Car Rental Subscription Services as a Viable Option Under Consideration
March 31, 2019
Rental car industry players ponder over a potential revenue stream
As the rental car industry comes to grips with increasing competition from the ride sharing sector, and pushes to stay ahead in the efficiency game by embracing new technology, the business is also tinkering with potential revenue stream markets. One such opportunity on the table, subscription-based sales, is particularly unusual.
At first glance, subscriptions seem counterintuitive to the whole economic model of the car rental economy. It’s an industry that garners most of its share through short-term rentals, especially when consumers have the opportunity to buy or lease-to-own a vehicle as alternatives. But for an industry not designed to take in earnings on long-term transactions, it’s an option under so much consideration, a special panel discussion dedicated to the topic will be part of the itinerary for the International Car Rental Show, taking place April 14-16 in Las Vegas.
Ride-sharing competitors are already operating with such a model, especially its biggest companies Lyft and Uber. Both of them introduced subscription services in 2018, with Lyft providing an all-access pass based on a fixed number of rides at various pricing points, and Uber creating Ride Pass, a monthly incentive for frequent users to get regular discounts.
Lyft, Uber and other ride-sharing businesses are cashing in on the millennial market, which is already outnumbering the boomer loyalists who’ve used car rentals for decades. And with this demographic shift, major rental companies like Enterprise and Avis undoubtedly want a piece of the action for the sake of survival.
Millennials have long been perceived as anti-car and prefer not to own one, especially with a wealth of car-access alternatives available. There’s no point in targeting part of that group that won’t even apply for a driver’s license, roughly 25 percent of the demographic. But for the rest of that crowd, there exists an opportunity to sway them over.
Given recent labor disputes among ride-sharing companies, it’s apparent that internal structuring remains an issue, which gives car rentals a distinct advantage when it comes to transactions. They key is to come up with a model that’s a fit with how car rentals ordinarily do business.
So far, one program that seems to be working is at a Budget dealership in Pennsylvania, which is based on a previous incentive called Budget Mini-Lease. The program’s been running for at least six years and at last count had a mix of some 700 regular individual and corporate clients.
However, a lot of other similar programs have failed for various reasons ranging from complications associated with a new potential revenue-generating model to internal snags with coordinating short- and long-term rentals. It may be a matter of time before additional adjustments will determine whether subscriptions is a viable option for the car rental business.
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