Igor Marchal On The Future Of Car Rental Distribution

Car rental companies can’t sufficiently differentiate their products or provide a modern shopping experience within the current distribution framework. That’s according to travel industry veteran Igor Marchal of Klomat Consulting. Drawing on his experiences at CWT, Expedia and Europcar, Marchal explains the constraints currently hindering the car rental industry and suggests a course of action.


It seems little has changed in the two decades since car rental companies and global distribution systems first enabled online reservation technologies.

By and large, shopping for a rental car on any travel website or online booking tool still entails a tedious scroll down a long list of vendors and vehicle categories. The display is cluttered with inclusive or optional ancillaries and insurance, and tagged with obscure acronyms such as CDW, LDW, TP, ASC or PAI. This apparent complexity is particularly surprising at a time when the broader mobility landscape is undergoing something of a revolution. Car-sharing and ride-hailing are becoming ubiquitous and complementary to traditional car rental while ground transportation providers (including limousines and other chauffeured services) are busy consolidating and pushing to create global solutions for business travelers. 

To stay ahead of this revolution, major car rental players are investing massively to improve their offers. They are gradually deploying customer-centric and technology-driven services like connected fleets, electric vehicles, keyless entry and ignition, paperless contracts, vehicle model pre-selection and real-time app notifications. Car rental companies upgraded their direct channels – mainly websites and mobile apps — to reflect these service enhancements. Paradoxically, though, users of most common third-party distribution channels can’t take advantage of all those new services.

Yet these indirect channels can account for the majority of a car rental company’s revenue. If nothing is done to bridge the gap in content richness and consumer experience, two major risks for the car rental industry lay ahead: commoditization and loss of control over distribution.

First of all, commoditization. When a vendor is unable to showcase its unique selling proposition in a compelling way, the only selling point visible to the end client is price. Car rental has remained a relatively low-margin business primarily for this reason.

Airlines suffered a similar trend when low-cost competitors first emerged. In recent years, full-service carriers improved the merchandizing of their inventory through indirect distribution channels. They also got help from rich-content providers such as ATPCO’s RouteHappy, feeding a number of OTA websites with detailed airfare merchandizing and amenity information. This helps guide consumer choices beyond price alone.

Igor Marchal of Klomat Consulting

Considering the massive investments required to tackle digital transformation, car rental companies more than ever should fight for value rather than price. No matter which channel consumers choose to rent through, they will need clear visual cues to assess the intrinsic value of each product. Relying on brand marketing and advertising alone is showing its limits.

The second risk for the car rental industry is losing control over its distribution. 

Look what happened to the hotel industry. Despite hefty investments in proprietary websites and apps, hotels have all but completely devolved their distribution to online travel agencies. OTAs structured their displays so that online shoppers could better compare rates and properties. They grew increasingly popular and gained so much power that hoteliers now pay a premium to be merchandized favorably – if at all – on OTA storefronts. This is not always in the consumer’s best interest.

This same power shift is already evident in the car rental industry. Some OTAs now upsell their own, cheaper car insurance instead of letting rental companies sell theirs at the pick-up counter. 

On the other hand, airlines seem to be getting better at merchandizing, thanks partly to unity afforded by the International Air Transport Association. With the promise of richer, personalized content delivered through distributors or content aggregators, IATA’s New Distribution Capability initiative spurred deep changes in the airline distribution landscape. 

As a consequence, airlines are gradually freeing themselves from the straightjacket of obsolete GDS architecture that prevented them from delivering the right customer value. In the long run it makes no difference which indirect channel becomes dominant. The industry as a whole will be obliged to embrace NDC standards, which were engineered collectively by airlines and not distribution channels.

The car rental industry can learn a lot from this ongoing shift in airline distribution strategy, shining a light on its internal speed bumps along the way.

What’s The Holdup?

Car rental companies have not sufficiently coordinated their efforts for the common good. Sadly, there is no real equivalent to IATA in the mobility business. Leading car rental companies in 1989 created the ACRISS association, but it never had sufficient power to discipline the industry as a whole. Its authority currently covers only EMEA territories. The world’s largest car rental market, the United States, has its own association called the American Car Rental Association. Its U.S.-centric agenda is not necessarily aligned with that of ACRISS. As a result, the car rental industry is regrettably still not speaking with one voice.

Despite the rise of non-GDS aggregators, car rental distribution is still dominated by GDSs, especially for corporate travel. GDS technology for car rental uses an IT architecture initially designed for airline distribution, which has hampered enhancements in shopping capabilities. In 2019, the only car rental ancillaries a consumer can book through a GDS are winter tires, satellite navigation, ski racks and child seats.

It is tempting to conclude that this slow pace of innovation is due to car rental being a relatively small, non-strategic and therefore poorly funded line of business for GDS players. To be fair, GDSs have tried to innovate and set up better standards for years, sometimes even with success. 

As an example, Amadeus last year joined forces with ACRISS and Blacklane to spell out new distribution standards for airport transfers and chauffeur services. This is an encouraging move but fostering constructive cooperation between fierce competitors can be as challenging as herding cats. 

For any standard to positively impact the industry, all stakeholders must agree beforehand. That means aligning all three primary GDS providers and the majority of vendors in any given market. Unfortunately, we are not there yet. GDSs may put forward meaningful changes, but they have limited clout and legitimacy when it comes to enforcing them among vendor-clients. 

If Not GDSs, What Then?

Who else can instigate industry cohesion? Non-GDS content aggregators are more agile than GDSs and already established direct connections with various distribution channels. That said, as smaller challengers, they often adapt to vendors’ and distributors’ own API protocols rather than trying to impose their own. 

To get itself out of this gridlock, the car rental industry needs to help itself. Constructive cooperation is possible. Compared to IATA’s nearly 300 member airlines, car rental has only a handful of significant players. There are three preliminary steps the car rental industry collective should take if it wants to dramatically improve its distribution.

1. Empower ACRISS and make its reach global while increasing its funding to make it a strong and respected trade association.

2. Collectively agree on how car rental should be sold over the next decade, especially when it comes to removing clutter and setting transparent pricing rules. Consumers hate complexity and jargon. Many are baffled when attempting to understand what’s included in a car rental rate, what’s extra and whether these extras are necessary or nice-to-haves.

This is a daunting but crucial task. Consumers can rent a car in Mexico for just $1 a day through any major OTA. A hugely deceptive local practice follows. At pick-up time an average $2,500 guarantee is temporarily debited on the renter’s credit card. Often, the card is insufficiently provisioned, so the rental agent either applies an additional, inflated insurance fee or switches the renter to a significantly more expensive rate.

Local regulators increasingly scrutinize misleading practices like this one. It is not enough; without an industry-wide watchdog, rogue players will continue to trick customers and tarnish the entire industry’s reputation. If the industry does not help consumers make sense of the jungle of prices and confusing terminologies, OTAs will most likely jump in to curate car rental inventory — and control it. 

3. Create an ACRISS-approved quality label with transparency standards that online consumers would seek out and ACRISS non-members would envy. When your website features an IATA accreditation logo, it brings you instant visibility, credibility and professional recognition.

After taking these steps, the car rental industry will at last be able to take its distribution to the next level. Enforcing harmonized display, pricing and merchandizing standards across all distribution channels would ensure fair competition while putting an end to commoditization through genuine value differentiation. New yield management opportunities should emerge, such as using loyalty program status to drive personalized discounts and services. Fleets and rental locations could also be partly mutualized, with the same benefits code sharing brought to airlines. 

For leisure and corporate travelers alike, this will mean a new era in which booking ground transportation finally becomes a modern and altogether smoother, stress-free experience.


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Igor Marchal

Author: Igor Marchal

Igor Marchal is a 20-year veteran in travel distribution. He launched Klomat Consulting in 2019 to advise on online distribution, negotiation strategy, procurement and vendor management. He recently took a sabbatical year to complete an Executive MBA at the Institut d’Administration des Entreprises in southern France, spending his free time consulting and teaching at business schools. Passionate about online travel technology, merchandizing and car rental, Igor has developed sophisticated airfare monitoring services and is a strong advocate for the development of ancillaries and NDC. Earlier in his career he held roles in supplier and revenue management at Expedia and product marketing at CWT. Igor also was an account manager for Europcar. Connect with him on LinkedIn.

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