The summer traveling season is in high gear, and on-airport rental operators are profiting from the patronage of customers who put a high premium on convenience. Savvy travelers deplane with a rental reservation made online, and their cars are ready for pickup just paces from the arrival gate.
Are you interested in getting in on this action? Part one of this series detailed some of the ins and outs of the airport rental market and the challenges and hurdles it presents to smaller operators.
Attempting to establish or move operations on airport — particularly at a mid- or large-sized airport — is not for the faint of heart. However, it is possible. Depending on the market you are in and what you are willing to invest, it might be the logical next step to growing your rent-a-car business.
We spoke to three operators at different stages of doing business on airport. One is just getting onto a new consolidated rental facility, another has been on the airport for about a year and is enjoying success, and the last operator sold his airport franchise. Their experiences and recommendations may help you determine if this is the right business venture for you.
Ramping Up for Anchorage Airport
Dennis Lavey sold his independent car rental business in Anchorage, Alaska, years back, and then bought it back three years ago after it had become a U-Save franchise. The Lavey family owns one location next door to Ted Stevens Anchorage International Airport and another in downtown Anchorage.
“We’ve had some discussions about expanding it to the airport, and that’s our big thing; we feel we need to be on the airport,” says Lavey, who is now a partner in the business. His son, Mitch, runs the operation. Moving onto the airport seems to be part of a natural progression in the operation’s growth.
At press time, they were negotiating to secure a spot in the new consolidated rental facility being built at the airport, but have yet to submit an official application. The process of getting into the facilThe facility, scheduled to open July 18, process of getting into it is not as complicated as other airports. The airport has eight openings and seven companies at present to fill those slots. No bidding was necessary.
But the challenge for the Laveys will be growing their operation’s volume to a level where it can absorb the airport’s minimum wage guarantee and high costs of being a part of the new rental car facility. They are strategizing how best to do that in order to move forward.
“If you want to be on airport you have to do a lot of cars,” Lavey says. “Typically we run about 100 cars, and I think the minimum we would have to run is 300 on the airport because the fees are very high.” [PAGEBREAK] Success in Syracuse
In 2004, Dollar Thrifty Automotive Group (DTAG) franchisee Kris Tucci opened a Thrifty off-airport operation two miles from Hancock International Airport in Syracuse, N.Y. At that time he wasn’t interested in being on airport because New York state law didn’t allow operators to pass on the 10-percent airport concession recovery fee. But when the law changed last year, it actually became more cost-effective for Tucci to do business on airport.
“When you looked at the shuttle cost, the cost to operate fuel and everything else, it was cheaper to go on-airport then to continue to service the airport [from] here,” Tucci explains. “So that’s when we pulled the trigger.”
Also motivating the move was being a big-name brand that didn’t offer on-airport conveniences, Tucci says. Customers expected that a company such as Thrifty would have a counter just beyond the gate and wouldn’t have to put customers on a bus to get to a rental car. As a result, the company’s no-show percentages were surprisingly high.
About a year ago, when the time came to negotiate with the airport for space, Tucci says the stars aligned. Hancock had two empty counters next to each other and empty car stalls that weren’t making rental income for the airport. This was a perfect match for the Dollar and Thrifty operations Tucci wanted to set up.
Airport management was easy to work with and made the process smooth. All that was necessary was a public hearing to declare that Thrifty and Dollar wanted to set up operations. Tucci’s people signed contracts, the airport cleared out the spaces, and a month later they were open for business. Now all the counters are occupied at Syracuse, and occupants get a five-year term.
The airport collects a fee of 10 percent of revenue per month with a minimum guarantee of $2,500. The counter space and parking spaces have rental charges, but Tucci doesn’t need as many parking spaces as the other companies because his company stages cars at the off-airport location, which he still operates.
Going on airport has proven to be a good decision for Tucci. “Our market share climbed 4 or 5 percent within the first year of being on airport,” Tucci says.
Something that has helped the company’s growth has been the ability to get walk-up business, which is unusual for airports.
“Syracuse is a funny city; not everyone gets off the plane with a reservation — probably 20 percent of them don’t,” says Colleen Rosenkrans, the company’s vice president. “So being on the airport allowed us to get the walk-up business we otherwise would not have had an opportunity to get.” [PAGEBREAK] Not for the Small Guys
Tom Celona, a Thrifty franchisee, recently sold his location at T.F. Green Airport in Warwick, R.I., which serves Providence, to scale down operations. Celona says the Providence airport was great to work with and lets anyone set up operations there.
“You just pay 10 percent of your gross receipts and come on in,” he says. “There is no bidding at Providence … there is not a limited number of counter spaces.”
Celona believes operating costs alone might be too high for smaller operators. For example, the counter needs to be staffed 24 hours a day. “If you’re doing three-tenths of 1 percent of market share, just the employees alone will blow you out of the water,” Celona says.
Regardless of your size, a strong, well-trafficked Web site where customers can book rentals is so important to success on airport, according to Celona.
“More than ever, you have to have a huge presence on the Internet,” Celona says. “And I don’t just mean by booking through Expedia or Travelocity, but with your own Web site. In order to do that and publicize, you need to be part of a bigger franchise.”
Tucci of Dollar Thrifty and Lavey of U-Save agree, advising that smaller companies franchise with a national brand in order to get the business necessary to cover the on-airport expenses and, ultimately, to succeed.
Newbie’s Guide to Getting on Airport
For rental operators with no airport experience, Jerry Copelan, airport industry veteran and president of Copelan Consulting, LLC, offers a general approach for breaking into the airport rental market.
Become an off-airport operator. Learn how the airport functions. Serving airport travelers will get you into the habit of matching up your resources, such as your fleet and staff levels, to the needs and flow of airport operations. See if the business is profitable and worth your while.
Try to become a limited-service operator. When extra space becomes available or the airport’s contracts with rental car companies expire, the airport may accept bids for limited-service operators (which have counters on airport and then bus customers off-site to pickup vehicles). If you’re fortunate enough to get one of these spots, this is a good means of testing the on-airport business.
Get a sense of the operational costs and needs that come with operating airport counters. If you’re a franchisee, start marketing through the means available through the franchise. This is also a good time to get to know the customer base. Is it mainly business travelers coming through the airport who want their vehicles right away? Does this particular airport get any walk-up business that you could capture? If you are successful as a limited-service operator, consider the next step.
Bid for airport space. When the next round of on-airport bidding comes up, do your homework and place your bid. [PAGEBREAK] Steps to Prepare for the Bidding Process
By Joe Olivera
• Understand the number of in-terminal rental car companies currently operating and the facilities they operate.
• Get familiar with the airline flight schedules to understand the daily ebb and flow in the customer pattern.
• Prepare an operational plan as to how you would conduct operations if you were awarded a rental-car concession.
• Meet the aviation director and other airport staff to stay informed of all issues concerning auto rental and the airport.
• When you are ready, approach the airport staff to inquire as to when the next bid is expected.
• Attend all airport car rental meetings that you become aware of and insist that you be on the airport communication list for such meetings.
• Request the results for the previous bid from the airport and the airport bid requirements at that time, so you can learn what the airport requires in the bid submission, such as financials, management resumes, insurance requirements, and so on.
• Attend the pre-bid meeting and listen carefully to all the individuals at the table. Be sure to ask questions on any items you don’t understand.
Joe Olivera is the executive director of airport concessions for the Dollar Thrifty Automotive Group.