Celebrating its 20th anniversary, the 2015 International Car Rental Show brought together some 800 attendees from across North America and overseas.
This year, to reflect its place as the only convention that serves the entire car rental community on a global scale, the conference was renamed the International Car Rental Show. International attendees traveled from 33 countries, including China, New Zealand, Nigeria, Russia and Brazil.
Held April 12-15 at Bally’s Hotel and Casino in Las Vegas, the International Car Rental Show included participation from the carsharing community, a seminar track devoted exclusively to car dealers and the second annual meeting for Latin American car rental operators. The exhibit hall featured 90 exhibitors showcasing products and services for every facet of the car rental process.
Adam Laxalt, attorney general for the state of Nevada, delivered the opening address. At 36, Laxalt is the youngest attorney general in the U.S. and has less than three months in office. In his address, he explained the role of the attorney general’s office and his first initiatives in the position.
A champion of state’s rights, Laxalt believes the federal government has recently implemented regulations without proper representation from Congress. “A lot of you are classified as small and midsize businesses, and the thing that you can’t survive is federal regulations that don’t bring the actual stakeholders to the table,” he said.
Laxalt pledged to work with the business communities that make up his constituency and inform them when imminent federal rulemaking might affect businesses unfairly.
The American Car Rental Association (ACRA) general session was highlighted by Sally Greenberg, executive director of the National Consumers League, who spoke out on the detrimental effect of predatory excise taxes. Greenberg showed that 38% of the average overall cost of a rental car transaction is made up of taxes and fees.
The ACRA board of directors’ discussion included Greg Scott, ACRA’s new lobbyist. To support the fight against discriminatory rental car excise taxes, ACRA developed the Curb Automobile Rental Taxes coalition, or CART. The campaign is designed to promote HR 1528, “End Discriminatory State Taxes on Automobile Renters Act of 2015,” ACRA’s bill in Congress.
During the Tuesday morning breakfast general session, Diane Clancy of ACRISS, the European Association of Car Rental Industry System Standards, spoke on the benefits of Europe’s industry standard car codes and whether those classifications could be implemented in North America and elsewhere.
Welcoming the World
This year’s show featured special events designed for international attendees, including a seminar entitled “International Operators: Keys to Growing U.S. Business,” an international meet-and-greet networking session and the second annual Latin American meeting.
Held on Wednesday April 15, the second annual Latin American meeting — conducted primarily in Spanish — served car rental operators from Central America, South America and the Caribbean with seminars focusing on their specific region. Topics covered the latest in mobile technology, improving service and sales performance, creating revenue opportunities with U.S. travelers and a snapshot of the travel market in Cuba.
Expanding the Program
Concurrent sessions featured topics including how to manage negative online reviews, valuing your business for sale, how to grow your business internationally, how to handle a legal claim made against you and how to manage rental fleet liability, among others.
New for 2015, the conference featured “lightning rounds,” or four mini seminars packed into an hour and 15 minutes. These 15-minute presentations delivered insight on new products and services, best practices and new trends advancing the car rental process. The lightning rounds were presented in two concurrent sessions, four to a room.
In another first, the show provided content specifically geared toward car dealerships looking to upgrade their rental programs. Seminars covered topics such as misconceptions to dealership rentals, managing rental risk in dealerships and the role of software in dealership operations.
The 2016 International Car Rental Show will be held April 17-19 at Bally’s Hotel and Casino.
Car Rental: Today and the Future
The 2015 International Car Rental Show was bookended by panel discussions that put the industry into context as it stands today, while giving a glimpse into its future.
The opening keynote panel, comprised of representatives from the major car rental companies and Fiat Chrysler Automobiles, tackled issues including sales capacity, the used car market, recalls and opportunities for independents.
Buying and Selling
The panel opened with a dialogue on the potential for the U.S. to reach 17 million light-duty vehicle sales in 2015, a mark last achieved in 2001. This high-water mark may conjure the specter of overcapacity in rental fleets, though the panelists pointed out that the percentage mix of rental to retail is healthier today than pre-Recession levels. While total light-vehicle sales grew 5.9% in 2014 over 2013, sales into rental grew only 3.7% during this time.
A diversified model mix plays a more important role today, said Susan Lombardo, vice president, vehicle acquisition, Enterprise Holdings. “It’s not just about volume and discount; it’s about the right equipment and getting the right vehicles in the right channel,” she said.
Looking specifically at model mix, the crossover segment was cited as a “game changer” for its residual value strength, fuel economy and utility.
In terms of remarketing, Greg Thibault, vice president fleet disposal, Avis Budget Group, said the online marketplace has revolutionized the wholesale market. He emphasized that rental consignors need to be using multiple selling platforms, including live auction, retail, auction simulcast and upstream remarketing — and monitor those channels around the clock.
“You can’t take cars to auction anymore and run them one day a week,” Thibault said. “The days are gone when dealers go to auction, buy 50 cars and try to sell them all. [Dealers are] going to be armed with a lot of information on where to buy, what to buy and how much to pay. You have to be where they can see you.”
While today’s used car market is viewed as better than expected, it is bracing for greater supply of off-lease vehicles in the second half of the year, which may dampen pricing. Thibault acknowledged this higher volume, but said the off-lease surplus will have higher mileage than rental fleets and attract a different buyer.
Avis Budget Group looks to keep de-fleeted units in the 32,000-mile range, which would allow the dealer to sell the car as Certified, Pre-Owned (CPO) and to keep some of the manufacturer’s warranty on it, according to Thibault.
A headline issue in 2014 was the record number and volume of vehicle recalls. Last year may go down as an aberration, but the current legislative and regulatory climate should keep recall levels above historic norms. From a rental perspective, that means honing logistics to facilitate repairs.
“I think we’re getting better at the recall process in its entirety,” said Thibault. “A year ago, it was a shock to the system. But we’ve got [new] processes in place with our supply chain group and better communication with the manufacturers. We’ll get better as we keep going.”
Lengthened order-to-delivery times were another issue that was largely out of the control of rental operators and to a large extent the manufacturers themselves — though this appears to be improving.
“The rail companies have not given us any indication that we’ll have massive problems moving forward,” said Caroline Costello, head of rental sales, Fiat Chrysler Automobiles. Costello added that a greater level of transparency between the manufacturers and the rental companies has led to better forecasting.
New federal corporate average fuel economy (CAFE) standards, as well as federal safety initiatives such as mandated backup cameras, will likely raise prices on new vehicles. “Vehicles will go up in cost,” said Bob Barton, vice president of franchising, Hertz Corp. “The higher the vehicle costs, running your business becomes more expensive.”
However, Costello added that suppliers are working with manufacturers to incorporate new technology and achieve economies of scale to keep pricing changes at a slower incline.
While the North American car rental market has faced growing consolidation for years — 96% of airport rentals are controlled by the majors — Joe Knight of Fox Rent-A-Car said there is still opportunity for independents to attract airport business.
“We believe that the economics of an on-airport operation are becoming much more dramatic in terms of space allocation,” he said. “[However,] we believe that off-airport has a bright future.”
Knight said the lower cost structure of operating off airport would translate into an attractive rate, though higher travel times to the location would diminish the service advantage. “But you can survive by increasing your customer service and convincing the customer to come back to you,” he said.
Carsharing’s Blurring Line
In a first for CRS, Alan Woodland, executive director of the Carsharing Association, moderated a panel of members of the carsharing community. Woodland advised that while carsharing has seen healthy growth, its overall market size in the U.S. of 17,000 units is still just a fraction of the two million units in traditional car rental.
Julian Espiritu, managing director of Abrams CarSharing Advisors, emphasized that while the North American market has grown through consolidation and expansion by the major carsharing companies, the real growth for carsharing is found in emerging markets such as Latin America, Eastern Europe and Asia.
This growth potential seems to be embodied in Carrot, the only carsharing firm serving the 26 million inhabitants of Mexico City. Panelist Diego Solorzano, Carrot’s co-owner and founder, said that 15 years ago, only 5% of Mexico City’s 20 million commuters were middle- to high-income earners; today, the figure is closer to 15%.
More inhabitants can afford cars but choose not to because of the hassle and high expense of owning one in Mexico City, Solorzano said. As a result, “We grew to 10,000 customers in three years, one of the fastest carsharing operations in the world.”
Solorzano pointed out that 15% to 20% of Carrot’s rentals are more than 24 hours. “That’s a trip that could be done by traditional car rental, and it would be 10% to 15% cheaper to use traditional car rental,” he said. “We are seeing, particularly in developing countries, that people are willing to pay more for having a car close by.”
Kyle Sabie, corporate rental manager for Enterprise CarShare, said carsharing in part was an offshoot of the local rental car transaction using technology to create a new experience. While he sees the blurring of the traditional lines continuing, “We’re very much in the education phase before we can find new avenues for automated car rental,” he said.
The Car Rental Crystal Ball
The closing panel discussed car rental through the lens of transportation and mobility. What will be the impact of a consolidated industry, or “oligopoly,” on car rental’s future?
Luke Schneider, CEO of Silvercar, the tech-enabled renter of Audi A4 models at airports, didn’t mince words: “[Traditional car rental] has got operations models that are unbelievably inefficient, horribly human and paper-based. Technology adoption is basically an afterthought. That’s an invitation to come in and challenge,” said Schneider, who views his company not as an airport car rental company but as a personal transportation company.
Chris Agnew, managing director at MKM Partners, an equity trading and research firm, said that while the industry may be an oligopoly, “three is the magic number in any industry. I do see the potential for a rational industry, one that can earn a fair return on capital.”
Erik Hansen, senior director of domestic policy at U.S. Travel Association, brought up demographic trends in which car rental will play an important role. “When you have urbanization of almost every part of the country, ownership becomes more difficult,” he said. “The opportunity for car rental would be to provide that last mile of mobility in those areas.”
Studies show that intercity travel is poised to explode, intensified by international travel to the U.S. “Technology won’t replace the Grand Canyon or a handshake or a personal relationship that you can strengthen through a face-to-face meeting,” Hansen said. “Everyone will travel more frequently, but that will come with a lot of challenges that can be solved by car rental and carsharing and mobility sharing industries.”
Hansen added that underfunding of the country’s infrastructure is a considerable barrier to mobility at a time when congestion is increasing.
Agnew brought up statistics from an MKM study on the effect on car rental of Transportation Network Companies (TNCs) such as Uber. The survey of Uber users found that 25% of respondents would replace carsharing or car rental with the TNC mode.
While TNC use is clearly growing fast, Agnew said that Uber is not cost competitive with car rental or carsharing for longer trips — and 70% of Uber trips are fewer than 30 miles.
“Renting cars won’t change, but does it evolve into more flexibility, to rent by the hour without a rental counter and using new technology to book?” Agnew asked. “[Rental] companies will adapt, in my view.”
The three panelists agreed that the millennial generation — the so-called adopters of disruptive technology — graduate into more traditional modes of transportation when they start families.
Regulations that raise barriers to accessibility options such as TNCs, high-speed rail, bus or car rental, particularly at airports, will have a dampening effect on travel, they said.
“If there is one thing that won’t change, it’s our need to get around,” Schneider said. “We do transportation — at least personal transportation — very poorly in this country. If there is an opportunity to do it better, and if we have to knock it down one use case at a time, starting with airport car rental, so be it.”