The New York Times reports that, in an increasing number of areas, "the Lyft and Uber experience for both business and leisure travelers is simply worlds better than turning to a rental car." I can’t disagree with that.
Uber's ride-sharing service, barely five years old, is valued today at more than $60 billion. (Hertz, one of the Big 3 car rental firms, has a market cap of less than $2 billion.) Uber, Lyft and other nimble, app-enabled companies already have disrupted the traditional taxi business in major cities around the world. It's no surprise that the car rental business is now under siege.
The terrible, awful car rental experience
The Times traces the byzantine process of picking up a rental car, which at an airport often involves waiting for a bus, then standing in line at the rental car counter, dragging luggage through a parking lot, customer “service” agents that are anything but - and a host of other frustrations. It’s hard to deny that simply tapping your smartphone and waiting curbside for Uber is far easier, and in many cases, more cost efficient.
How can car rental companies find a "new place" for their business models in 2017 and beyond?
Industry leaders Avis, Enterprise and Hertz claim to understand the looming challenge. Each has taken steps to blunt the competition. Avis, for example, is expanding its Zipcar car-sharing service that enables members to pick up a car from designated parking spaces in certain downtown areas and college campuses and drop them off just as easily.
Shared-economy partnerships
Hertz has signed an agreement with Uber and Lyft to provide older cars to Uber and Lyft drivers who might not have cars of their own. Hertz, however, sees this as a new revenue stream while defending its traditional business. Enterprise has a similar agreement with Uber. There also are efforts to have rental cars delivered to drivers as a way of eliminating lines and the horrible pick-up experience. But overall the industry has been slow to embrace the massive changes that are needed to compete in the new era where digital technology rules.
Cognizant, the information technology company, recommends that car rental companies take a page out of the retail best practice playbook and focus heavily on the ability of technology to deliver a customer-friendly service.
In this context, the rental car line would vanish. A traveler's arrival at an airport would automatically alert the car company, provide an inventory of available cars with customized upgrades, and allow the traveler to walk straight to the car with no paperwork. Meantime, the mobile and digital relationship would give the car rental company invaluable information that would help recognize a particular customer's needs -- a ski rack, for example, or a baby carrier. The expanded digital relationship would also extend to cross-selling hotel rooms and related services.
The problem with this technical vision -- a good one, incidentally -- is that change will run into a culture that, as The New York Times article suggests, is anything but customer friendly. There is also the fact that car rental companies are so late in recognizing the need for change. With online travel agents such as Expedia and Booking.com, car rental companies have already lost that first contact point with many of their customers. It's also very late in the day to gain a technology lead with ride-sharing companies that are more of an existential threat to their core businesses.
Is there a lesson in here for a business that already thrives on the web? Yes. It's called "listening to the customer."