The Technology-Driven Web World Order

The Internet’s growing role as a core revenue channel, along with other advances in technology, creates growth opportunities for RACs bold enough to adapt quickly.

Today, 54% of American Internet users — 93.5 million people — research travel online. Travel is the sixth most popular product category on the Web, according to a Stanford University study. In the car rental industry, the Internet’s influence has shifted market and segment share, transformed revenue streams, and improved operations and customer service. For smaller rental companies, e-commerce has also increased profit opportunity and promoted brand awareness previously off-limits.

The Internet tends to foster transparency and remove barriers. While Enterprise Rent-A-Car can create a strategic advantage — indeed, a potential barrier to entry — through technology interface in its core segment, the Internet is an open portal that can reduce such advantage, particularly in other segments.

But to capitalize on this potential, rental operators must understand and respect the scope of the Internet’s influence. Then, through personnel, knowledge and technology, RACs can integrate those strengths into strategy, execution, process and systems.

Who’s Spending Money Online?
Approximately 170 million people use the Internet in America. North American e-commerce is projected to reach $3.4 trillion, representing 51% of the global projection. The number of women using the Internet has now surpassed the number of men. More purchases are now made on the Internet than by phone.

The region with the most phone purchases is the Northeast, while the West has the most Internet purchases.

Travel research is the seventh most popular activity on the Internet. The tenth is buying. About 36% of Internet users shop online. Of those, 14% have bought travel services.

The 2003 J.D. Power Domestic Airport Rental Car Customer Satisfaction Study found that 44% of leisure renters use the Internet to book the rental, up 8%. Among business renters, 39% check the Web, up 9%. In addition, 25% of business and 30% of leisure renters went to a rental company’s Website to make the reservation.

According to ComScore Networks, consumers spent $9.1 billion on travel in the first quarter of 2003, up 31% versus the first quarter of 2002, tracking over $36 billion for the year. The percentage increase is less than half of that for the previous two-year comparison, which was 81%.

Car rental holds the third position in percentage share of online travel spending, accounting for $940 million in the first quarter of 2003. At 32%, rental also holds the second position for percentage change versus 2002. The Internet revenue channel for car rental in 2003 is tracking to be $3.76 billion.

The Internet has opened a floodgate of opportunity for car rental companies, removing barriers to customer acquisition and simplifying the purchase process. At the same time, technology has introduced new reasons to keep industry leaders up at night. For some operators, worries stem from the need to manage a large infrastructure. For many small companies, differentiation is a challenge.

There’s mounting pressure to keep rates low. Consumers are more educated about car rental pricing among competitors. Consumers are more value-conscious.

“Loyalty programs are not enough,” observes Thio Koslowski, an automotive analyst at research firm Gartner. “They’ll have to create something new to convince consumers to go with them. This is an opportunity to leverage technology to do a better job of integrating the rental process.”

Simply put, rent-a-car companies must focus on user interaction, both online and offline.

Diminishing Returns on Brand Awareness
There’s no question that the Internet will continue to make car rental more of a commodity in the eyes of the public. Essentially, in today’s market, brand is not as significant to consumers as it was five or 10 years ago. Renters are increasingly more sophisticated. They can get almost any information and access any rental company through the Internet, whether through hardwire or wireless connections.

Reservation agents essentially sound the same. Home pages look similar. The rental fulfillment is essentially the same, whether a fast-track or counter rental. The return process is also the same. The customer experience, touted as the formula for business success, is less distinct.

The greater the transparency, the less differentiation there is among rental companies and product offerings. The role of customer loyalty diminishes in such a market.

As a result, there’s a growing trend toward brand becoming more price sensitive.

Sandy Rogers, senior vice president of corporate strategy at Enterprise Rent-A-Car, offers a different perspective.

“Transparency makes it easier to see that Enterprise offers the best value,” Rogers says.

CONTINUED:  The Technology-Driven Web World Order
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