The UK car rental market needs to be disrupted to improve profitability and utilisation
Disrupt or transform?
The journey to customer centricity for car rentals starts here.
I have always dreamt of travelling the world.
As a child, I have travelled a lot in trains across India. I remember my excitement as a train would slowly approach the platform, waiting to take me to somewhere new and totally unexplored. The journey would be long, but you could experience the true nature of India’s diversity. I carried this dream with me when I moved to the UK and wanted to explore every nook and corner of this beautiful and diverse European continent, to experience the sights and sound of new cultures and their culinary delights. I have travelled to many countries across Europe and have always found that the best way to explore a new country and enjoy its scenic countryside is to drive. And this, unfortunately, has led to many uncomfortable encounters with car rental companies that operate across the continent.
One of my most recent experiences was at the Venice Treviso airport in Italy in November 2018. We were getting away on our anniversary to Slovenia, and I had planned to drive from Venice. I had booked a hire car through a popular online car rental price comparison website, who contracted with a car rental operator in Venice airport to provide me with my car when I arrived at the airport. All hell broke loose when I turned up to pick up the car. The desk agent cooked up a story of very high hidden charges (one-way drop off fee, cross-border travel fee, etc.) none of which were disclosed to me during the booking, but could all be discounted if I purchased their “super relax” insurance cover. With my prior experience of car rentals, it was easy to see through that story. I tried in vain to look for another hire car from a different operator, but prices were through the roof by then. I could not cancel the reservation without losing all my money and received no help from the online website with whom I had made the booking. Finally, I ended up paying the extra (almost double!) charges and went on my way, having spent over two hours at the airport trying to negotiate with the desk agent. Great start to our holiday.
Experiences such these are very much the norm. It is so prevalent that in the UK, the Competition and Markets authority had to do an assessment of unfair practices being undertaken by some of the rental companies. Over 85% of customers who regularly rent cars expressed dissatisfaction in their experience of renting cars. They have highlighted some key customer pain points:
- long waiting times to pick up the car (average pick up time is about 45 mins to an hour in busy locations such as big airports, train stations);
- non-transparent pricing and hidden charges being levied post rental;
- being mis-sold insurance through scare tactics;
- lack of information on existing damages in the car which lead to post rental charges; and
- a general lack of empathy towards customers.
In some countries across Europe, as was in my recent case, experiences can be a total nightmare for customers who can be fleeced out of their cash. Contrast this to the single most important reason for renting cars; 70% of people hire cars for ‘convenience’. It is hard to miss the irony in the situation.
This is where the idea behind Nuvven emerged.
Our vision is to create a consumer centric car rental experience that unlocks the true value of ‘convenience’ that customers desire when renting cars. Our end goal is to create more transparency and drive best practices in the car rental industry, which is currently riddled with complex operational processes that drive non-standard behaviours. For example, if you do a quick scan of the internet for booking a car, the prices can vary quite drastically based on whether you are going direct or through a price comparison website. If you decide to go for the cheapest deal, you will eventually find out that there were some hidden charges which were never published on the booking site. If you forego on price and pay a premium, then you are most likely to get a reliable service. Customers often feel they are being taken hostage, and forced to pay more, to ensure that ‘convenience’ is achieved.
It is not all bad. There are a few car rental companies who make an effort to provide good customer service (e.g. Auto Risen who have achieved 96% customer satisfaction score) or offer upgrades and reward customers for repeat business (e.g. Rentalcars). Some of the new brand of disruptive car rental companies have gone to great lengths to ensure customer experience remains at the heart of their business model, e.g. Virtuo and ZipCar have designed their processes to deliver a superior experience by leveraging smart connected technologies in ways which cannot be matched by the incumbents. Others, such as Drivy and Turo, are trying to create an ‘Uber’style model for car rentals by offering a platform for individuals to offer their personal car for hire.
Unfortunately, these disruptive models have found it difficult to scale and are therefore limited to big cities, often being badged as ‘alternatives to vehicle ownership’, due to the flexibility and ease being offered to customers, which is hard to achieve by the incumbents in the car rental industry. Hence, their impact has been like a drop in the ocean when you compare it to the $78 bn global car rental industry.
Which raises the question, do we disrupt, or do we transform the industry at scale?
At Nuvven, we believe that transforming the industry from the inside out is key to solving the customer problems. We want to tackle the deep-rooted issues in the car rental industry first, like Amazon did for the retail industry. The global car rental industry is heavily ‘cartelised’ by a handful of car rental companies (e.g. Avis, Hertz, Enterprise, Sixt and National) who collectively control about 60% of the worldwide market share for self-drive cars. The remaining 40% of the market remains heavily fragmented with numerous small and mid-sized car rental companies (e.g. in the UK alone, there are over 200 small and medium sized car rental companies with fleet sizes between 100–3000). To make matters more complicated, ubiquity of e-commerce and mobile technology has created a channel split between direct bookings vs bookings made via travel agents and online aggregators, making it harder to innovate without a closer collaboration between all parties.
In a series of blogs, we will be exploring some of the deep-rooted issues in the car rental industry that we have uncovered and how the Nuvven team is striving to develop innovative and technology enabled solutions for transforming the industry from within. In our next blog, we will be exploring some of the big challenges in Fleet Management faced by car rental companies and talk about how they can improve their Fleet management and utilisation using ‘Connected Vehicle Technology’ from Nuvven.