The emergence of Uber and other ‘ridesharing’ technology offerings has left people asking about the future of the car rental industry. Kate Kennedy investigates what impact the rise of the sharing economy is having on the likes of big car rental players such as Avis Budget, Hertz and Europcar.
A growing shift towards sharing economy services continues to gather pace around the world, with the likes of ‘first to market’ pioneers Uber and Airbnb now household names in the travel space and seemingly playing a bigger and bigger role. Uber is now in 81 countries and 581 cities, including 15 in Africa, with South Africa enjoying the biggest representation with five cities, followed by Nigeria, Kenya and Egypt, which each have two.
Airbnb, meanwhile, claims to be in 191 countries and 65,000 cities. Looking at those numbers, it’s probably fair to say that the sharing economy is here to stay.
“The sharing economy is no longer a concept, but a reality with rapidly accelerating adoption,” says Martin Lydall, Chief Commercial Officer of Europcar in South Africa. “Young people do not view ownership in the same way as previous generations did, and for very good reason. This is unlikely to change.”
Not only are these services proving popular due to their convenience, but the synergy with a continent such as Africa is obvious – as massive unemployment hurts even some of Africa’s biggest economies, so the likes of Uber and Airbnb are providing employment and entrepreneurial opportunities.
Further to that, the sharing economy has even greater appeal for today’s and tomorrow’s travellers – both leisure and business: the millennial traveller who seeks a bit more meaning from his or her travel and favours conservation and cost-consciousness over bells and whistles. Ridesharing plays a role in achieving these goals, by reducing traffic congestion and emissions, and eliminating or reducing the costs associated with owning a car.
“Uber’s mission is to help people get a ride at the push of a button – everywhere and for everyone,” says Samantha Allenberg, Spokesperson for Uber Africa. “Now we’ve started tackling an even greater challenge: reducing congestion and pollution in our cities by getting more people into fewer cars.”
There’s no doubting, however, that what’s of greater appeal is the convenience of ridesharing, and if you apply that to the business travel space, it clearly has a role to play in areas such as airport pick-ups and drop-offs, which, at face value, might pose a threat to the ‘point-to-point’ services offered by the car rental brands.
DIFFERENT STROKES
While the perception remains that ridesharing provides a threat to the car rental industry, the argument put forward by those with a vested interest suggests otherwise.
According to both Uber and some of the big car rental players, the needs of car rental customers and their ridersharing counterparts are quite different. That would probably explain why neither entity appears overly concerned about the success of the other. If you delve a little deeper, you can see why.
Uber is clearly convenient for spur-of-the-moment, short, simple trips, whereas people who rent cars usually plan on driving a fair distance and often make multiple trips or stops.
“We don’t believe Uber has altered the car rental landscape as such, as it is often more practical and cost-effective for business and leisure travellers to have flexibility and freedom of movement,” says Karen Schwartz, Sales and Marketing Manager – Inland, Hertz Southern Africa.
Allenberg agrees, saying that Uber provides alternative transport, allowing travellers to choose the best option for their current situation.
“Traditional car rental is an average length of rental of approximately four to five days, depending on the segment of customer,” says Rebone Motsatsi, Executive Commercial at Avis Rent a Car Southern Africa.
Taking that a step further, CEO of the Avis Budget Group in the US, Larry DeShon, believes that in the United States, rental customers who travel fewer than 50 miles (80km) per day, the ones who are more likely to give their business to Uber, are one in a million.
SERVICE & SECURITY
The approach to service is also very different. Rental cars, whether self drive or chauffeur-driven, adhere to strict maintenance schedules to ensure driver and passenger safety. Vehicles are thoroughly checked before and after each rental and repairs are carried out as needed. It’s impossible for Uber to offer the same undertaking.
The quality of drivers for rental car companies is also vetted.
“Our chauffeurs undergo driver training, which includes advanced driving, driver etiquette, master drive, basic first aid and firefighting training,” says Motsatsi.
Schwartz offers a similar response.
“Uber does not offer the professionalism of a qualified, professionally trained driver with a skill-set that includes etiquette, advanced driver training and first aid, which are the minimum qualifications for a Hertz chauffeur driver,” she says.
That’s not to say that Uber drivers are maniacs on the road or that their cars are not roadworthy, but given the nature of the business model, there’s no way they can offer the same vehicle service standards. That being said, Uber says it doesn’t take the safety of passengers lightly. According to Allenberg, prior to Uber, many of Uber’s safety features did not even exist.
“Uber’s technology has paved the way for these trips to be as safe as possible,” she says. “Every trip is GPS tracked and we have dedicated incident response and law enforcement teams, as well as around-the clock customer support.”
This follows the news in February that Uber South Africa had partnered with multiple security response services in an effort to further ensure the safety and security of its drivers and customers. No doubt, this was in response to the bad press Uber received in South Africa in 2016, following a few disturbing incidents. According to Uber, these new partnerships will see security and medical services dispatched in emergency situations in a reduced time, in an effort to improve the safety for driver partners who use the Uber app.
Uber, though, are not alone in offering a service like this.
“The Hertz Emergency Rescue Option (HERO) is optional when renting a vehicle from us and comes as a complimentary value add when using our chauffeur drive or transfer services,” says
Schwartz. “HERO services include evacuation and trauma services, emergency medical transport (road and air) and access to a 24-hour medical call centre for the duration of the rental or service.”
From a corporate travel point of view, the issue of ‘duty of care’ has become increasingly important, with corporate entities now a lot more sensitive to their responsibilities, with regards their employees’ travel. With that in mind, it’s clear that this remains an issue for corporates when weighing up whether to go the Uber route or stick with the tried and tested car rental option.
Uber, it seems, is sensitive to this issue, and it would be no surprise to see more safety-conscious security initiatives from the ridesharing service in the future. That is, of course, if it would like to continue appealing to the business travel market.
TECHNOLOGY
Technology, of course, is the foundation on which Uber was built. The digital platform allows users to request a ride from a nearby vehicle through the app, making it easy and convenient to get around at short notice.
In its six years of operation, Uber drivers have logged more than two billion trips globally. The company entered South Africa in August 2013 and claims to have enabled over 4,000 economic opportunities since launching in the country. Uber says it facilitated one million trips in South Africa in 2014 and two million in the first half of 2015. All of which has probably forced the car rental companies to re-look their technological offering, particularly as it relates to that next generation of business travellers.
Avis has responded by developing a new app, something they feel meets the demands of tech-savvy customers. Basically, it seeks to simplify the car rental process.
Since launching in July 2016, Avis Now has been rolled out in the US, Europe and Australia, and it will soon be launched in the South African market.
The app, available for Apple and Android operating systems, allows you to complete the process of renting a car on a digital platform. Travellers can choose the exact car they want, confirm, change or cancel reservations, extend rentals, view rental agreements at any time, and return the car without assistance, all via the app. This means by-passing the queues at the counter to collect keys and sign paperwork. And when returning the car, it’s as simple as clicking a button in the app to terminate the agreement.
“Avis Now is outperforming our projections for downloads and usage, and producing satisfaction scores that set a new high watermark,” says Scott Deaver, Executive Vice-President and Chief Marketing Officer at Avis Budget. “This is a customer-driven innovation with a singular purpose: to make car rental easier. That vision will continue to guide the evolution of Avis Now, bringing features designed to make the rental experience increasingly fast, simple and satisfying, as its availability expands across America and throughout the world.”
Avis Now is compatible with all vehicles in the Avis US fleet, including 40,000 connected cars that enable further enhancements to the rental experience such as smartphone-controlled door locking and unlocking, and headlight flashing for easier car location.
WORKING TOGETHER
So, if you take into account the various views, the offerings are different, but can they work together? According to Uber, the answer is yes.
“We’ve already partnered with a few rental companies to bring vehicle solutions to driver partners,” says Allenberg. “In late-2015 we launched a short term rental programme, negotiated by Uber, that gives drivers of metered taxis or other passenger transport vehicles the option of renting an accepted vehicle at improved rates. They can then use these vehicles, in partnership with Uber, until they have built an earnings and quality record needed to qualify for a full maintenance lease programme facilitated by WesBank.”
An interesting initiative, but what about co-existing in the business travel space?
“Uber gives the car rental customer, and the public in general, a reliable alternative to traditional transport solutions,” says Lydall. “In car rental, Uber has the potential to compete, but currently the highly competitive car rental rates mean that Uber is only an economically viable alternative if the traveller is travelling for less than one day and is making only one or two relatively short transfers. Because of this, we see Uber as a synergistic addition to the market, offering an alternative to low margin one-day rentals.”
Hertz have a similar take.
“We believe that each product has its place in the market. While Uber might work well for a trip from the airport to the office, for example, car rental may be a better option if customers’ schedules are more demanding and they require more than a simple ‘here to there’ service,” says Schwartz. “Uber’s charges are based on time and mileage, and, depending on the time of travel, a surcharge also applies. With car rental, the cost of the rental is predetermined upfront.”
As always, time will tell, particularly as the various offerings evolve and the various players change tack to meet customer demand.
But, for now, it does seem as if the two parties are happily coexisting and servicing different needs in the market.
SAFETY CONCERNS
Uber received some negative press in 2016 around the issue of safety, particularly regarding female passengers. As a result, Uber has developed a suggested checklist for its customers:
- Know your driver – check that you’re getting into the correct vehicle with the correct driver, and verify the information given to you on the app
- Track your trip using the in-app GPS features
- Share your estimated time of arrival with friends or family
- Use in-app support
- Provide feedback – riders and drivers are able to rate each other post-trips. This helps to raise awareness of any issues to management level
ZIPCAR
Seeing the potential in the growth of the sharing economy, Avis invested $500 million in 2012 in the car-sharing company Zipcar. The service “offers convenient, affordable access to cars without the cost and hassle of ownership.”
There are one million members in over 500 cities and towns around the US, UK, Canada, France, Austria, Germany, Turkey, Belgium, and Spain, as well as over 50 airport locations. The fleet includes more than 60 makes and models, with everything from compacts, sedans, SUVs, minivans and convertibles to pick-up trucks, moving vans and luxury vehicles.
You can sign up using the Zipcar app and get access to over 12,000 vehicles. It shows you nearby cars and allows you to book the one that best suits your needs. The app serves as the key to the entire fleet. You can take your trip and bring the car back to its designated parking spot when you’re done. You can reserve by the hour, day, on-demand or up to a year in advance.
MERC ENTERS THE GAME
Avis isn’t the only company seeing value in the sharing economy. Mercedes-Benz launched a pilot car-sharing programme in Germany in December called Croove. Unlike BMW’s Reach Now, which offers only BMWs, Croove is open to anyone with any brand of car – private cars included. The app, available only for iOS currently, walks both owners and renters through simple sign-up and transaction processes that allow them to list their vehicles and find the right car for their needs. Users can either arrange an in-person key exchange or pick-up and delivery by the owner. The app includes a checklist to use when looking for damage after the rental is concluded. Mercedes is looking to develop a PIN-based keyless function to make the exchange even easier.
LUXURY CAR SHARING
Stirling Automotive, a luxury car rental company based in Cape Town, is one of the players in the innovation race in South Africa, embracing the peer-to-peer global revolution with a platform for luxury cars. It allows private owners to list their luxury cars for rental, while backing up the offering with comprehensive vehicle insurance, liability cover and 24-hour roadside assistance.
All parties are security vetted to ensure safety. It has an existing fleet of luxury vehicles with a guaranteed income programme for owners who do not want to manage the rental process, but still want to share in the revenue.
CAR-SHARING STATS
- Car-sharing revenue is expected to grow from $1.1 billion in 2015 to $6.5 billion in 2024 (Navigant)
- 23.4 million car-sharing members are forecast for 2024, up from 2.3 million in 2013 (Navigant)
- 200,000 car-sharing vehicles are forecast for 2020, up from 55,000 in 2013 (Navigant)
- 66% of the world’s population will live in cities by 2050 (UN)
5. Cars are only in use about 5% of the time, with the rest of the time spent parked (fortune.com)