Ever wonder how a weekly houseboat rental can cost $12,000, or how many days are in a snow rental season? Or about the difficulty in getting insurance for motorcycle rentals? For car rental operators that want a look at a different rental universe, Auto Rental News examines recreational rental operations to see how they compare.
ARN profiles three powersports rental operations on land, lake and mountains: Harley Davidson motorcycle and scooter rentals at Route 66 Riders in Southern California, Yellowstone Adventures’ combination snowmobile and car rental in the Yellowstone National Park, and houseboat and personal watercraft rentals on Lake Powell on the Arizona and Utah borders.
The operators discuss the seasonality of their businesses, rates, fleeting and de-fleeting, liability issues and insurance costs, land access restrictions and strict rules that they face when renting vehicles for use on protected land.
Lake Rentals, from Personal Watercraft to Houseboats
Lake Powell, the 183-mile long man-made reservoir straddling the border between Utah and Arizona, has been called one of the greatest water recreation spots on earth. Vacationers can rent “anything that floats,” according to Bubba Ketchersid of Lake Powell Resorts & Marinas, including houseboats, powerboats and personal watercraft (PWC).
Operating under Strict Rules
However, as Lake Powell is under the authority of the National Park Service (NPS), public access is strictly controlled. “The Park Service’s objective is to preserve and protect,” says Ketchersid, a district manager for Aramark Parks & Destinations, owners of Lake Powell Resorts & Marinas and the sole concessionaire for the lake. “We have to manage our business so it fits that model.”
Moreover, the NPS not only restricts the number of boats allowed to rent out at any one time, it closely monitors and approves watercraft rental rates, marketing materials and consumer-facing collateral. Changes in rental rates for watercraft are initiated by comparability studies with similar businesses done every three years. “We have to justify our rates to the Park Service. We can’t just start charging more because we want more profit,” Ketchersid says.
Economy Causes Shift in Rentals
The company has managed fleet size to fit the economy. The houseboat fleet has dropped from a peak of 150 to 130 this year. The powerboat fleet has decreased from 150 units to 120. The economic slump has led to a change in not only the number of rentals but also the types of houseboats rented. In the past, Ketchersid says the largest 75-footers were always rented, whereas now, the 62-foot and 59-foot models are in the water more often.
The booking window has also narrowed from reservations a year in advance to now six or seven months in advance.
The largest and most luxurious houseboat, accommodating up to 12 people, rents for about $12,000 per week. PWC rates are $240 per day, or $50 per hour for a minimum of two hours.
During the boating season, from June 15 to Sept. 15, utilization is around 90 to 100 boats out at any one given time.
The lake is open during the winter, though rentals are minimal. (Two houseboats have been reserved for Christmas this year.) That doesn’t mean Ketchersid can rest easy in the off season. “I tell everybody we go back to a normal 40-hour workweek in the winter. In the summer, it’s blow and go, seven days a week,” he says.
Stretch Holding Times by Remodeling
The company keeps its houseboats in fleets for about seven years, though that holding period has been stretched to nine years for some boats. Last year, the company purchased 20 new houseboats. They’re not buying any boats this year, but rather remodeling their older models to get a couple more years out of them.
Their largest houseboat, a 75-footer, retails for about $400,000. Ketchersid says the goal is to keep the boats rented at least 12 weeks per year, which will generally pay the boat off within four to five years. The boats are sometimes self-financed through Aramark and sometimes leased.
PWCs cost about $8,000 and up.
Insurance and Safety
In the summer Lake Powell Resorts & Marinas has three boats out on the water every day servicing customers in a 50-mile radius for mechanical issues or emergencies. The company cooperates with rental agencies in other marinas, also operated by Aramark.
“We try to drive home that you always have a designated driver, and no alcohol for drivers,” says Ketchersid. “For the number of boats we rent out, we have very few major accidents.”
Aramark offers an insurance option for its renters, called a waiver liability. The insurance comes with either a $500 or $1,000 deductible. Because the concession is in a national park, the insurance cannot be mandatory.
Ketchersid has a total staff of 140 this year (down from 212 last year), including 20 mechanics in the summer. This winter he’ll retain 12 people on staff.
Finding New Houseboaters
Ketchersid says the competition isn’t necessarily other houseboat destinations, but different types of vacation venues such as Disneyland and cruise lines.
The company markets a customer loyalty program, which entails analyzing client demographic data and vacation travel patterns. They also partner with one of the boat makers, a Canadian company, to exhibit at boat shows that target the desired demographic.
Many houseboat rental customers own their own businesses and enjoy adventurous vacations. Ketchersid says 70 percent of houseboating customers are just the average upper-middle-class family who has been houseboating for generations. On the powerboat side, he estimates 70 percent of rentals are international guests.
“Our biggest challenge is finding new people and learning how can we get them into houseboating,” he says.
[PAGEBREAK] Brad and Doug Schmier of Yellowstone Adventures sell and rent snowmobiles as well as rent cars through a Budget franchise. YA’s target utilization for snowmobile rentals is 70 percent for the season, which is usually 60 to 70 days, from the end of December to the beginning of March.
Snowmobile, Car Fleets Balance Out Seasons
Yellowstone Adventures, based in West Yellowstone, Mont., began in 1972 as a snowmobile dealership and soon expanded to include snowmobile rentals. In 1990, a Budget Car Rental franchise was added. The distinct types of rentals have allowed owners Brad and Doug Schmier to service both winter and summer markets in this world-famous recreational area.
Predetermined Fleet Size Is Essential
Yellowstone Adventures’ (YA) snowmobile fleet size peaked at 140 units, although this has declined somewhat due to restrictions to access the national park, as well as the overall economy. On the car rental side, the Budget fleet ranges from six in the winter to 50 in the summer.
In seasonal rentals, it’s important to accurately predict optimal fleet size in advance. Unlike fleeting up in auto rental, a snowmobile fleet is pretty much committed for the season, says Doug Schmier.
Factory orders take place in April for delivery in October. Finding a few extra snowmobiles in season may be possible, but it might mean doing some hunting for them and paying retail prices.
YA’s target utilization for snowmobile rentals is 70 percent for the season, which is usually 60 to 70 days, from the end of December to the beginning of March.
Daily rental rate is roughly calculated by dividing the cost of the snowmobile by 40. “If I can rent that snowmobile for 40 days, I’ve paid for it,” says Brad Schmier, though this does not cover overhead. The cost of a new snowmobile runs close to $9,000.
Snowmobile rental rates are for the most part locked in for the season. “What you have printed is what you have out there,” says Brad.
Profits are hard to predict on the snowmobile side, says Doug, who relates the business to a farmer’s. “You go to the bank, and you borrow money to buy the rental fleet,” he says. “But you’re dependent on the weather; you hope you have a good snow year. You’re dependent on the economy; you hope that a lot of people are going to come up on vacation and rent. At the end of the season, you harvest your crop. You sell off your snowmobiles and you see if you made any money or not.”
Cleaner Snowmobiles, Longer Hold Time
The Schmiers try to keep their fleet to mostly one- to two-year-old models. However, they have had to run some models longer. In 2003, access rules changed for Yellowstone National Park, forcing them to switch to cleaner-burning snowmobile models. The new models cost more and are harder to remarket. “It’s not the type of sled most people own,” says Brad. This led to longer hold times, in some cases as long as four years.
Because the car rental and snowmobile rental businesses peak at different times of the year, the de-fleeting of snowmobiles in the spring can be timed with fleeting up of the car rental operation for the summer. The opposite happens in the fall. “Fortunately, we don’t have to finance a lot of stuff, but that’s through many years of being in business that we’ve been able to build up the capital,” says Doug.
Remarketing happens all at once at the end of the season. With a smaller market, mostly located in the Midwest, and no auctions as an outlet, they have to reach out when it’s time to sell. “Everyone needs a car. Not as many people need or have a desire to own a snowmobile. It’s a geographic issue,” says Doug.
Keeping Vehicles in Top Condition
Yellowstone Adventures has an extensive preventive maintenance program on its snowmobiles. “We don’t want [the renter] to have a bad day,” says Brad. “There are too many things that can go wrong that you have no control over. You need to make sure you have control over what you can.”
In-house mechanics service the dealership and the rental division. The dealership treats the rental fleet as a customer in regards to maintenance and repair. Some mechanics stay on year-round to work on the cars as well, but the Schmiers de-staff for slow times.
Ensuring Client Safety
Yellowstone Adventures self insures its snowmobile fleet. The company offers a collision damage waiver on the recreational products. There is a deductible.
Because snowmobile renters might be unsure of their personal insurance policy coverage, they are more apt to take the CDW. “If they don’t wreck it, that’s a profit center, but if they do wreck it, being self-insured, we take it in the shorts,” says Doug.
In addition to helping visitors plan an itinerary of things to see, YA instructs all riders on proper operation. “If we don’t do that in a recreational sports business, we are wide open,” says Brad. “There’s such a huge risk of lawsuits.”
Even experienced riders have problems, either losing a friend or getting stuck somewhere in the park. The staff will then go out to help. “I’m the coordinator for West Yellowstone Search and Rescue for this area, so when those guys are missing, I’m involved anyway,” says Doug.
Doug adds that with recreational vehicles, it’s important to “go the extra step when it comes to customer service because the customer has more questions. The goal is to have them come back with this big Cheshire-cat grin,” Doug says. “Then you know it was a successful day.”
[PAGEBREAK] Route 66 Riders rents Harleys and scooters next to the world famous Bartels’ Harley-Davidson in Marina del Rey, Calif. More than 80 percent of the business comes from international tourism, especially Europeans, Australians and South Americans who want to experience Americana on Route 66.
Marketing Americana on a Harley
Route 66 has long been known as the symbol of a mobile America, and tourists wanting to experience a part of Americana can choose to follow this historic highway aboard America’s most iconic motorcycle brand.
Glenn Bartels, owner of the independent Harley-Davidson rental operation Route 66 Riders, says more than 80 percent of his business comes from international tourism, usually through tour operators coming from Europe, South America and Australia.
Bartels comes from a Harley family. In 1983 his father founded the famous Bartels’ Harley-Davidson, now located in Marina del Rey, Calif. In 1994, with just four Harleys, Bartels branched off to start his own rental company, now in a conjoined building, and he later added scooters to the rental business.
A Bike for All Seasons
Bartels says the ideal fleet size for his staff and location size is 135 units, though demand is usually greater. In the winter, from December to February, he cuts his fleet to about 50 bikes.
Rates are adjusted based on the season. Quotes for a summer rental are around $200 a day, less if rented weekly.
Scooter rentals are used more as a tool for a sale. Bartels is an authorized reseller of the Genuine Scooter brand.
A One-of-a-Kind Agreement with Harley
Harley operates differently than most OEMs when it comes to supplying rentals, says Bartels. “They modeled my store for what has become their international Authorized Harley Rental Program, which is now in its 10th year,” he says. “I am currently the only independent Harley Authorized Rental Operator in the world.”
Because he is prohibited by his license agreement to sell any inventory directly to the public, Bartels created a specialized lease program with the dealer network. The motorcycles are leased for one season. The winter fleet is returned to the dealers in the spring with under 10,000 miles on the bikes, while the summer fleet is returned in the fall with 16,000 to 20,000 miles.
“It works great for a dealer who needs current second-hand inventory to retail,” says Bartels. “Often dealers are buying used bikes in questionable condition at auctions, sometimes at higher rates than our units. We return the used rental units in pristine condition.”
Bartels works closely with dealers to plan lease returns, allowing dealers to pre-market the bikes. In addition, if any renters are interested in buying a bike, Bartels sends them directly to the dealer.
Bartels says he manages revenue per unit, though he tends to avoid the fancy reports. “I know what it is, based on what I’m doing every day because I’ve been doing it for so long,” he says. “I don’t need the report. I just know it.”
Protecting the Hogs
The majority of rental customers do not have insurance that will cover them for a motorcycle rental, and regulations vary for different states even within the same insurance company, according to Bartels.
He says it was difficult in the beginning to find a company to insure his rentals. “I went the first six months relying on my own AAA insurance policy with a hope and a prayer, and good fortune,” he says. Eventually he found an insurer with good rates and low deductibles, but had to switch when the company went away after Sept. 11.
Now, his rentals are fully covered through Harley’s provider, Zurich/Empire Fire and Marine. He says he spends $180,000 a year on his insurance policy.
Managing the Matrix
Bartels manages his fleet with a year-round staff of eight. Though the crew is taxed in the summer months, “I don’t have to lay anyone off in the winter,” says Bartels. “We still manage to stay busy to where an eight-man crew is still working.”
Because Harley dealerships—including the one next door—are consistently backed up on repair work, Bartels keeps his own maintenance team with a service bay and utility warehouse. “We literally will have to prep 30 bikes for rental in 48 hours, and they all need full service,” he says. “We need three hours to service each bike properly.”
Reservations are received via email. Bartels keeps track of them through a spreadsheet matrix accessible online by his staff and mechanics. Booked tours are built into the matrix at the beginning of the season. The matrix is set up to accommodate “random chaotic events that occur.”
Some 80 percent of overseas tours are booked a full year in advance. Marketing is Internet and word-of-mouth, and being next to one of the most well-known Harley dealerships in the country helps, too.
Mostly, the experience of riding a Harley through classic American scenery does the job for him.