Mobility Research

Adding car sharing to your car rental business

[fa icon="calendar"] 19 Jun 2019, 14:33:51 / by Mobiag


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car sharing on vacation

Businesses, whether they are in the mobility industry or tourism, are constantly looking for new sources of revenue. If you own a car fleet, you can increase its utilization rate and create an additional revenue source for your business by adding car-sharing service. The operational and business changes required will be mitigated by the software, as most advanced business software enables you to manage car sharing and car rental models, and the mix between the two, under one hood.

In this article, we will look at tourism industry as one example where car sharing can be easily added and can generate additional revenues for more traditional tourism agencies, as well as, for mid-size and boutique hotels. Bigger hotel chains have partnerships with bigger car rental companies, sharing profits from sales. However, most small to mid-size hotels own a fleet of vehicles that they rent to their visitors. The utilization rate of such fleet might be significantly affected by seasonality and other factors according to location. When it’s high season, the revenue stream from the car fleet might be steady, but off-season cars remain mostly grounded. Adding car sharing option will help you acquire more customers during the season and put those cars to work when the number of visitors might not be so high.

Most smaller to mid-size companies are careful when implementing a new business model. However, adding car sharing option to the existing car rental operation is easy. The software handles most of the workload for you, the change in operational management is almost unnoticeable.

If you are already running a car rental operation with your boutique hotel or tourism agency, it’s easiest to start with station-based car sharing. As you already have one-station, most likely the hotel location, you will just need to strategically choose several locations around the city. These locations are most likely already suggested by you to your visitors. For example, if you are running a summer vacation facility, this would mean  several parking spots near the beach.

Adding car sharing option to your tourism and hotel services not only makes it easier to acquire customers offseason but also to acquire customers that might not be staying at your hotel or using your tourism agency. Strategically choosing tourist attraction point might significantly boost your revenues. A rising trend in tourism is guided tours by locals, where some companies sell ‘unique tours’ beyond traditional tourist attractions or serve as marketplaces for such tours by locals. Such tours are a great source for your car sharing operation. AirBnb and GetYourGuide both offer such “experiences”. Careful analysis of such tours and their locations might provide you with new opportunities beyond highly competitive traditional tourist sights. While free-floating operation might be more successful in such cases, careful selection of parking spaces (stations) could easily provide the same effectiveness.

car sharing on vacation

Operational change

There are some operational differences that will be made to your business as you add car sharing to your car rental business. Booking times is one such difference. With traditional car rental operation, you are able to predict in advance the bookings, as customers usually book their vehicles several days in advance. Car sharing operation is all about last minute bookings, at the customer’s convenience. The predictions with such operation are more dependent on data analysis and location demand analysis. However, advanced car sharing or car rental management software doesn’t distinguish between these two models.

If you have a vehicle available at your station, it can run several models at the same time – a customer can book it for several hours or days or can book it without pre-defined hours and pay per minute/per kilometer. Not only does the car sharing management software enable you to add a new model, but it also allows you to streamline and automate you existing car rental operation through a mobile application and easier customer and trip management in the back office.

You can also combine the two models on the go and offer customers to switch from one model to another. This particularly concerns the fee structure. For example, if a user books your vehicle for an undefined time and is being charged per minute, you might want to switch the pricing model to match lower fees of an extended trip as in car rental model. That is after the customer has used your vehicle for more than several hours (defined by you) you can start charging per hour, rather than per minute. Again this can be done by the software, without you manually changing it, all you have to do is define such business rules in advance.

This allows you to offer superior service and mitigate some of the operational costs. The crucial point is to communicate such fee change in advance. This allows the customer to continue usage of your vehicle, without being anxious of being overcharged over an extended period of time. It also gives them the confidence not to rush and not think constantly about the pricing. In this way, it serves as a no-pressure “trial” option for a visitor who might not be sure how long they might not need a vehicle. The convenience of having the two interchangeable models at the same time is a customer delight. This in no way affects your longer or whole day car rental packages. If such changes are anticipated, you are not protecting yourself by not offering car sharing service, but allowing competitors to eat into your revenues. The change in pricing model is automatically reflected in the invoicing, making it transparent to the customer at the time of billing as well.

car on vacation

Another important difference in operations is key collection. Traditional car rental companies usually relied on key collection at their stations. However, most companies are now switching to keyless access to the vehicle through their mobile application. Keyless access is a convenience that customers expect these days, and whether you run just car rental company or a combination of the two models, it’s something that you should implement. Same can be said about registration – traditional car rental companies usually relied on paper-based registration (and then key collection). Customers expect now to be able to register through an app and start using a vehicle soon thereafter. Nobody wants to stand in line for registration. You car sharing software doesn’t differentiate the registration process of the two models, as essentially it doesn’t matter to you whether your customer is going to use car rental service or car sharing service. All information and communication are (or should be) exchanged through the app anyways.   

There are numerous advantages to adding car sharing service to your already existing car rental model. Most importantly, you will able to add additional revenues, increase your customer base and utilization rate. Since most changes are mitigated by the software, the cost and effort of such a change are minuscule. By not providing car sharing service, you might be risking cannibalization of your income by local mobility service providers and competitors.


Topics: car sharing

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