How to beat the majors at rate management

The Tennant Group

Jim Tennant

How to Beat the Majors at Rate Management

The Tennant Group

• Roundtables – Car rental equivalent to a Dealer 20 group. Owners and GMs only exchange financial information and meet twice a year. Talk to me if you are interested.

• Expert Witness Services.

• General Consulting on all vehicle rental related matters.

• [email protected]

The Tennant Group

Rate Management

How to Beat the Majors at Rate Management

Rate Management

• In the 80s Bob Leech used to advertise his one and only rate ($19.95) in cutout letters glued to the outside of his building.

• His Roundtable members convinced him to take his rate off his building and to have a winter and summer rate ($17.95/$21.95).

• He finally adopted shoulder season rates and so then he had 4 rates per year.

Rate Management

• Yield Management – Airlines realized it costs little more to fly a plane full than empty.

• They could afford to sell an otherwise empty seat for far below the cost of flying the plane because they were flying it anyway – full or empty!

Rate Management

• National Car Rental pioneered Yield Management in car rental in 1993.

• By the late 90s all the majors were using sophisticated Yield Management techniques.

• Today industry utilization is far higher than 20 or 30 years ago.

Rate Management

• Objective: Adjust prices so that reservation flow each day provides just enough reservations 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!

Sitting vs. Rolling

SittingTime Depreciation YesInterest YesLicense & Taxes YesMileage Depreciation NoOil Changes NoTires NoRepairs & Maintenance NoRental Labor & Commissions No

Sitting vs. Rolling

RollingTime Depreciation Yes

Interest Yes

License & Taxes Yes

Assuming 100 miles/rental day

Mileage Depreciation $5.00

Oil Changes $0.50

Tires $1.00

Repairs & Maintenance $0.50

Labor & Commissions $1.00

Total Extra Cost of Rolling - $8.00/Day

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 $9.00 would be suicidal!

• If you are swamped with cars, you might even rent below your incremental or rolling cost of $8.00 because you have to pay parking, hikers, etc.

Questions?

What do the majors do?

The major brands have a clear and consistent rate hierarchy.


– Hertz, National and Avis are the top tier.


– Budget and Alamo duke it out next.


– Thrifty and Enterprise are very close.


– Dollar has become the loss leader.


– They watch each other like hawks. These tiers are consistent across all major airport markets.

I Year Average Hi Lo

Hertz 57.34 79.33 43.49

National 56.14 (1.20) 73.72 42.18

Avis 55.91 (0.23) 79.14 41.59

Budget 47.09 (8.82) 72.08 33.27

Alamo 46.98 (0.11) 67.50 34.00

Thrifty 39.67 (7.31) 61.76 30.04

Enterprise 39.01 (0.66) 59.39 30.52

Dollar 35.67 (3.34) 48.46 27.59


– Here is a chart of the same rate quotes week by week over the last year:


– The rates are very volatile – but the relative position of each brand is remarkably stable.


– They watch each other like hawks.

– They watch and change rates continuously.Thursday, April 11, 2013

8:00 AM 9:00 AM 10:00 AM 11:00 AM 12:00 PM 1:00 PM 2:00 PM 3:00 PM 4:01 PM 5:00 PM 6:01 PM

AD $16.00 $25.00 $25.00 $25.00 $25.00 $25.00 $25.00 $25.00 $25.00 $25.00 $25.00

AL $26.77 $26.77 $26.77 $26.77 $26.77 $26.77 $26.77 $26.77 $26.77 $26.77 $26.77

ET $26.86 $26.86 $26.86 $26.86 $26.86 $26.86 $26.86 $26.86 $26.86 $26.86 $26.86

FX $16.89 $16.89 $16.89 $16.89 $16.89 $19.16 $19.16 $18.37 $18.37 $18.37 $18.37

ZA $20.86 $20.86 $20.86 $20.86 $20.86 $23.67 $23.67 $22.69 $22.69 $22.69 $22.69

ZD $26.92 $26.92 $26.92 $26.92 $26.92 $26.92 $26.92 $26.92 $26.92 $26.92 $26.92

ZE $29.49 $29.49 $29.49 $29.49 $30.49 $30.49 $30.49 $30.49 $30.49 $30.49 $30.49

ZI $37.99 $37.99 $37.99 $37.99 $37.99 $37.99 $37.99 $37.99 $37.99 $37.99 $37.99

ZL $29.33 $29.33 $29.33 $29.33 $29.33 $29.33 $29.33 $29.33 $30.32 $30.32 $29.33

ZR $22.92 $22.92 $22.92 $22.92 $22.92 $22.92 $22.75 $22.75 $22.75 $22.75 $22.75

ZT $26.34 $26.34 $26.34 $26.34 $26.34 $26.34 $22.75 $22.75 $22.75 $22.75 $22.75



– They watch and change rates continuously.Friday, April 12, 2013


AD $25.00 $25.00 $25.00 $25.00 $25.00 $25.00 $25.00 $25.00 $25.00 $25.00 $25.00

AL $26.77 $26.77 $26.77 $26.77 $26.77 $26.77 $26.77 $26.77 $26.77 $26.77 $26.77

ET $26.86 $26.86 $26.86 $26.86 $26.86 $26.86 $26.86 $26.86 $26.86 $26.86 $26.86

FX $22.54 $22.54 $22.54 $22.54 $22.54 $22.54 $22.54 $21.61 $21.61 $21.61 $21.61

ZA $23.67 $23.67 $23.67 $23.67 $23.67 $23.67 $23.67 $22.69 $22.69 $22.69 $22.69

ZD $26.92 $26.92 $26.92 $26.92 $26.92 $26.92 $26.92 $26.92 $26.92 $26.92 $26.92

ZE $30.49 $30.49 $30.49 $30.49 $30.49 $30.49 $30.49 $30.49 $30.49 $30.49 $30.49

ZI $29.99 $29.99 $29.99 $29.99 $29.99 $29.99 $29.99 $29.99 $29.99 $29.99 $29.99

ZL $30.32 $30.32 $30.32 $30.32 $29.82 $29.82 $29.82 $29.82 $29.82 $29.82 $29.82

ZR $22.92 $22.92 $22.92 $22.92 $22.92 $22.92 $22.75 $22.75 $22.75 $22.75 $22.75

ZT $26.34 $26.34 $26.34 $26.34 $26.34 $26.34 $22.75 $22.75 $22.75 $22.75 $22.75



– They watch and change rates continuously.Saturday, April 13, 2013


AD $25.00 $25.00 $13.00 $13.00 $13.00 $13.00 $13.00 $13.00 $13.00 $16.00 $16.00

AL $26.77 $26.77 $26.77 $26.77 $26.77 $26.77 $26.77 $26.77 $26.77 $26.77 $26.77

ET $26.86 $26.86 $26.86 $26.86 $26.86 $26.86 $26.86 $26.86 $26.86 $26.86 $26.86

FX $13.52 $13.52 $13.52 $13.52 $11.67 $11.67 $11.67 $11.67 $11.67 $11.67 $11.67

ZA $20.29 $20.29 $20.29 $20.29 $20.29 $17.50 $17.50 $17.50 $17.50 $17.50 $17.50

ZD $26.92 $26.92 $26.92 $26.92 $26.92 $26.92 $26.92 $26.92 $26.92 $26.92 $26.92

ZE $30.49 $30.49 $30.49 $30.49 $30.49 $30.49 $30.49 $30.49 $30.49 $30.49 $30.49

ZI $29.99 $29.99 $29.99 $29.99 $29.99 $29.99 $29.99 $29.99 $29.99 $29.99 $29.99

ZL $29.82 $29.82 $29.82 $29.82 $29.82 $29.82 $29.82 $29.82 $29.82 $29.82 $29.82

ZR $22.92 $22.92 $22.92 $22.92 $22.92 $22.92 $22.75 $22.75 $22.75 $22.75 $22.75

ZT $26.34 $26.34 $26.34 $26.34 $26.34 $26.34 $22.75 $22.75 $22.75 $22.75 $22.75



– They watch and change rates continuously.First Last

8:00 AM 6:00 PM

AD $16.00 $16.00

AL $26.77 $26.77

ET $26.86 $26.86

FX $16.89 $11.67

ZA $20.86 $17.50

ZD $26.92 $26.92

ZE $29.49 $30.49

ZI $37.99 $29.99

ZL $29.33 $29.82

ZR $22.92 $22.75

ZT $26.34 $22.75

Questions?

What can you do?

1. Make sure you have the right size fleet. The most sophisticated rate management will not be enough if you are over-fleeted.

2. Rate Management can improve utilization by moving cars on slow days.

3. Rate Management can improve RPD or DDA by getting higher rates on busy days.

What can you do?

• Reservation Flow is more predictable than you think.

– If your reservation build starts at least 2 weeks out, you can build a forecasting spreadsheet that will give you a good early warning of upcoming good and bad days.

What can you do?


21 Days 14 Days 7 Days

19 24 26 27 28 28 28 34 36 41 48 54 54 57 64 75 85 97 97 97 105 Mon 04/02

64 78 78 77 75 72 74 82 82 87 96 101 98 103 105 112 115 121 111 106 105 Mon 04/02

15 15 20 20 20 20 23 27 29 33 34 34 36 46 54 62 68 75 78 81 100 Tue 04/03

50 47 60 58 55 55 60 64 65 72 69 68 71 84 89 93 96 98 97 97 100 Tue 04/03

35 38 41 42 42 45 48 54 63 66 67 68 74 81 84 91 97 101 101 124 139 Wed 04/04

104 108 111 111 110 111 112 118 132 131 129 131 133 136 129 133 133 133 130 144 139 Wed 04/04

22 26 26 27 28 29 36 40 42 42 45 49 51 57 63 71 72 71 81 89 109 Thu 04/05

63 71 69 71 70 69 81 85 85 83 90 91 89 94 97 104 104 98 101 101 109 Thu 04/05

32 35 35 35 38 40 46 48 48 48 52 54 64 69 69 73 75 82 100 108 127 Fri 04/06

104 116 106 99 102 102 112 108 106 107 112 106 118 121 115 114 115 113 123 122 127 Fri 04/06

40 41 43 46 46 49 53 57 56 63 67 69 75 86 88 90 95 99 101 106 Sat 04/07

120 122 118 123 118 118 119 128 124 132 133 131 135 144 140 139 139 133 127 122 Sat 04/07

22 23 22 23 24 25 24 24 27 34 36 37 42 43 45 50 57 58 68 Sun 04/08

66 68 60 62 61 60 54 54 60 71 72 70 75 72 72 77 84 78 86 Sun 04/08

What can you do?


– You can keep good records so that you know what to expect based on previous years.

– You can monitor reservation enquiries by day of pickup.

– You can ask location managers to predict demand a week or two ahead.

What can you do?


– One way or another, you must know which days to slow down and which days to speed up reservations.

What can you do?

• You need to place yourself in the rate hierarchy.

– For a normal flow, I need to be just below Competitor A.

– If I need more reservations, I need to be below Competitor B or far below A.

– If I need fewer reservations, I can be above A.

What can you do?

• You need to monitor your competition.

– You know this already – internet, telephone, etc. probably every day.

What can you do?

• You need to communicate your constantly changing rates to your staff.

– Red, Yellow Green?

– Level 1, 2, 3, etc.

– Do NOT use HI/MED/LOW! (Someone is sure to

say to a customer “We are on HI rates today.)

– Use the sign-in screen on your counter system.

What can you do?

And last, you need to figure out

HOW YOU ARE GOING TO SPEND ALL THESE EXTRA

PROFITS!

Questions?

Rate-Highway, Inc.

Michael Meyer

Rate Management – part II

Who am I?

• President of Rate-Highway

• We are global, helping build revenue for car rental companies in the US, Canada, Mexico, South America, Europe, Australia and New Zealand

• We are one of a select few providers of market data

• We are the only providers of complete Rate Management & Automation

The Answer

• Are you ready?

– I am going to make this really easy, the two ways to beat the majors are:

(Jim performs drumroll)

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 reach your goal?

Your Goal?

• Isn’t your goal to beat the majors?

– In a word: NO. I believe it shouldn’t be (more on this later)

• Before we talk about your goal please allow me to share some of my thoughts…

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 and high seasons?

Reflecting… (pt 2)

• Or could your goals possibly have less to do 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 step out of the weeds.

Pick Your Battles

• Can you out spend a Major Brand?

• Do you have more available resources than they do?

• Then why would you fight for their position?

– If a major wants to be lowest in a market, is that a battle you can win?

– Be careful who and why you follow

Competing or…?

*Logos are the property of their respective owners. Location and size of logo is

reflective of nothing but your imagination.

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

Back to Goals

• I believe your goal should be:

Grow Revenue (simple right?)

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 time as possible

• This means when others change their price, you should update your pricing too, if needed

My Market is…

• Funny, I couldn’t keep up with the rate changes in my market if I had 24 hours a day to 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 from the hip!

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

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-up times

Rate Movement

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

4/11/13 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 8:00

ECAR at LAX 1 day rental for 4/14 at 10 am

Advantage Alamo Enterprise Fox Payless Budget

Hertz Avis National Dollar Thrifty

Rate Movement

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

4/11/13 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 8:00

ICAR at LAX 1 day rental for 4/14 at 10 am

Advantage Alamo Enterprise Fox Payless Budget

Hertz Avis National Dollar Thrifty

Where is the help?

• Rate Management Services arrived at car rental 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 Rate Management company

Automation Benefits?

• Automation top 5 problems solved:

1. My market changes rates too fast/often

2. I don’t have the time to research & update

3. I’m missing booking opportunities (too high)

4. My daily dollar average is suffering (too low)

5. I make mistakes sometimes when entering rates

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 are expensive to obtain and may not be worth it

• Decide how aggressive you want to build your reservations

• Identify your peak periods and plan for them

• Systematize it (either manual or via automation)

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 are expensive to obtain and may not be worth it

• Decide how aggressive you want to build your reservations

• Identify your peak periods and plan for them

• Systematize it (either manual or via automation)

Systematize

• A clear, written rate strategy

– If someone else can’t make sense of it and use 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 data you need when you need it

Systematize

• Better yet automate it and free up time to work ON your strategy instead doing the busy work

• Select a rate automation provider that meets your needs:– Collect (raw market data)

– Compare (automatic integrated market analysis and rate suggestions)

– Correct (integration with your CRS to update your rates)

Collect

• With data collection services you are provided with market data that can be collected 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

Rate Reports

Compare

• The comparison ability allows the rate automation company to compare a selected market to your rate strategy

– If you rates are in alignment with the rate strategy then no suggestion is needed

– If you rates are NOT in alignment with the rate strategy then a suggestion is provided

Rate Suggestions

Correct

• The correction ability allows the rate automation company update your reservation system with updated rates

– Your rates are now updated on your electronic channels

– Your rates can also be updated automatically in your counter system

Complete!

• Now you can take a vacation!

• Let the rate automation system check the rates and correct them for you

• Rate automation does not replace the rate manager it just makes them much more effective

• Remember to revisit and refine your strategy as needed

Questions?

Michael MeyerRate-Highway, Inc.

[email protected]

(888) 551-0029 x705

Technology

How to beat the majors at rate management