Operators: What Does the Future of Car Rental Look Like?

iStockPhoto.com/Karneg
iStockPhoto.com/Karneg

What will car rental look like in the next five to 10 years, or longer? What factors will play a role or pose a threat in the advancement of the industry?

Technology is already shaping the future in some areas, while other factors are still years from being fully developed.

Auto Rental News talked to several operators to get their predictions on the future of car rental — and how their companies are planning to adapt to these advancements and changes.

Automation Domination

As technology continues to create a more on-demand environment, customers, especially in the younger generations, are used to doing everything on the go, from a smartphone or tablet, including making reservations for car rentals.

Nima Mobasser, vice president of Los Angeles-based State Van Rental, sees a future with more shared vehicles, more streamlined reservations and check-in/checkout processes, and growth in the carsharing and self-service models.

“The car rental industry will eventually morph into it [carsharing],” he says. “I don’t see it necessarily as a threat, but evolving into more technology-driven processes.”

“The future will be customer-service driven as it always has been, but having an up-to-date user experience is paramount in being a leader in car rental,” says William Harris, owner of New York City-based Edge Auto Rental. “Speed, ease of use, and less friction are going to play a major role in keeping a customer coming back.”

To stay up to date with the changing needs of its customers, Edge Auto Rental is developing an on-demand, mobile-friendly reservation process through its website. “Customers want to press a button on their phone and have the vehicle be ready when they arrive or have the vehicle show up at their location when they need it,” says Harris.

For Peter Chapman, owner of Alaska Auto Rental, the future customer interface looks to be mobile heavy, as the younger generation becomes a larger part of the renter demographic. As a small independent rental company, Alaska Auto Rental in Fairbanks, Alaska, hasn’t developed an automated online reservation system, but it’s working toward that goal.

“It takes more effort to make the investment in mobility as a small independent company,” says Chapman. “But we are moving toward a mobile-friendly website so our customers book from a smartphone.”

Steve Lazaroff of Discount Car and Truck Rentals sees technology as potentially changing car rental into something that resembles a ride-sharing or peer-to-peer environment where people rent out their own cars.

“If I had no car and had the option of renting a car from my immediate neighbors within a five-minute walk, I’d never need to go to a car rental company,” says Lazaroff, director of Discount’s retail sales division.

Self-Service, Carsharing Transforms Car Rental

Carsharing technology has started — and will continue — to change the traditional rental counter process.

Using elements of carsharing technology developed by Rent Centric, Discount has developed a self-service program where customers can rent cargo vans or cutaway trucks from about 25 parking spots throughout Montreal and Quebec City. Customers use the web app on their smartphone to find and reserve the closest vehicle at any time, according to Lazaroff. Once at the vehicle, the app initiates the rental process and unlocks the doors.

To develop a self-service option, Edge Auto Rental is installing self-service kiosks at its rental locations. “More and more customers don’t want to deal with a person when picking up their car,” says Harris.

When it comes to carsharing, Harris thinks the concept will continue to grow as more people decide to not own vehicles. Though carsharing is currently more common as hourly rentals through companies like Zipcar and car2go, group sharing of a vehicle could become more popular. “I think more people will own cars through a subscription and share with multiple people,” Harris says.

Chapman likes the idea of self-service as a convenience for his customers, but currently the cost of implementation for the technology is more than the benefits he could gain in his use case, he explains.

Rise of Ride Hailing

The growth of ride-hailing services like Uber and Lyft has been seen as a threat to car rental. While rural areas and most local markets remain largely unaffected, ride hailing has become entrenched in cities.

“Uber and Lyft compete with the car rental industry in some respects, but the model only works in dense, urban areas,” says Sharky Laguana, owner of Bandago. “While they are taking some business away from rental companies, a rental car is still the economic choice if you are taking a longer trip or have a lot of luggage.”

Even in the face of potential business erosion in certain situations, the concept of ride hailing could also be seen as a collaborator to rental companies in a larger transportation ecosystem. According to Laguana, Uber or Lyft could bring a rental company’s customers from the airport to its off-airport location.

“Rental companies can use ride-hailing as the ‘last mile’ to bring customers to their door,” says Laguana. “A rental company wouldn’t need to send a shuttle bus to the airport, which removes an expense.”

Additionally, the ride-hailing model may not be sustainable. Laguana commented on the fact that Uber currently doesn’t show a profit because it’s still investing heavily in growth.

“The overall sustainability of the model is still unclear; the cost of the service could rise if drivers conclude they aren’t making enough money after wear and tear on the car,” he says. “And if the service cost rises too high, the entire business could collapse. Right now the model counts on incoming investment dollars, which can change on a dime.”

Autonomous Vehicles are the Future

Although the idea of self-driving cars had seemed to be in the distant future, they are already hitting the roads in pilot programs by companies like Google and Uber.

Lazaroff sees a scenario in which a company’s autonomous fleet — or a neighbor’s car — can be summoned, with a system that rebalances the fleet and manages pricing based on demand. He says there is room for smaller fleet owners, and success will be based on ratings. “He lives and breathes by his rating, and if it isn’t good, his vehicles don’t go back into the ‘swarm.’”

Laguana acknowledges that autonomous vehicles are coming and will be here soon, but he also brings up some of the challenges that driverless cars will face, including software, legal and legislative framework, and security.

“It will take a long time to sort through all the legal and legislative issues with autonomous vehicles,” says Laguana. “It took five years to pass the vehicle recall law, which had broad consensus. Security is also an underappreciated concern at the moment. Hackers could attack and find vulnerabilities in the technology.”

Laguana recommends car rental operators start thinking about the idea of driverless vehicles and how that will impact the car rental industry. “In car rental, we maintain the vehicles,” he says. “And autonomous cars will still need to be maintained.”

Harris was impressed by the autonomous technology displayed at the recent Automobility LA, the trade show that preceded the LA Auto Show. The autonomous vehicles section included Olli, a self-driving, electric, partially 3-D printed minibus.

“The tech is here and ready to go,” says Harris. “It was amazing to see at the Automobility conference. I would imagine we will start seeing autonomous cars being used in smaller cities that are willing to adapt in the next few years.”

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