Car Rental Q&A: What Factors Will Help Me Decide if a CarSharing Service can be Successful?

Q: I'm looking into starting a carsharing service to complement my traditional rental fleet. What factors will help us decide if we'll be successful?

— Bechir Blagui, Hollywood Rent a Car, Hollywood, Calif.

A: Are you looking to start a completely separate carsharing company, with separate branding and marketing, which will look to attract a customer base that is foreign to your existing car rental business?

You could go this route, but it entails costly technology and employing distinctly different practices than traditional car rental. Instead, you might consider “on-demand” or “self-service” car rental as an alternative, yet for a similar purpose.

In this model, the operator would simply be adding enhancements on an existing rental management infrastructure versus implementing a parallel, completely new business model. The result is not a dramatic business leap for the operator, but instead a facilitator of strategic cost improvements for better customer reach, service efficiency and higher profitability.

Keep these words in mind: client self-service. Carshare technology, in the form of self-service car rental, takes the dynamic online reservations tools found in a good car rental program to the next level. The purpose of this new generation of carshare technology is to provide rental customers with tools that not only allow them to reserve and pay for a vehicle without administrator assistance, but also afford them vehicle access in complete self-service fashion.

The on-demand, self-service vehicle rental management approach automates the customer verification process, allowing them to unlock, drive, lock and return vehicles — all from a mobile app. Yet unlike the traditional carshare concept, this process does not require membership pre-subscriptions, RFID readers and RFID cards.

So we shouldn’t be looking at this issue for its possibilities of separate business “success,” but from the perspective of a greater revenue opportunity with reduced administrative expenditures, weighed against the reduced cost of the technology deployment compared to traditional carsharing.

An on-demand, self-service vehicle rental deployment would typically run less than $300 for the hardware kit in each vehicle, plus a monthly amount of about $20 for the network service and Web portal (in countries with mature cellphone infrastructures).

For instance, decentralizing and automating the rental process leads to new ways to think about rate management and new ways to leverage your car rental system software. In addition to seasonal rates, think about seasonal regions, or moving units to areas based on seasonal demand.

With seasonal regions, operators will know when and where to place their vehicles to capture potential clientele — an annual event location, an airport, a hotel parking lot or body shops, to name a few — even if those locations are significantly remote, such as out-of-state or even out of the country.

Operators would hone this seasonal movement based on the system’s activity data. The automated analysis capability here can get quite sophisticated. Needless to say, the alternate to capturing this potential would be large brick-and-mortar expenditures with dedicated staffing.

With new self-service programs, an automated utilization rating can be implemented to take advantage of real-time demand pressures. Automated regional ratings can also be applied to encourage on-demand self-service renters to return vehicles to high activity locations.

Other aspects include increased revenue potential by servicing smaller incremental rental durations, such as by the minute or by the hour.

There is another value proposition in the business-to-business and business-to-consumer spaces, such as allowing access to students operating as Uber drivers or moving or delivery companies that need vehicles for their own services.

In conclusion, if you already have a successful car rental operation, implementing on-demand, self-service technology for use with some of your vehicles is a very low risk, potentially high reward management automation add-on.