Olympic Car Rental - Case Analysis

[pic 1]The U.S. Car Rental Industry

• A service based industry
• In 2009 total market revenue for the rental car business industry fell 6.5% from 2008
• Revenue was up by 2.5% in 2010
• In 2011 – 12 the growth rate went up to 2-3% per year

Markets

Airport Rentals

• Dominated by major brands
• Have to pay concession fees as well as fixed fees
• Early mornings and late night collections

Local Rentals

• Local offices including car dealerships and repair shops
• In 2002 there were nine national car rental companies
• By 2012 there were just four major national car rental companies
• High level of competition
• High entry barriers

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Customer Segments

• More likely to rent a compact car
• Likely to earn points during business trips and spend in leisure trips

Refer: Table A (Original source)

Olympic Rent-A-Car

• Car rental business – Value player but not a strong player
• Lower prices than Hertz
• Struggling to compete with competitors
• Do not hold a large market share
• Customers are not loyal to their business

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Enterprise Rentals

• Big player in off-airport rentals
• Planning to increase its presence in business traveler market
• Approximate coverage of within 15 miles at 90% of populations
• New customer loyalty program – attracted business customers – gaining popularity

Problems

1. Recent implementation of new customer loyalty program by Enterprise Car Rentals
2. Difference in Olympics’ and Enterprises’ loyalty program – Rental days to credit earning, and dollars spent to point earning (respectively)
3. Slow growth of business car rental’s market
4. Technology development – Increasing web based conferencing (decline in business car rental market)
   

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Recommendations

[pic 5]To compete against enterprise and other competition, Olympics should talk the following steps

1. Premium Service Provider

• Olympics should target upper class of renters and offer “Premium Services”

• Free pick and drop (from airport)
• Zero Black out (days when demand is greater than supplies for e.g. public holidays)
• Luggage handling over to air travelers at airport

• Bronze members should be invited to join premium services – they are active and 11 times more than gold club members
• Split its fleet (30% for premium services and 70% for regular services)

1. Partner with Independent companies, mobile / coupon companies

• It is ideal to target and takeover local and small rental services that are working in the area in order to increase its fleet size and revenue
• Olympics can create a network of independent car rentals, smaller firms and giving it a great customer base and convenience
• Consumers are becoming tech savvier and increasingly becoming comfortable with online transactions and third party agencies

• Online sales of leisure and business travels increase by more than 20% in 3 years ($90 billion in 2009 to $119 billion in 2012)
• 58% of business travelers booked their travel online
• Emerging trends such as mobile devices and online coupons are attracting further customers online

• Early partnership with mobile companies, and online coupon companies can make Olympic capture the market before completion enters

1. Adopt dollar based reward system

• Moving to dollar based reward system will incentivize business customers to spend more
• Heavy business travelers are a good target for higher consumer level
• Business customers pay higher per trip – moving to dollar based strategy will incentivize customers to earn higher reward, at the same time, higher spend by customers can make up for additional revenue for extra trip