1 Sept 2022 | 4 min read
It’s a well known fact that the car rental industry is booming. A prediction is that the market will grow from €50.34 billion in 2020 to €137.21 billion in 2027 at a CAGR of 6.7%!
This growth is due, in part, to the increasing popularity of contactless and keyless technologies. These technologies are making it easier for people to get around, since 82% of customers affirm that the availability of contactless experience from businesses is important and easy to use.
This means that customers will be able to rent cars without exchanging keys before or contact the rental company directly, tapping into the need for convenience and time-saving solutions that is drawing customers to keyless rentals over traditional ownership.
Implementing a contactless and keyless strategy within your car rental business can help you improve customer satisfaction and operational efficiency, digitalisation is the latest innovation to give a boost to your rental business!
A recent study by KPMG found that, just in the US, the number of vehicle miles traveled (VMT) dropped by 64% in 2020, the first time this number has dropped in 30 years. This sudden drop in VMT is driven by a variety of factors, including the COVID-19 pandemic and the resultant change to working from home that many across the globe have gotten used to.
With people working from home and avoiding public transportation, there’s simply less need for cars.
It works out that in EU and UK between 2021 and 2022 car purchase and ownership dropped to a level of 11.7 million, about 25% less than in the previous year and the lowest number since 2001. Also, with the Covid recovery, rentals began to have serious difficulties in supplying vehicles, due to the severe microchip crisis that brought production to a standstill.
Going into 2022, both new and used vehicle price indices were at an all-time high. Coupled with the rising price of gasoline, it’s no wonder people are reconsidering buying and owning a car, and that rental companies had to raise the rental prices because of the trouble in finding vehicles.
Car production is also an issue, with supply lines critically compromised by the impact of the pandemic. Many manufacturers have run into significant difficulties sourcing parts from suppliers for their most profitable models. These supply chain issues, combined with the rocketing cost of freight shipping have only added to the rising cost of car ownership.
The current situation has made it clear that the traditional model of car ownership is gradually becoming untenable. People are increasingly turning to alternative methods of transportation, something that won’t waste too much of their time and will make travel simple, comfortable, and less time consuming as possible, like digitized rental.
As we pointed out at the beginning of this article, the rental industry is expected to grow rapidly out to 2027. However, in order to take advantage of this growth, the traditional car rental business is not enough.
The first step is to slowly restore the heavy losses incurred since the beginning of 2020. Evidence shows that two thirds of Avis rentals at airports have closed and Europcar has decreased its 2020 revenues by 42%, and these are just a few numbers!
When tourism started to heal in 2021, prices for renting a car skyrocketed. But, why?
💡 The graph below shows the sharp increase in rental prices in the pre- and post-pandemic summer:
Halfway through 2022, some rental companies still don’t have enough cars for the huge demand coming from the post-covid recovery.
Not only is there high demand, but the needs of users have changed too. People after Covid have started to adopt more preventive measures, avoiding overly close contacts or queuing in overcrowded places. Rental front desks at airports, for example, are the perfect picture of what the user of 2022 wants to avoid.
Here is where the alternative option arises.
Contactless rentals are the turning point to slowly heal this situation and start giving users what they want. A seamless, peace of mind, and fast renting experience.
Many car rental services have ended up with big financial losses also because they provide an out-of-date experience. Long and cumbersome waiting times, clogged front desks in high season, and little organization for user needs.
According to XM Institute’s annual net promoter score benchmark study, the car rental industry’s average customer net promoter score is 5 (out of a maximum of 100). Definitely not enviable.
The opportunity for rental operators must grow on the innovation side, adopting innovative business models and offering a connected and keyless rental model to tackle outdated ones.
Established industry giants, such as Enterprise Rent-A-Car, The Hertz Corporation, Sixt SE, Europcar, and Avis Budget Group have already launched car rental apps in an effort to keep up with the competition and better meet customer needs.
In order to adequately meet the ever-changing needs of the modern consumer, the call for connectivity of rental fleets and the digitisation of the rental process are essentials for this quality leap.
Connected cars have greatly helped consolidate the car rental business, enabling service providers to track fleet usage and manage maintenance while also improving customer experience.
The core focus is that to compete in today’s market, rental operators need to innovate. Innovation in the sense of adopting a contactless and keyless strategy in a car rental business comes with several benefits.
The hard blow of Covid has left scars which need to heal slowly. Tourism and business travel are getting back on track and the rental industry is directly affected by this.
People’s habits have changed, and to heal these wounds and provide a new user experience, investing in technology and innovation is the way to go.