’m sorry. It looks like you live well out of town, make that 1.5 hours, maybe, possibly, if you’re lucky. Please don’t swear at me, sir, I don’t appreciate that. No sir, I don’t blame you at all for cancelling your coverage.”

    • 0 avatar
      Kendahl

      I once knew a woman who was in the business of buying and selling horses. She had a 4-horse trailer and a pickup to pull it. The pickup was totaled by a guy who ran a stop sign. Since she needed transportation immediately, his insurance company offered her a compact rental. They weren’t at all happy when she insisted on a half ton pickup to pull the horse trailer.

  • avatar
    dwford

    Ride shares just a tap away because you have created an account and provided billing info in advance. Don’t rental companies offer this as well? I think the difference is that you pretty much only need to create 2 ride share accounts, and the options for car rentals would mean more accounts to create.

    For certain trips ride share is definitely preferable to renting, but other trips are better served by renting. There is room for both.

    • 0 avatar
      krhodes1

      Yes, the rental companies all offer this – Hertz calls it Gold Service. At all but the smallest airports, I get an e-mail telling me my car, I go get it, and show my license on the way out of the lot. At the bigger airports, being a top tier renter with them I pretty much pick any car I want on the lot (baring the exotics). It’s pretty great. But really bloody expensive too! Usually $31/day for the damage waiver that my employer wants us to get, plus all the other taxes and fees. My most recent 6-day rental in LA was $754 with our corporate discount. I travel for work better than 40x a year.

      I find myself using Uber more and more. Certainly anywhere remotely urban, and in some cases suburban too – particularly for engagements on college campuses where the parking sucks. Recently, I was at the Univ. of MD for a few days – visitor parking was 3/4 mile from the building I was working in, and it cost $4/hr – I was there 10hr days. The second and third days it was cheaper to Uber back and forth to my hotel than to park on campus (and far more convenient). Had they warned me up-front, I wouldn’t have rented a car at all, and I won’t when I go back for the final phase of the engagement later this month.

      At this point it kind of comes down to having to pay for parking and/or whether there is food nearby to the hotel that decides if I rent or ride. My employer doesn’t care within reason, the client pays for it anyway.

    • 0 avatar
      Kendahl

      Uber or Lyft is fine when you need a way to get home from the bar without risking a DUI arrest. Going out of town, whether it’s a hundred miles or a thousand, is different.

  • avatar
    I_like_stuff

    Rental companies all suck. But they suck less than someone else driving me around. I’ve never liked taking taxis and not much of a fan of Uber/Lyft. I like the ability to go when I want, without waiting for someone to show up, or having to make small talk with the driver, or what have you. The only times I eschew a car rental is if I’m in NYC, or SF in which case driving is too much of a PIA vs other modes. But other than those rare occasions, it’s a rental for me.

    • 0 avatar
      Pete Zaitcev

      Rental is still better for me in SF. The pool of Uber drivers was kinda shakey there. Of course, I buy a parking problem when I rent. But it’s only money.

      • 0 avatar
        MBella

        You are correct. Just playing around the lowest I could get a compact for was $70/day when I looked at next week Monday through Friday.

      • 0 avatar
        krhodes1

        I never rent a car if I am actually IN San Francisco, as the public transportation is entirely adequate – I love the classic trolleys, and my usual hotel and clients are all right on the trolley line. I always rent one in the rest of the Bay Area though, my clients are spread all over the place. Probably cheaper to Uber, but I don’t care in that case. Parking is the #1 reason for me not to rent – if it is difficult or expensive I will skip the car.

  • avatar
    65corvair

    So you’re saying I should use Uber or Lyft instead of renting a car in Las Vegas and driving to Sequoia National Park. The following three days driving around the park with Lyft and Lyft back to Vegas. Taxi’s have to worry, rent a cars not so much. I’d worry about all the crappy sedans they have to take a hit on at resale time. I don’t rent a car to go fro the airport to the hotel.

    • 0 avatar
      JohnTaurus

      In certain situations, yes a rental is more logical, but if you were traveling to a large city for a meeting or conference, its a hassle to park, find your way around, not get lost, and return it with fuel in it, only to be charged extra due to some unspecified variance.

      I’d rather have a car at my disposal, personally, but I can see how avoiding the hassle of renting is appealing for some.

  • avatar
    Lou_BC

    “a tectonic shift”

    I’m reminded of that every time I’m next to a Harley at a traffic light.

  • avatar
    gasser

    I used to rent a car when visiting cities like Chicago. Now, however, with $50-$70/night hotel parking and valet parking at a restuarant. I go with Uber or Lyft. The high price of trips to and from the airport to downtown via cab used to get me into a rental car. Now, even though the Ubers are about what a cab costs if traffic is bad (all the time), but at least I don’t have to park the cab. Also, on return to the airport, no hunting for a gas station to avoid the $7/gallon refill charge for fuel that the rental agencies love to add on. In my experience the Uber and Lyft drivers have been no worse, and usually much better than cabbies.
    Also compared to L.A., the Ubers are cleaner than cabs. Others must be agreeing with me, since I have seen ads for rental agencies advertising 15-20% off if you pick the car up at the airport.
    For less than a day long rental, I’ve been using Zip and its been just fine. Yes, after 5 or 6 hours the total price of the Zip car hourly approaches the daily cost, but if I only need it for a specific trip, I’m OK with that.

    • 0 avatar
      PrincipalDan

      I enjoy the hunt of finding charming little places within walking distance of my hotels when business traveling.

      Lyft to and from the airport, lots of walking in between.

      • 0 avatar
        S2k Chris

        Depends on where you are. On business here in Chicago? Sure. On business in my office at an industrial park next to a milion more industrial parks in the burbs? Eh. Where I used to travel to in suburban Tulsa? God no.

  • avatar
    RHD

    My town used to have a major rental company office at the Sears store. I reserved a car online, and when I arrived as scheduled to pick it up, they had zero cars available. The poor attendant said that that happened all the time, and reserving a car online didn’t actually require a car to be available.
    I got a car when the next customer returning a car happened to show up. No one cleaned it, checked the tires or anything. That office is now out of business.
    Another car rental place in town has no facilities for washing cars, adding fuel or even airing up the tires. So if you ever buy a former rental car, don’t assume that it has been professionally maintained according to the manufacturer’s recommendations. The only thing you can be sure of is that it has been regularly used like a lady of the night, by hundreds of somewhat indifferent customers.

    Uber is great for short trips, but it will last for only as long as their drivers don’t realize that they are making less than the legal minimum wage, and their gas and maintenance expenses come out of that.

    • 0 avatar
      87 Morgan

      At some point, the cost per trip for Uber/Lyft will need to increase to accurately represent the cost of the fare. I try to tip well when I use either platform. Thus far I have had decent folks trying to make a living. I am fine paying them.

  • avatar
    MBella

    I understand how people dislike the little hole in the wall rental places in town. When talking about travel though, the rental process at airports has become about as painless as possible. I don’t have to talk to anyone until driving away. I go right to their lot, look at the cars they have available, and drive off. The only human interaction is when they check my ID at the exit gate. I’m sure that will be replaced by your phone to.

    I think Uber/Lyft make the most sense if it’s a single round trip. In the above examples, the meeting downtown. You need to get to and from the airport but otherwise will be walking. Perfect. If you’re going all over the place, the economies brake down quickly. I can’t remember the last time I spent more than $40 per day on a rental. Add a tank of fuel, and it’s still not more than most of my Uber round trips.

    • 0 avatar
      Pete Zaitcev

      Oh, I can. Denver is like that. $440 for a Jetta for 4 days, easily. They have absolutely astonishing fees at DEN that rental companies cleverly hide.

      Not that Uber would be any better, but…

    • 0 avatar
      krhodes1

      By the time you add the damage waiver (my company requires it), taxes and fees, I am rarely less than $100/day. That is with a corporate discount of 10-20%. Yes, you can rent much cheaper going through the off-airport and lower tier rental companies. I tried that when I first got this job – it gets old watching 9 Hertz buses roll by while waiting for the fly-by-night shuttle, and then getting a completely crap car. Once I found out we had a Hertz corporate discount and thus they are a “preferred vendor” for us, it was Hertz all the way.

      For personal travel I have no shame though – when Hertz blacked out points rentals for DC while I was going there on vacation with my roommate, I scored a beatup Elantra from Advantage for $12/day WITH the damage waiver through Expedia.com.

      • 0 avatar
        jkross22

        Your clients who pay for this are getting bent over a bicycle rack. Doesn’t Amex offer a premium rental car insurance plan that covers all of the coverage areas that hertz offers?

  • avatar
    S2k Chris

    Is there a known quality spread for premium vs budget car rental companies? I mean among the name brands, not Joe’s house of wrecks? I couldn’t really tell you what’s what to be honest. I had a corporate Avis number from way back when, usually go wit that unless Hertz or Dollar or whomever is cheaper or a better choice at my chosen airport, etc.

    • 0 avatar
      airporthaircuts

      You first need to differentiate between the brands and the parent companies. Enterprise bought National and Alamo about 2 years ago, and Hertz bought Dollar and Thrifty maybe 5 years ago. Avis has always owned Budget. I used to work for Enterprise at an airport location, and the only differentiation in vehicles between the three brands was that we weren’t supposed to park anything with over 20k miles on the National side. The primary differentiation is in service levels.

  • avatar
    MKizzy

    Its likely that Big Tobacco companies will start buying out the Marijuana growers and dispensaries the moment Marijuana is legalized nationwide.

    At least one big car rental agency will probably do the same as soon as autonomous vehicles or ride sharing reaches the required threshold of profitability. If you can’t beat ’em, buy ’em.

  • avatar
    Glenn Mercer

    All fair points, by Alix, but does anyone really think the rental firms haven’t noticed this? Zipcar (carshare) looked like a threat…. so Avis Budget bought it. Uber and Lyft are threats… so Hertz now rents cars to U/L drivers. People want more choice of vehicle… so now Hertz et al. offer “pick any car off the lot options.” And the Hertz app is pretty easy for me to use. Over and over in these “new services will disrupt [ fill in incumbent here ]” we see, over time, equilibrium reached. AirBnB challenged hotels, now most AirBnB rentals in NYC are from corporate apartment blocks that seem pretty hotel-like. Uber challenged taxis, now taxis have app-based dispatch systems like Flywheel and Curb. “Mobility services” are hardly new: Hertz was founded in 1918, and the auto industry somehow managed to live with it. Different services for different needs. From buy a car to lease a car to subscribe to a car to rent a car to carshare to taxi to ridehail a car to bikeshare and now SCOOTER share. Next we’ll find some billion-dollar unicorn offer “shoeshare, the ultimate mobility service.” Challengers emerge, incumbents respond.

  • avatar
    APaGttH

    Well…

    1) If cities wouldn’t adopt 50%, 60%, 75%, 100% rental car taxes at airports…

    2) If rental agencies didn’t try to convince me at the counter that a Toyota Corolla is a fullsize, or a Chevy Trax is a midsize SUV, or a Toyota Camry is a “premium” car…

    3) If rental agencies didn’t play idiotic games with toll transponders…

    4) If more and more airports don’t make me take a train or bus to the offsite center, with a cattle herd, adding at some airports 20 or 30 minutes of transit time between waiting, stopping at each terminal, and then the 5 minute drive to the rental car center…

    5) If rental agencies didn’t make surge pricing from Uber look reasonble during busy times…

    Sorry, but between taxes and how rental agencies act, no empathy if their business is being…challenged. It needs it.

    • 0 avatar
      jkross22

      Yup

    • 0 avatar
      200k-min

      For me it really depends on where I’m going and what I’m doing. Probably rent more often than Uber but the latter is gaining favor. National is our preferred corporate rental co. which is ok but I’m tired of getting $hit box Nissans all the time – even in the executive section…or worse yet not having any cars so I’m waiting for them to clean up a return quickly. And it wouldn’t kill them to offer some nicer trim levels in the vehicles. Without ability to bypass the counter I’d truly never rent, that is a chore and completely unnecessary these days.

      What’s killing the freedom of renting cars is the cost which piles on and on and on. All the taxes and fees on the rental itself. The cost of paying to park at hotel, at office at anywhere. Even places with oceans of surface parking charge these days. Unless you’re in rural Kansas parking ain’t free. Then you return the car and the nearest gas station to the airport has prices 25% higher than anywhere else. What the F!

  • avatar
    theflyingspamcan

    I mean, the big one people miss is corporate travelers. Sure Donny Tightwad might ride hail or Turo for personal trips, but corporate travel is huge for these companies. Our partnership probably gets the rental company a half million a year, if not more. Multiply that by many companies and it’s not hard to see where so much of the money comes from…

  • avatar
    spookiness

    I don’t travel much and when I do its pleasure not business, but I don’t rent cars that much anymore. I use transit, cabs, uber, bikes, walking many places I go. I am a Zipcar member and have used that in cities that have it. I have rented cars for just 1 or 2 days when I needed or wanted one, not necessarily for the full duration of the trip. When possible I have cabbed or transited to my hotel, then rented off-airport to skip some of the fees and taxes.

  • avatar
    tonyola

    I can tell you what the problem is, at least for the Sunbelt states – there aren’t any more Chrysler LeBaron convertibles on rental lots.

  • avatar
    road_pizza

    I’ll stick with rental cars, thankyouverymuch. When I want to go somewhere I want to leave NOW, not when some ride-hailer shows up. And I like to, you know, like, change my route on a whim, among other things? Ride hailing services are for one thing and one thing only… getting how from the bar when I’ve had a wee bit too much. Period.

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