Jim Shapiro and Ken Elder may not have had to “walk 10 miles in the snow to get to school,” but they did grow up in car rental without the benefit of today’s systems, technology and information overload. Here is a quick hit of remembrances, musings, advice and wisdom from two industry stalwarts. The two provide some takeaways that car rental operators could use today.
Shapiro started as an American International franchisee in 1981 and later broke off with several franchise owners to form Americar in the early ‘90s. He operated two Florida locations, out of Orlando and Tampa, and took reservations for Payless. Shapiro was president and on the board of directors for both ACTIF (Association of Car and Truck Rental Independents and Franchisees) and the American Car Rental Association (ACRA).
Elder started his first Thrifty franchise in Alexandria, Va., in January 1970 and ended up with 40 locations, from mid-Pennsylvania to Baltimore, Washington, D.C., Richmond, Va., and the Tidewater area of Virginia. Elder was a longtime board member of ACRA and served as its president.
Both Shapiro and Elder retired from car rental in the early part of the last decade.
Setting Rates and Taking Reservations
“When I came in the ‘80s, I’d look at how Thrifty was doing and I’d [set my rates] underneath them, because they had a better name than I did,” Shapiro says. “You’d sit it out for two weeks and you didn’t bother to change [the rates]. If you didn’t get reservations, you’d take another look and find they’d went beneath you. We’d make calls to find rates because we didn’t have computer access to find this stuff out.”
Elder did a lot of local reservations and says that a 20% no-show rate was common. “We had no idea when a car was going to check in, because local rentals aren’t very dependable, unlike airline reservations,” he says. “The high fee to change an airline ticket benefitted us because it kept people to their initial schedules.”
Shapiro contends that competition back then was “less fierce” than today, owing partly to the fact that his larger competitors didn’t pay too much attention to him. “With the smaller operators, there was some competition, but when you change your rates once a week, it’s not as competitive as changing them every hour,” he says.
Nonetheless, Shapiro recalls the “cannibalizing” of customers at the airport, where a representative from another car rental company would meet travelers — many with existing rental reservations — at baggage claim and lure them with a lower rate.
Elder recalls trying to gain consensus from other car rental companies to start a “do not rent” list. It didn’t fly, because companies “didn’t want to give up their bad list because they’d rather you compile your own and have the losses associated with it,” he says.
The Business Landscape
Shapiro fondly remembers the days of the investment tax credit in the ‘80s and its positive contribution to his bottom line. But Elder points out that it led to over-fleeting and bad business practices. “When everyone had 20% more cars than they could rent out, rates went into the toilet,” Elder says. “It got a lot of people in the car rental business that shouldn’t have been there.”
Elder recalls the days of high interest rates in the early ‘80s. “You could buy a car for $12,000 and sell it for $13,000 because of inflation,” he says.
Fleet financing was easier back then. “Everything done with the bank was with a handshake,” says Shapiro, who did a lot of factory financing. “I bought the cars, paid the interest, paid off the cars and that was that.”
However, easier financing led to unwanted competition. “You’d have a new independent operator in Orlando who would meet [a manufacturer’s] fleet representative and say ‘I want to start up,’” Shapiro says. “And [the manufacturer’s captive finance company] would give them financing and they’d get the cars relatively cheap.”
While more and more companies were using repurchase programs, Shapiro’s philosophy was to own his fleet. He found out he could do better by selling at the right time. “That’s why wholesalers liked to come to me, because the title was in my file cabinet. They’d cut the check and they were gone.” Having so much equity in his company allowed Shapiro to borrow at “unheard of” rates for an independent.
Technology or the Lack Thereof
It’s hard to imagine business life without computers and the Internet. Shapiro used “a lot of calculators and adding machines,” including a Friden calculator, a transistorized desktop electronic calculator. “It made an unmistakable whirring noise,” he says. Shapiro also bought one of the first fax machines in the early ‘80s. “It didn’t work very well,” he says.
Going back further, Elder remembers the filing cabinets that housed the cards for each unit and rental and using slide rules and rotary adding machines. In 1973, he bought his first calculator to multiply, add and divide.
Without technology, renter verification was difficult. “We never had a problem with anyone that had a library card,” Elder says. “And you had to have your name listed in the phone book. In those days, we were lending out a $4,000 car based on what we could find out through a telephone listing.”
You’d think losses due to theft or bad renters would have been greater, though both Elder and Shapiro claim to have lost only two or three cars per decade. Shapiro credits most of his success in this arena to his dedicated team of 11 who started with him in 1981. Remarkably, most of them still work for the surviving Payless operation today.
A Note on Customer Service
When it came to customer service, Elder held his own feet to the flame as the company owner. “I prided myself on never screening any calls,” he says. “If anyone wanted to call me directly, I would answer the phone. If you give bad service, the owner can’t do that.” Elder maintains that “it’s usually cheaper to fix the problem than letting them go away.”
As a bookend to our celebration of 25 years of Auto Rental News, you’ll find a comprehensive look back at the car rental industry in the November/December issue through the eyes of the people who made it run.