Hertz San Diego Airport — the Future of Car Rental?

You know it’s not your average ribbon cutting when Hertz CEO Mark Frissora shows up with a gaggle of Hertz senior executives in tow. Indeed, the Hertz brass instilled the official opening of the new Hertz facility at San Diego Airport yesterday with an air of importance. But the new facility isn’t just a redesign; it signals the beginning of a new way to rent cars.

That’s a bold statement, especially since there hasn’t been much innovation in traditional car rental in the last 20 years. But this facility is less about a physical rebranding and more about the implementation of technology to make the car-rental process faster, non-linear and flexible. Really.

The rental counter is gone. Exiting the shuttle bus, customers first encounter a check-in agent, who will direct them to an ExpressRent kiosk or an in-store agent. If there is a wait for either, the customer gets a pager (like TGI Friday’s) and is free to roam the facility, which now includes a convenience store, called “Road Trip by Hertz,” an iPad station with electronics recharge ports and a FedEx drop point. Of course, customers are free to go outside and roam the car selection. In San Diego, sport and luxury models are perched dramatically on “Wow” ramps next to placards with car specs.

The in-store kiosks are equipped with monitors that connect to a live agent, a critical component of the new system. Those live agents work out of three call centers, the biggest in Oklahoma, and allow the brick-and-mortar branches to streamline personnel and expand operating hours.

There are telematics-based upgrades such as the app customers can download to know how long it will take a shuttle bus to get to them. In turn, shuttle bus drivers can identify where their customers are.

Gold Plus program members get some new perks. Not only can they go straight to their car, as they could previously, they also have the option to switch into a different set of cars for free or take an upgrade. Upon exiting the lot, the attendant will make the change on the fly and print a new contract.

The Gold Choice area has a flight status board, and gold greeters are on hand to help with questions or help a customer connect to Bluetooth in the vehicle. Each car has a “certified clean and safe” card, signed by the employee who inspected it.

The media surrounding this worldwide rollout of facility overhauls is geared toward the benefits to the customer. But this trade publication, of course, is after the other side of the story and the impact to the bottom line.

Companywide, the facility renovations will cost $50 to $70 million a year, not much in the big financial picture, and also tempered by labor and operations savings. What about ancillary revenues? “We make more money by being good to customers,” Frissora said. For the San Diego facility, net promoter and customer satisfaction scores are up, along with an increase of a healthy $6.91 per rental and 17% in revenues overall.

From the look of it, when customers are offered the freedom to choose upgrades and a menu of services without a person across the counter, they will do so, and in greater amounts. Frissora says more than half of Hertz’s customers right now never talk to a person during the transaction. The idea is to be high tech, but high touch if needed. “We want customers not to have to talk to us,” he says.  “We want to be famous for our cars.”

To that point, Frissora said that Hertz will double its “Dream Collection” fleet by next year with models such as the Aston Martin Vantage, Lamborghini Gallardo and Tesla Model S. Hertz is finding a sweet spot in the $375 to $500 a day range for these models, he said.

I asked about renovations in light of proposed consolidated rental facilities, and indeed San Diego Airport has begun construction on a conrac that will move rental facilities to a centralized location. The renovations should be viewed as “skins” that can adapt to new environments, Frissora said. While facilities will move, most of the underlying improvements to the rental process should be able to be transferred.

But the most interesting development around the corner for Hertz wasn’t a part of this dog-and-pony show.

Hertz is introducing the next generation of its NeverLost navigation system in the fourth quarter. Similar to the kiosks, the new NeverLost will connect to a live, on-screen operator for real-time, in-car customer service.

But along with this in-vehicle, customer-facing navigation device comes an under-hood GPS tracking unit, called the “Zibox.” Used to track and control Hertz’s nascent 24/7 car-sharing technology, the Zibox allows drivers to enter and start the car; it can immobilize the car if stolen and is connected to the engine’s diagnostics to precisely manage preventive maintenance. Fuel usage will be monitored precisely via electronic fuel metering.

In terms of price per unit, Frissora quoted $2 depreciation a month, with the ability to reuse the device in different vehicles four to five times.

In quarterly conference calls two years ago, Frissora started mentioning that Hertz intends to put car-sharing technology in its entire fleet. Yesterday, Frissora said all 500,000 company-owned units would get the technology by 2016. While the technology is not new, the fact that Hertz will install it in its entire fleet is a big, bold move. Frissora said Hertz is forming partnerships with retailers, property managers and the like to spread 24/7-enabled cars into 16,000 locations.

With a GPS-tracking device in every car, Hertz will be able to know where every car is all the time. Think about that not only from a security and customer-service perspective, but also from the Big Data those devices will generate. By analyzing customer’s driving patterns, Hertz can understand travel patterns and location and buying preferences like never before in every market it serves.

While car sharing was founded on the need for short-term rentals in cities in which car ownership is onerous, this opens the floodgates into the suburbs, office parks, retail centers and airports. A standalone Zipcar and other smaller car-sharing companies don’t have the reach to do this, but traditional car rental companies with hundreds of thousands of cars certainly do.

You’ve heard me talk about the automation and decentralization of the car rental process; this is a flashing neon signpost along that road.

Originally posted on Business Fleet