Screenshot of www.acerentacar.com
The car rental industry is the only large segment of the travel industry in which it is normal business practice to offer reservations while requiring absolutely no commitment from the customer. This situation has been discussed widely in recent years in this magazine, at the Car Rental Show and elsewhere. Until now, there has been a strong feeling that this needed to change, but most rental car companies took the position of waiting for leadership to emerge.
This situation is now changing, with significant progress underway being led by several car rental chains and online travel agencies. In this article, we will review the problems, the cost of the status quo, new developments and some lessons learned.
The Soft Costs
No-shows have measurable costs, such as Global Distribution System (GDS) reservation fees, an underutilized fleet and the cost to accommodate overbooked customers. (See the infobox below for a financial analysis of the hard costs.) But the soft costs may have an even greater impact.
Soft costs include customer dissatisfaction when vehicles are not available, low employee morale and stress caused by overbooking, long lines, extra staff time needed to juggle reservations, opportunity costs regarding free upgrades to get the customer in the vehicle, costs to report no-shows to travel partners and overpaying commissions.
Often, the most expensive customer to win back is the one the rental operator lost at the counter — or had to hand off to a competing rental agency — because a car wasn’t available.
Barriers to Progress
No one benefits from the current situation, not the rental car companies, the online travel agencies (OTAs) or the customers.
Customers may book multiple reservations on one OTA, or even spread redundant bookings across multiple OTAs. It is not unusual to find a renter with a similar booking on Orbitz, CarRentals.com and the private brand’s website. In such a chaotic environment, the OTA doesn’t have any assurance it is paid the commissions it may have earned.
And ironically, customers are also hurt by the status quo. Overbooking results in confusion at the counter, delays opening contracts and unexpected vehicle classes, among other issues. Moreover, those hard and soft costs due to overbooking must ultimately be passed on to the consumer.