How Is Technology Changing the Car Rental Industry and What Is the Future of Car Rental?

The car hire industry faces several ongoing issues arising from damaged reputation, logistical difficulties and a lack of marketing. However, existing and new technologies are having a dramatic impact and are beginning to revolutionise the industry. The rise of smartphones, companies like Uber and the development of electric and autonomous vehicles are hot topics when it comes to predicting the future of car rental. Here we will examine the current problems, how technology is changing the industry and what the future looks like.

Current Issues with the Car Hire Industry

There are a number of issues that currently affect the car hire industry. If left unaddressed, they can ultimately result in consumers seeking alternatives for their vehicle requirements. Fortunately, these problems can be overcome by listening to consumers, keeping a close eye on market trends and making appropriate changes.

Transparency and Customer Service

Two of the biggest bugbears of consumers are the transparency and customer service levels of car rental firms. Customers expect prices to be all-inclusive and hate being pressured into purchasing extras like damage waiver insurance. Many consumers charged for accidental damage do not believe they caused the damage, and yet another annoyance is administration fees billed for associated paperwork.

The rise of online review platforms like Yelp and Trustpilot has meant that bad customer experiences are now widely publicised and hence greatly magnified. This is because online reviews have become highly trusted and also because consumers are more likely to write a review about a bad experience than a good one. Once a negative review has been posted, it can take around twelve positive reviews before the effects of that bad post are cancelled out.

In 2015, the UK-based Competition and Markets Authority conducted a review of the car hire industry and ordered companies to offer transparent pricing, clear terms and conditions and explanation of the full extent of damage cover. The review also required new procedures relating to accidental damage, allowing consumers to see evidence and challenge the findings before being charged for repairs. While most car hire companies have taken heed of the review’s requirements, a few continue to irritate customers with some of these entrenched issues while others seek new ways to extract additional revenue.

The bad experiences of past consumers coupled with the conduct of a minority of car rental firms has damaged the reputation of the industry. This damage is not irreparable though, and customers do notice commitment to transparency and diligent customer service.

Logistics

Logistics plays a key role in operational efficiency. Fleets need to be managed so that vehicles are available when and where customers request them. In situations where the quantity of a certain type of vehicle is low, it is often necessary to reposition them between rental outlets. This empty transfer of vehicles results in significant time loss and fuel costs as well as negative environmental impact. Making changes to reservation procedures can be daunting, yet it leads to drastic improvements in both efficiency and profitability.

Case Study: Algorithmic Approach to Vehicle Reservations

In 2013, Engineering and Management Master’s student, Beatriz Brito Oliveira, trialled an algorithmic-based reservation system. This was within a Portuguese car rental firm that was struggling with the logistics of its low-quantity special vehicles across its forty branches. Their existing reservation software enabled employees to view vehicles’ current reservations and look at various allocation configurations. However, it was not possible to view the confirmation status or the profitability of each reservation. Upgrades and downgrades were used, but only when absolutely necessary. The existing procedure meant that reservations were allocated in the order they were requested considering only feasibility. Reservations were not reviewed and rearranged following initial allocations.

By implementing an algorithmic-based reservation system, all available data including confirmation status and the profit of each reservation could be utilised. Reservations could subsequently be made based on both feasibility and profitability. This resulted in a twenty percent increase in longer, more profitable allocations and a twenty percent decrease in empty transfers for repositioning. The new system also enabled the reallocation into strategic roles of the two experienced employees that had managed the reservations.

Marketing

It can be difficult for smaller car hire companies in particular, to market themselves effectively. Despite social media transforming the marketing landscape over the past decade, many firms have struggled to keep pace with the trends. The car rental industry as a whole continues to lack in online presence, yet online visibility is an essential component in attracting consumers.

To improve visibility, car hire firms must engage with social media platforms such as Facebook and Twitter to enable more potential customers to discover their business. Sites like these also enable communication with consumers to address queries and build rapport. Company websites still play a key role in attracting customers, so these need to provide information clearly and concisely, have a simple interface for enquiries and be regularly updated to remain relevant.

How is Technology Changing the Car Hire Industry?

Technology such as the internet and smartphones has already made a significant impact on the car hire industry. Although technology gives consumers more control, it also drives change and opportunity within the industry. In fact, technology can help reduce some of the current issues the industry faces. However, some technology like Uber and Zipcar could be seen as a threat to the industry.

The Internet

The advent of broadband has meant that the slow, unreliable internet connections of dial-up are firmly in the past. Broadband is often provided at a fixed rate and offers consumers a constant internet service. As such, users have internet access that is unrestricted by the time-based charges of old and data can be transferred quicker than ever before. The introduction of broadband has revolutionised the internet and enabled much of the population to have access to it. With improved access has come increased usage. People use the internet more and more for tasks like shopping, reading the news and planning holidays that they previously would have done in different ways.

The improvements to the internet infrastructure have made it considerably easier for car rental firms to showcase their products and services. Companies can run websites and social media pages to attract customers, and these in turn have opened new channels for communication with customers. Now, the internet will likely be the first place consumers try when looking for a car hire company, and they can compare a number of different car hire companies in minutes.

These improvements to the internet can be harnessed to address the current industry issue of marketing. Car rental firms should take advantage of the instant nature of the internet to grab the attention of consumers and make it easy for them to make enquiries. Companies should also be active on social media to interact with potential customers and advertise promotions. In addition to marketing benefits, the internet provides great benefits to car hire operations. Individual branch-based systems can be easily integrated, while cloud solutions mean data can be backed up off-site.

Smartphones

Smartphones have further increased the reach of the internet, enabling consumers access wherever they are. Many car rental firms have embraced the technology, developing mobile-friendly websites and apps so their customers can make reservations easily and instantly.

Canadian company, Discount Car and Truck Rentals, has taken this one step further. First, it located some of its fleet in different car parks throughout the cities in which it operates. It then developed its app to not only locate and reserve the nearest vehicle, but to also begin the rental and unlock the vehicle doors on the arrival of the customer. As people increasingly prefer not to deal with someone in person when they go to collect their rental vehicle, this type of self-service innovation is likely to become a key feature in the future of car hire.

As well as further improved internet access, smartphones have paved the way for even more technological advancement. They could be considered the cornerstone of apps like Uber and Zipcar, providing drivers with a platform to hire out their vehicles for use as taxis and providing consumers with immediate access to a private taxi service.

Uber and Zipcar

Innovative on-demand car hire models such as those used by the taxi and ride share companies, Uber and Zipcar, have had an enormous impact on the traditional car rental and taxi firms. Both platforms can be used on computers or via smartphone apps and enable quick door-to-door transport with just a few clicks or taps. Consumers select their pick-up location and destination, view a cost estimate and then wait for a car that arrives in a few minutes. Payment information is stored on file, so there is no need for cash. The simplicity and convenience of use has meant that many consumers now choose companies like Uber and Zipcar when they previously may have used traditional car hire and taxi companies.

Case Study: 2016 Certify Report

Travel and expense management firm, Certify, conducted a survey in 2016 which examined over nine million receipts and business expenses. Its report revealed that ten percent fewer journeys had been taken in rental vehicles compared to the previous year. At the time of publication in April 2016, Uber held forty-three percent of the market, while traditional car hire held only forty percent. Car rentals fell fifteen percent between 2014 and 2016 and traditional taxi firms were also hit hard, with a fall of twenty-three percent during the same period.

The review focussed on business usage and the drastic impacts on traditional car hire and taxis could in part be due to Uber’s launch of Uber for Business in July 2014. Nevertheless, Uber has demonstrated popularity with both business users and the general population. For example, its payment system means that parents can be safe in the knowledge that their children always have a safe method of getting home, even if they don’t have any cash. Uber users can also hold business and personal accounts concurrently so that business journeys are automatically invoiced to their workplace whilst personal travel is managed separately.

What Future Technologies Could Dramatically Change the Industry?

There are several new technologies that are set to shape the future of the car rental industry. Among them are electric cars and autonomous vehicles. Self-service and on-demand models will continue to play important roles, and eventually, all these technologies will unite as they develop.

Electric Cars

Due to concern for the environment, much attention has been given to the development of vehicles that will reduce the carbon footprint. Various types of hybrid car have been produced since the late nineteenth century. It is only recently, though, that hybrid cars have entered the mass-market. This is mainly because of difficulties creating batteries capable of wide enough ranges to make them practical. Hand in hand with this issue was a lack of charge points, meaning that the batteries could not be charged during journeys. Hybrid cars have now reached a level of performance that satisfies consumers, but the next step is undoubtedly fully electric cars.

There are already over ninety thousand registered electric cars on British roads, and now the technology is at a satisfactory standard, this number is set to rise, just as it did with hybrid cars. In the UK, there are currently more than four thousand charge points for hybrid and fully electric vehicles, which has created a solid infrastructure for the future. At the International Car Rental Show in March 2017, Europcar revealed one of its latest initiatives is to have an all-electric car club, demonstrating an awareness that electric cars may dramatically change the industry.

Autonomous Vehicles

There is great excitement at the emergence of the first autonomous vehicles. Once perfected, these driverless cars will be able to sense the surrounding environment and navigate with no human input. Uber has been at the forefront of the introduction of autonomous vehicles to the car hire industry. In September 2016, it launched its first self-driving vehicle in Pennsylvania, USA. Due to the early stages of the technology, a safety driver was required to assist but the pilot provided invaluable real-world testing. The scheme was subsequently rolled out to Arizona and California as well.

The programme has not been without its problems, however. In December 2016, Uber was ordered to remove its semi-autonomous vehicles from Californian roads following two red-light violations. Uber claimed the violations had been due to human error. Now operating a fleet of forty-three semi-autonomous vehicles, Uber’s cars cover a total of around twenty thousand autonomous miles per week. Despite these encouraging figures, it should be noted that each vehicle only drove a maximum of one mile in between human driver interventions. Clearly, there is a long way to go before fully-autonomous cars are on the horizon, but this is one new technology that is definitely here to stay.

There are many naysayers who suggest that autonomous vehicles spell the end for the car rental industry. Yet perhaps the example set by companies such as Uber that embrace the new technology is more a demonstration of the opposite via a willingness to adapt. This approach, if followed by other car hire companies, may, in fact, pave the way for a very bright future. After all, as Auto Europe CEO Imad Khalidi points out, with other modes of transport, “You don’t see the country.” He concludes: “No other form of transportation will overtake car rental. It will live a long time.”

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