In 2006, the rental industry is more aware than ever of the strength of the growing insurance replacement and local marketplace. For the first time, the local rental segment is outperforming the airport segment. According to Auto Rental News’ 2004 industry statistics, the local market had $9.5 billion of a $17.6 billion total rental market. The market grew to $18.91 billion in 2005, and while airport revenue growth is slow, the local market continues to expand.

Official statistics peg local market growth at 5% to 10% per year, but some industry sources claim that the insurance replacement end of the business has been growing at an average of 15% per year over the last 10 years. This market growth, along with the emergence of new players in the marketplace and new technology demands and developments, has characterized the rental industry’s history for the past 20 years.

In the 1980s and 1990s, local rentals were a much smaller business, and the landscape was dotted with names like Agency Rent-a-Car, Snappy Rent a Car, Ugly Duckling, Spirit Rent a Car, Super Star Rent a Car and Premier Car Rental, among others. Locally, there were just one or two rental companies with little competition for business. By the end of the ’80s, Enterprise Rent-A-Car had 500 locations and 50,000 vehicles, not one of which was on-airport. Hertz, typically an airport presence, began focusing on their Local Edition stores in the ’90s.

During the ’90s, however, insurance replacement began to grow exponentially, and larger players such as Enterprise and Hertz Local Edition began to expand aggressively. In 1991, the local market produced just $2.52 billion in revenue. Since then, local rental’s $7 billion growth spurt has been largely responsible for the growth of the rental industry, an encouraging statistic for those rental operators who do not want to be dependent on the health of the travel industry.

Today, Hertz has more than 1,300 locations serving the local market with a goal of opening at least 300 new locations each year. Enterprise currently has 6,500 offices and over half a million vehicles in service. Enterprise focuses on the local market—generating about 90% of its business there—but Hertz, as well as independent and franchise rental operations still have an excellent opportunity to their participation in the local rental market.

Accidents Happen
Understanding the source of growth is essential to strategic success in the insurance replacement industry. An increase in local rentals can be attributed to the same consumer mentality that has put a cell phone in everyone’s pocket: convenience. In 2006, Americans are used to getting what they want when they want it. With the wealth of information available, they have also become smarter consumers, aware of what benefits their insurance policies offer.

When a person gets into an accident, they no longer rearrange their schedules to accommodate their car being in the shop for a week. Instead, consumers rely on insurance to provide them with a vehicle. Thanks to the average American’s rapidly rising expectations for service and convenience, insurance replacement continues to be a booming market.

TSD has experience outfitting thousands of rental operators at the independent, franchise, and corporate level with management and reservation technology. And those who are successful in the insurance replacement business have a few things in common: they build relationships, they are consistent in their customer follow-up and they demonstrate a great amount of perseverance and persistence. It is possible to be successful without a national call center and a million-dollar advertising campaign, but what is the trophy for duking it out with the big names on a daily basis?

How about a higher utilization rate and maximized revenue per car? While rates are sometimes lower for insurance replacement rentals, the higher number of rental days per contract allows rental operators to make a smaller fleet investment while still selling the same number of days, resulting in an average of 15% higher revenue per unit.

The insurance replacement and local rental segment also provides greater stability than the airport market, which rises and falls with the travel industry and national security issues. Growth is steady, and the local and insurance replacement market is forecasted to expand due to the growing car rental replacement rider coverage and consumer demand for convenience, according to industry experts. While people choose to travel based on unpredictable variables, when an accident happens many people must rent a car.

Secret of Success?
If the landscape still looks impossible for a small fish in a big pond, consider the story of Subway, the number one fast food franchise in the U.S. (by number of locations). Subway opened its first storefront in 1965, the same year that McDonald’s went public. They did not even consider franchising for another eight years, by which time McDonald’s was a household name. Despite their late start and typically higher prices, Subway overtook McDonald’s as the fast food chain with the most sites in North America in 2002.

[PAGEBREAK]

What’s the secret to Subway’s success? According to an article in Entrepreneur magazine, Subway claims it is built on the simple formula of giving customers what they want, particularly healthy choices and fresher products. Subway found the right tools to level the playing field in the fast food industry. While they matched some of the better qualities of McDonald’s and other chains—getting customers in and out quickly, for example—they chose to compete by differentiating themselves, not matching what was already on the market.

Similarly, a combination of technology, creativity and customer service can bolster success in the local market, particularly when servicing insurance companies. Local companies with a stake in the community can use their personal status as an opportunity to create connections with their customers, while taking advantage of available technology to provide the convenience and customer service of many national brands. Remember Subway’s mantra of giving customers what they want? In 2006, when the entire world is hooked into cell phones and the Internet, having service that will keep up with expectations demands the accompanying technology.

In the mid-’90s, State Farm changed the way that insurance companies do business with rental companies by switching to an online reservation process. Technology is the key to complying with the demands of insurance companies and consumers. An online reservation puts you on the same screen as all the other brands that have a relationship with the insurance company, leveling the playing field. Consider the link an effective marketing tool in the same vein as an express line for preferred customers. The link allows you to facilitate a seamless and convenient reservation for the insurance company and handle extensions electronically. Cutting down on the time spent on the telephone will provide benefits for all parties.

Beyond reservations, certain tools within rental software are necessary for facilitating a seamless and convenient transaction for the insurance company. Split billing allows the rental company to invoice the renter, the insurance company and any other involved parties separately. A comprehensive split billing tool adds insurance companies as “accounts receivable” while collecting payment from customers at the counter. Professional, timely and accurate invoicing enhances the rental company’s image in the eyes of the insurance companies, while ensuring that they are paid on time.

Technology can also be used to expedite and simplify the insurance extension process. Rental software can provide you with an insurance call report to keep you abreast of your “to-do” list regarding insurance rentals. Keeping the rental organized and efficient for both the insurance company and the renter is essential to your customer satisfaction and your opportunities to score repeat business from either party.

Rental technology can also assist with the rental experience at the consumer level, helping to ensure that they will become a repeat renter even when the insurance company is not covering the vehicle. Rental software should allow you to quickly process the customer, including when it comes time to return the vehicle and pay any part of the split for which they are responsible. Plus, conveniences like high-speed credit card processing can cut down on your fees and risks while keeping the return queue moving.

Since persistence is important to success in the insurance replacement business, rental software should give you the ability to automate your follow-up procedures. Creating a marketing database for mailers, tracking the source of your customers, sending birthday cards, and remembering preferences for repeat renters can make the difference of a customer choosing you in an otherwise homogeneous market. It can also allow you to effectively allocate even the most limited marketing budget. While your vehicles may be the same as others’, and technology may have put you at the same level of speed, efficiency and convenience, personal touches and follow-up are where a local company can excel.

Thriving Among Giants
A bit of creativity and persistence can also open up new niches in the local market. Toyota Rent a Car is an excellent example of a company taking advantage of industry connections and status to enhance their program. “Toyota sees a lot of opportunities in our rent a car program,” says Bruce Derby, Toyota Rent a Car’s marketing/advertising manager. “We certainly want to be there to provide replacement vehicles and take care of our Toyota customers. Dealer customer satisfaction and support are our top priorities with this program. We are working with our Toyota Certified Collision Centers in expanding our services.” Other companies, such as U-Save Auto Rental, are working to achieve a solid presence as insurance replacement and local providers.

The technology and procedures you have in place to service insurance companies can serve you well in courting area dealerships and collision centers as well. For more than 20 years, TSD has worked closely on technology for both manufacturers and dealerships, discovering that there are concerns at both levels about the service that customers receive when using an outside rental company during a dealership service appointment. According to a recent TSD survey of 89 dealers, more than 60% do some business with rental companies for their loaner or overflow needs. However, their concerns included overspending on rentals and the rental company being a negative reflection on the dealership. Rental companies have the opportunity to stand out by providing consistently excellent service to the dealership’s customers and communicating with the dealership about overdue vehicles, much as they would with an insurance company.

The local and insurance replacement market provides opportunity with the right mix of marketing, creativity and investment in technology. No matter who your competitors are, the technology exists to level the playing field and provide you with opportunity. Doing things differently and listening to customers, as Subway has, can foster surprising amounts of growth. However, even if you are not interested in building your local rental company to become the number one company nationwide, opportunities abound. Thousands of small, independent sub shops run a thriving business every day. Many people have an affinity to “shopping locally,” whether it’s the extra dressing that the guy behind the counter slips you, or the fact that your rental agent knows you like to drive red cars. Either way, local businesses can thrive in any market dominated by giants, and the rental industry is no different.

0 Comments