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How Are Car Rentals Changing Due To Digital Channels? Not As Fast As You Think

@rafat

Mar 03, 2014 9:00 am

Skift Take

The world of traditional car rental booking isn’t changing as fast as you would assume in a world rushing towards digital and mobile. Is that a function of these companies’ hesitancy to embrace these open channels and protect their turf, or is the slower pace of change a real reflection of the car rental consumers?

— Rafat Ali

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Waymond C  / Flickr

Increasingly, car booking is happening online, though travel agencies are holding steady. Waymond C / Flickr


While all the attention of tech cognoscenti is on the sharing economy — and rightly so as the new local transportation startups and service continue to change the face of urban centers across the world — the fusty old world of traditional car rentals is changing because of the rise of digital, though not at the pace you would think.

That’s the main takeaway after pouring through the last eight years of SEC annual report filings for the two remaining public companies in car rental market, post-consolidation: Avis Budget Group and Hertz Holdings.

The chart below is a look at the two companies’ SEC filings and their numbers about changing reservations channels for them, split traditionally between travel agents, online, phone and other channels. And some observations based on that chart/data:

  • Direct online brand site bookings are peaking at about 30% in car rentals.
  • This above could be interpreted couple of ways: that these companies haven’t done enough in digital to make their brand websites more usable, and/or market them in a better way.
  • Or, that these companies realize how important GDS/travel agent booking still are (managed or unmanaged), and they don’t want to mess with that cash cow.
  • Travel agents (using the GDS systems) are holding steady for last six years in car rentals, at about 30% of all bookings, SEC filings of public rental cos show.
  • For Avis-Budget, about 7-10% of its bookings are coming through online travel agencies like sites in the Priceline family, Expedia, and others.
  • For Hertz, that share of online travel agencies is higher and stood at about 15 percent in 2012, and is rising. Its acquisition of Dollar and Thrifty brands, both of which have historically relied on the Internet as the primary source of its reservations, means that percentage will only go up.
  • Phone reservation centers are becoming a thing of the past, and it is the fastest falling channel of reservation for these companies, though it has fallen more for Avis-Budget than it has for Hertz.
  • Avis-Budget started breaking out reservations coming through its direct-connect technologies, the only one to do so, and that stands at about 12 percent as of the end of 2013. These are direct connections that airline sites are using to pull in car rental inventory and booking on to their own sites.
  • Hertz breaks out reservations coming through local sources, which could be local tour agents, among other sources, and that stands at a small 5%-6% yearly.
  • Neither of the two companies are breaking down their mobile bookings yet, but that’s a small part of booking origination as of yet. For now, it is managing the booking on mobile.

Douglas Quinby, PhoCusWright’s vice president of research, believes the trends are less about car rental companies favoring one channel or another, and are more about economic trends and airlines limiting capacity.

“I think one issue has been the recession,” Quinby says. “Air passenger volumes have not risen much since 2009, and a big piece of leisure transient business that comes online and through airport locations has not grown.”

At the same time, the corporate business, which primarily is from travel agencies and global distribution systems, “has been strong,” Quinby says.

Distribution of Car Rental Reservations by Channels

Year Avis Budget Group Hertz Holdings
2013 30% of rental reservations through brand-specific websites (Avis, Budget, Budget Truck, Payless and Apex), 12% through contact centers (phone), 28% through GDSs, 7% through online travel agencies, 12% through direct-connect technologies and 11% through other sources. All of Zipcar car sharing reservations were generated online or through apps. N/A yet
2012 29% of reservations through Avis and Budget branded websites, 12% through contact centers, 28% through GDSs, 9% through online travel agencies, 9% through direct-connect technologies and 13% through other sources. About 32% of the worldwide reservations came through travel agents using GDSs, while 30% came through its websites, 17% through phone calls to its reservations center, 15% through third‑party websites and 6% through local booking sources and tour reservations. Its Dollar and Thrifty brands have historically used the Internet as their primary source of reservations, it expects the percent of reservations that come through the Internet to increase as a result of its acquisition of Dollar Thrifty.
2011 31% of reservations through Avis and Budget branded websites, 8% through contact centers, 30% through GDSs, 6% through online travel agencies, 14% through direct-connect technologies and 11% through other sources. About 33% of the worldwide reservations came through travel agents using GDSs, while 30% came through its websites, 20% through phone calls to its reservations center, 12% through third-party websites and 5% through local booking sources.
2010 Bookings over the Internet accounted for 36% of Avis’ 2010 domestic rentals, with 28% derived from bookings on avis.com, and for 54% of Budget’s 2010 domestic rentals, with 31% derived from bookings on budget.com. 47% of ABG’s domestic car rental reservations was through 3rd-party distribution channels, which include traditional and online travel agencies, airlines and hotel companies, marketing partners such as credit card companies and membership organizations; and GDSs. In 2010, about 18% and 2% of its domestic car rental reservations came through its largest GDS source and its largest non-GDS third-party source of reservations, respectively. About 32% of the worldwide reservations came through travel agents using GDSs, while 30% came through its websites, 22% through phone calls to its reservations center, 11% through third-party websites and 5% through local booking sources.
2009 Bookings over the Internet accounted for 51% of Budget’s 2009 domestic reservations, with 31% of reservations derived from bookings on budget.com. Bookings over the Internet accounted for 34% of Avis’ 2009 domestic reservations, with 26% derived from bookings on avis.com. 45% of its domestic car rental reservations was through 3rd-party distribution channels; see channel descriptions above. In 2009, about 17% and 2% of its domestic car rental reservations came through its largest GDS source and its largest non-GDS third-party source of reservations, respectively. About 31% of the worldwide reservations came through travel agents using GDSs, while 23% came through phone calls to its reservations center, 31% through its websites, 10% through third-party websites and 5% through local booking sources.
2008 Bookings over the Internet accounted for 55% of Budget’s 2008 domestic reservations, with 33% of reservations derived from bookings on budget.com. Bookings over the Internet accounted for 35% of Avis’ 2008 domestic reservations, with 28% derived from bookings on avis.com. 45% of its domestic car rental reservations was through third party distribution channels; see channel descriptions above. In 2008, 19% and 2% of its domestic car rental reservations came through its largest GDS source and its largest non-GDS third party source of reservations, respectively. About 32% of the worldwide reservations came through travel agents using GDSs, while 25% came through phone calls to its reservations centers, 29% through its websites, 9% through third-party websites and 5% through local booking sources.
2007 Bookings over the Internet accounted for 52% of Budget’s 2007 domestic reservations, with 32% of reservations derived from bookings on budget.com. Bookings over the Internet accounted for 32% of Avis’ domestic reservations, with 25% derived from bookings on avis.com. In 2007, avis.com reservations grew by 16% and budget.com reservations grew by 10% over the prior year. About 32% of the worldwide reservations came through travel agents using GDSs, while 27% came through phone calls to its reservations centers, 27% through its websites, 8% through third-party websites and 6% through local booking sources.
2006 Over 49% of Budget’s 2006 domestic reservations were derived from bookings over the Internet, with 30% of reservations derived from bookings on budget.com. Over 28% of Avis’ domestic reservations were derived from bookings over the Internet, with 22% derived from bookings on avis.com. In 2006, avis.com reservations grew by 11% and budget.com reservations grew by 8% over the prior year. About 34% of the worldwide reservations came through travel agents using GDSs, while 30% came through phone calls to its reservations centers, 25% through its websites, 7% through third-party websites and 4% through local booking sources.

Source: SEC filings

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