Predicting Returns and No Shows
A high utilization culture has to be a team effort. Management has to constantly focus on the key numbers. Even more importantly, management has to back up the frontline staff. Being out of cars can be stressful, and the burden should not always fall on the shoulders of the rental agents.
All staff should be taught how to calculate availability by predicting returns and no-shows. The pattern is surprisingly consistent for both, but occasionally the predictions will be wrong. This is where the staff has to be trained and conditioned to understand that running out of cars is acceptable and, in fact, necessary to be profitable. They must be confident that management will back them up if they are wrong occasionally.
Many rental operations run specialty vehicles very profitably. Utilization is usually much lower for specialties, but rates are high enough to offset. The danger is that staff can be conditioned to expect lower utilization company-wide. Tracking utilization separately for specialties and standard rental vehicles is one good solution.
Dealing with Vehicularly Challenged Days
Staff should be commended and rewarded when utilization is high. We prepared a somewhat lighthearted training document, “Procedures for Vehicularly Challenged Days,” and used it to help develop a high utilization culture. Some of the main points covered were:
• Be prepared. Dealing with an anticipated shortage of cars should start long before you run out. Find another company that will take your reservations, preferably honoring your rates. Go through your reservations and choose which ones to refer — short rentals, not repeat or corporate customers, etc. Start referring before you run out.
Look at specialty vehicles and plan substitutions where possible. Larger vans can be used for minivan reservations. SUVs can be used for luxury reservations. Again, start early when you have lots of options. It is much more difficult if the only vehicle on your lot is a compact and you have a minivan reservation.
• Make sure you can rent every possible vehicle. Get cars out of the shop. Call overdues. Reconcile the “Cars Not on Rent” list.
Assign staff to greet customers as they arrive or to even ride the bus with them. It is very bad customer service to have customers wait in line, and when it is their turn, to be told to get back on the bus to go to another company.
Reward Good Performance
We also instituted a bonus plan that rewarded high utilization. Everyone working received a $5 bonus per shift if company-wide utilization exceeded 85 percent, and everyone working received a $10 bonus if company-wide utilization exceeded 90 percent. (Only one bonus per employee per shift, but the utilization bonuses could add up nicely in a good month.) The bonus plan was generous, but when company-wide utilization was above 90 percent, we could certainly afford it.
It took a few months and some staff replacement, but we got to the point that utilization was almost always above 80 percent and often above 85 or 90 percent.
If your utilization is consistently high, you will probably find that you have a higher daily dollar average because you are not forced to discount as often. Also, your labor costs will be lower because it is easier when you have fewer cars on the ground and your overhead will be lower because you need less space. Isn’t that worth the extra effort?
Jim Tennant has more than 30 years experience in the vehicle rental industry as both a franchisor and franchise operator, and presently as an industry consultant and expert witness.