1. The Tennant GroupJim TennantHow to Beat the Majors at RateManagement
2. The Tennant Group• Roundtables – Car rental equivalent to aDealer 20 group. Owners and GMs onlyexchange financial information and meettwice a year. Talk to me if you areinterested.• Expert Witness Services.• General Consulting on all vehicle rentalrelated matters.• Jim@TennantGroup.com
3. The Tennant Group
4. Rate ManagementHow to Beat the Majors atRate Management
5. Rate Management• In the 80s Bob Leech used to advertise hisone and only rate ($19.95) in cutout lettersglued to the outside of his building.• His Roundtable members convinced himto take his rate off his building and to havea winter and summer rate ($17.95/$21.95).• He finally adopted shoulder season ratesand so then he had 4 rates per year.
6. Rate Management• Yield Management – Airlines realized itcosts little more to fly a plane full thanempty.• They could afford to sell an otherwiseempty seat for far below the cost of flyingthe plane because they were flying itanyway – full or empty!
7. Rate Management• National Car Rental pioneered YieldManagement in car rental in 1993.• By the late 90s all the majors were usingsophisticated Yield Managementtechniques.• Today industry utilization is far higher than20 or 30 years ago.
8. Rate Management• Objective: Adjust prices so that reservationflow each day provides just enoughreservations to keep the fleet on the road.• If you have to cut off reservations early,you could have had higher rates.• If you don’t have enough reservations,your cars will sit.• Either way, money is left on the table!
10. Sitting vs. RollingRollingTime Depreciation YesInterest YesLicense & Taxes YesAssuming 100 miles/rental dayMileage Depreciation $5.00Oil Changes $0.50Tires $1.00Repairs & Maintenance $0.50Labor & Commissions $1.00Total Extra Cost of Rolling - $8.00/Day
11. Sitting vs. Rolling• If it costs $8.00 more to have a car rolling,then you make money renting it at $9.00,even though renting all your cars for $9.00would be suicidal!• If you are swamped with cars, you mighteven rent below your incremental or rollingcost of $8.00 because you have to payparking, hikers, etc.
13. What do the majors do?The major brands have a clear and consistent rate hierarchy.
14. What do the majors do?– Hertz, National and Avis are the top tier.
15. What do the majors do?– Budget and Alamo duke it out next.
16. What do the majors do?– Thrifty and Enterprise are very close.
17. What do the majors do?– Dollar has become the loss leader.
18. What do the majors do?– They watch each other like hawks. These tiersare consistent across all major airport markets.I Year Average Hi LoHertz 57.34 79.33 43.49National 56.14 (1.20) 73.72 42.18Avis 55.91 (0.23) 79.14 41.59Budget 47.09 (8.82) 72.08 33.27Alamo 46.98 (0.11) 67.50 34.00Thrifty 39.67 (7.31) 61.76 30.04Enterprise 39.01 (0.66) 59.39 30.52Dollar 35.67 (3.34) 48.46 27.59
19. What do the majors do?– Here is a chart of the same rate quotes weekby week over the last year:
20. What do the majors do?– The rates are very volatile – but the relativeposition of each brand is remarkably stable.
24. What do the majors do?– They watch each other like hawks.– They watch and change rates continuously.First Last8:00 AM 6:00 PMAD $16.00 $16.00AL $26.77 $26.77ET $26.86 $26.86FX $16.89 $11.67ZA $20.86 $17.50ZD $26.92 $26.92ZE $29.49 $30.49ZI $37.99 $29.99ZL $29.33 $29.82ZR $22.92 $22.75ZT $26.34 $22.75
26. What can you do?1. Make sure you have the right size fleet.The most sophisticated rate managementwill not be enough if you are over-fleeted.2. Rate Management can improve utilizationby moving cars on slow days.3. Rate Management can improve RPD orDDA by getting higher rates on busydays.
27. What can you do?• Reservation Flow is more predictable thanyou think.– If your reservation build starts at least 2weeks out, you can build a forecastingspreadsheet that will give you a good earlywarning of upcoming good and bad days.
29. What can you do?• Reservation Flow is more predictable thanyou think.– You can keep good records so that you knowwhat to expect based on previous years.– You can monitor reservation enquiries by dayof pickup.– You can ask location managers to predictdemand a week or two ahead.
30. What can you do?• Reservation Flow is more predictable thanyou think.– One way or another, you must know whichdays to slow down and which days to speedup reservations.
31. What can you do?• You need to place yourself in the ratehierarchy.– For a normal flow, I need to be just belowCompetitor A.– If I need more reservations, I need to bebelow Competitor B or far below A.– If I need fewer reservations, I can be above A.
32. What can you do?• You need to monitor your competition.– You know this already – internet, telephone,etc. probably every day.
33. What can you do?• You need to communicate your constantlychanging rates to your staff.– Red, Yellow Green?– Level 1, 2, 3, etc.– Do NOT use HI/MED/LOW! (Someone is sure tosay to a customer “We are on HI rates today.)– Use the sign-in screen on your countersystem.
34. What can you do?And last, you need to figureoutHOW YOU ARE GOING TOSPEND ALL THESE EXTRAPROFITS!
36. Rate-Highway, Inc.Michael MeyerRate Management – part II
37. Who am I?• President of Rate-Highway• We are global, helping build revenue forcar rental companies in the US, Canada,Mexico, South America, Europe, Australiaand New Zealand• We are one of a select few providers ofmarket data• We are the only providers of completeRate Management & Automation
38. The Answer• Are you ready?– I am going to make this really easy, the twoways to beat the majors are:(Jim performs drumroll)
39. The Answer• Set all your rates to $1,000 a day– You just beat the majors for highest price,congratulations!• Or, set all your rates to $1.00 a day– Either way beat the majors, but did you reachyour goal?
40. Your Goal?• Isn’t your goal to beat the majors?– In a word: NO. I believe it shouldn’t be (moreon this later)• Before we talk about your goal pleaseallow me to share some of my thoughts…
41. Reflecting…• Thought about this presentation a lot,came up with the questions:– “What does beating a major look like?”– “Is it even possible?”• Taking a step back, what is YOUR goal?– Beating others to the lowest price?– Beating others to the highest utilization first?– Beating others to be sold out first on holidays andhigh seasons?
42. Reflecting… (pt 2)• Or could your goals possibly have less todo with “them” and more to do with you?– Building reservations smarter vs. faster? (i.e.better revenue)– Increasing your daily dollar average? (i.e.better revenue)• If you do better than you have ever done,does it matter what company X did*?* Yes, I know, there are exceptions for airport %, etc. Talking big picture here. Please stepout of the weeds.
43. Pick Your Battles• Can you out spend a Major Brand?• Do you have more available resourcesthan they do?• Then why would you fight for theirposition?– If a major wants to be lowest in a market, isthat a battle you can win?– Be careful who and why you follow
44. Competing or…?*Logos are the property of their respective owners. Location and size of logo isreflective of nothing but your imagination.
45. Wait a minute…• Whose side am I on?– Full disclosure, Rate-Highway does work with:• Major brands (both corporate & licensees)• Independents– In this race for revenue• We might make the fastest cars• But we never supply the drivers– YOU are the driver– YOU make the rules
46. Back to Goals• I believe your goal should be:Grow Revenue(simple right?)
47. Easier Said Than Done• Easy to say, but how?– Price your products as competitively as possible• Factor in utilization / market position / product mixture– Maintain relevant pricing for as much of the timeas possible• This means when others change their price, you shouldupdate your pricing too, if needed
48. My Market is…• Funny, I couldn’t keep up with the ratechanges in my market if I had 24 hours a dayto do so– With all the car types– All the dates to check– All the lor’s to research• I don’t have time for all that, I just shoot fromthe hip!
49. Markets Differ• Simple (seasonal or non-airport)– Daily and weekly rates– Differ by day• Complex (airport)– Daily rates• Might have 1, 2, 3, and 4 day rates• Weekly rate• Might have 8 or 9 day rates also
50. Markets Differ (pt 2)• Highly Complex (airport)– Daily rates• Might have 1, 2, 3, and 4 day rates– Weekly rates– Week plus rates• Might have 8 or 9 day rates also– Time of arrival rates• Daily and weekly rates differ based on pick-uptimes
51. Rate Movement$0.00$5.00$10.00$15.00$20.00$25.00$30.00$35.004/11/13 8:00 4/11/13 12:00 4/11/13 16:00 4/12/13 8:00 4/12/13 12:00 4/12/13 16:00 4/13/13 8:00 4/13/13 12:00 4/13/13 16:01 4/14/13 8:00ECAR at LAX 1 day rental for 4/14 at 10 amAdvantage Alamo Enterprise Fox Payless BudgetHertz Avis National Dollar Thrifty
52. Rate Movement$0.00$5.00$10.00$15.00$20.00$25.00$30.00$35.00$40.004/11/13 8:00 4/11/13 12:00 4/11/13 16:00 4/12/13 8:00 4/12/13 12:00 4/12/13 16:00 4/13/13 8:00 4/13/13 12:00 4/13/13 16:00 4/14/13 8:00ICAR at LAX 1 day rental for 4/14 at 10 amAdvantage Alamo Enterprise Fox Payless BudgetHertz Avis National Dollar Thrifty
53. Where is the help?• Rate Management Services arrived at carrental after Airlines and Hotels• There are two types of help available:– Data Collection• What are the rates in my market?• More of a DIY solution– Full Rate Automation• Keep my cars correctly priced• Collect Compare Correct• Collaboration between CRS, Counter System and RateManagement company
54. Automation Benefits?• Automation top 5 problems solved:1. My market changes rates too fast/often2. I don’t have the time to research & update3. I’m missing booking opportunities (too high)4. My daily dollar average is suffering (too low)5. I make mistakes sometimes when entering rates
55. So What To Do?• Decide on a goal– Airport locations• Decide on a daily dollar average target• Identify where in the order you want to fall– Be realistic – remember some of the positions areexpensive to obtain and may not be worth it• Decide how aggressive you want to build yourreservations• Identify your peak periods and plan for them• Systematize it (either manual or via automation)
56. So What To Do?Continued…– Neighborhood locations• Decide on a daily dollar average target• Identify where in the order you want to fall– Be realistic – remember some of the positions areexpensive to obtain and may not be worth it• Decide how aggressive you want to build yourreservations• Identify your peak periods and plan for them• Systematize it (either manual or via automation)
57. Systematize• A clear, written rate strategy– If someone else can’t make sense of it anduse it, then it does not count• Utilization inflection points– How are you getting utilization information?• Market Data– Find a data provider that gets you the datayou need when you need it
58. Systematize• Better yet automate it and free up time towork ON your strategy instead doing the busywork• Select a rate automation provider that meetsyour needs:– Collect (raw market data)– Compare (automatic integrated market analysisand rate suggestions)– Correct (integration with your CRS to update yourrates)
59. Collect• With data collection services you areprovided with market data that can becollected using specific criteria:– Local or one-way rates– Length of rent– Pick up date(s) and time– Car types– Competitors– Regular, government or discount rates
60. Rate Reports
61. Compare• The comparison ability allows the rateautomation company to compare aselected market to your rate strategy– If you rates are in alignment with the ratestrategy then no suggestion is needed– If you rates are NOT in alignment with the ratestrategy then a suggestion is provided
62. Rate Suggestions
63. Correct• The correction ability allows the rateautomation company update yourreservation system with updated rates– Your rates are now updated on your electronicchannels– Your rates can also be updated automaticallyin your counter system
64. Complete!• Now you can take a vacation!• Let the rate automation system check therates and correct them for you• Rate automation does not replace the ratemanager it just makes them much moreeffective• Remember to revisit and refine yourstrategy as needed