The Auto Rental Industry 1996
The Phoenix Rising from the Ashes?
Reprinted from the ACRA Report – Newsletter of the American Car Rental Assoc., July 1996
by Neil Abrams
Neil Abrams Associates
I want everyone reading this article (assuming of course, that you’re involved one way or another in the business), before you continue any further, to get up out of your seats and take a standing ovation! Go ahead, don’t be embarrassed, you’ve earned it.
Now relax. Sit down and read on. After the past few years of auto rental executives, operators, and the industry at large getting trashed, ostracized, and ignored, we’re finally gaining some respect. Is it because auto rental has become the cash cow that many believe it once was in the 70’s and through the mid 80’s? Probably not, although financial performance of the industry in general, domestically and internationally, has been steadily improving. Is it because the heyday of the candy-coated manufacturer turn-back programs have come and gone (although not entirely) and auto rental operators, large and small, have been forced to make money the old fashioned way? As John Houseman used to say for Smith Barney, “they must earn it.” The reason for the new found respect is that we’ve simply been forced to get better at asset management, yield management, market development, and customer service. We have further refused to accept the notion that auto rental is nothing more than a commodity business, and companies have developed character, personality, and identity.
So why do I maintain that the auto rental community is facing the new millennium on the upswing, and we no longer have to feel the need to apologize for the business we are in, and in fact, we can be proud of it? Among the barometers that I use to read the industry landscape is the number of calls I get from business and travel journalists from around the world who want to know the who’s-doing-what-to-whom in the business. What are the trends? Why are certain decisions being made? What can the renting public expect to pay and what services can they legitimately demand in the future? Lots of questions to a reluctant industry which always appears to be looking over its shoulder (but that’s another subject for another editorial). Believe it or not, we’ve become interesting once again, and the public and business community want to know what’s going on. Why is it, for example, that of the top eight major auto rental companies in the country, with the exception of Enterprise, each company has either been acquired, been put up for sale, been considering a sale, or has had a change in ownership structure in one form or another … and all of this occurring within the past three years? Extraordinary! There’s been action among the majors, mostly positive, and that’s what the business world likes to see.
Another measurement gauge that I use to determine perceived industry respectability is the number of calls I get from vendors, suppliers, and service organizations who are presently selling into the industry, or would like to. In my 15 years as a principal of a specialized consulting firm, the number of these calls that I am receiving is currently at an all time high. They are coming from technology companies, finance companies, real estate companies, risk-management related firms, and vehicle remarketing outlets to name a few. They all seem to see a big up-side opportunity to establish a foothold today in a growing revitalized industry which has global development possibilities. Who am I to argue with them?
The bottom line folks, is that I’M BULLISH! There, I’ve said it; but it’s not due to what I feel, it’s what I see. We’re better and smarter than we were not too long ago, having learned from adversity. We have confronted the ultimate truth and reality that the reason we are in the business is to make a fair buck for all of the effort and risk that it takes to be in the game. And you know what, we’re getting a lot of attention, and a lot more respect as a result.
Hope you enjoyed the standing ovation – but not too much. A mentor of mine back from my Hertz days used to say that if an observer stands still long enough, he will see the auto rental business come full cycle and history will repeat itself. I hope not. We’ve come too far. There’s more to be done, obstacles and challenges that must be overcome, but I think, this time, we get it!
Neil Abrams is President and founder of Neil Abrams Associates, Inc., a management consulting firm established in 1982 to provide specialized support and counsel to primarily independent auto rental ownerl operators and licensees of major systems. He is considered a leading independent expert on the auto rental business. Mr. Abrams can be reached at (914) 696-5100.