Experts Cite Subscriptions As A Fit With Car Rentals

Experts cite subscriptions as a fit with car rentals

Frequent travelers targeted as an ideal market for latest initiative

In the wake of car rental companies Enterprise and Hertz introducing subscription packages to their customers, industry experts believe such a move just might be what the doctor ordered.

“When you lay the car rental business model over a subscription model, car rental seems poised to win in this space,” said Chris Brown, editor at Auto Rental News in an interview with Travel Weekly. Brown added that subscriptions are a fit for the industry since car rentals “know the transactional economics of putting people in and out of cars on a three- to four-day basis.”

In May, Enterprise introduced a $1,499 monthly subscription fee that’s being tested in Minnesota, Missouri and Nevada. The incentive is good for up to 3,000 miles each month and covers such amenities as extensive damage and liability protection, roadside assistance, maintenance as well as the ability to choose among a six-vehicle class fleet and swap autos up to four times monthly.

Early in June, Hertz launched a more versatile monthly plan that’s being tried out in Georgia and Texas. Their subscription platform enables consumers to rent among the more basic vehicles in the company fleet for $999, or go for more luxurious models for $1,399. However, the plan only offers two vehicle swaps a month.

The timing of going the subscription route seems opportune as the economic transition towards subscriptions has been growing steadily, according to consultants McKinsey & Co. In 2018, the firm revealed that subscription-based e-commerce transactions have doubled annually since 2014. Additionally, its report stated that industry-leading retailers have generated revenue at an exponential rate through these types of transactions, from $57 million in 2011 to nearly $2.7 billion in 2018.

While those numbers make it irresistible to get onto the subscription bandwagon, car rentals have likely avoided the move because the majority of their customers are more infrequent users of the service, unlike consumers who regularly use services like Amazon and Netflix. But the rise of a sharing-based economy enticing younger consumers to own less and rent more might make subscription models more attractive in the car rental industry.

The transition is one of many factors Enterprise looked at before introducing subscriptions, said Kyle Sabie, the company’s assistant vice president. “As we look at all the different types of individuals and the use cases for why they rent cars, we have a robust history of who they are,” said Sabie to Travel Weekly. “We have science that we are incorporating into this.” 

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