Page 4 - Fortune-November 01, 2018

R E I N VE NTI N G TH E R E NT AL CAR

turn on the ignition. You’ll drive off without stock down by more than 50% over the past
having to go through yet another line at the three years. (Enterprise is privately held.)
don’t-back-up-or-we’ll-puncture-your-tires Profit margins are stagnant, and new compet-
exit gate. And that’s if you go to the lot at all: itive pressure is coming from all sides: Ride-
Someday, the rental agency may send a self- hailing services like Uber and Lyft are wooing
driving car to pick you up at your terminal. rental companies’ business customers, and
“In the future, we don’t need to see you at big automakers are contemplating a future as
the counter,” says Avis Budget CEO Larry De “mobility companies” that rent cars directly
Shon. Every big rental-car company is taking to consumers. “In next five years you’re going
steps in this direction, but Avis, the smallest to have Google, Uber, Avis, Hertz, and Ford
of the industry’s “Big Three” by U.S. mar- all in the same business,” says Neil Abrams, a
ket share (behind Hertz and Enterprise), is veteran car-industry analyst.
making the most concerted effort to update For Avis, it adds up to an evolve-or-die
its 600,000-vehicle fleet—and protect its moment, one in which its rivals will be just as
$9-billion-a-year business from obsolescence. aggressive (indeed, Hertz had a Lyft partner-
In the past 18 months, Avis Budget, which ship before Avis did). “This isn’t one where we
owns those two namesake brands along with can sit back for the next 10 years,” says chief
Payless Car Rental and car-sharing pioneer innovation officer Arthur Orduña. “We don’t
Zipcar, has struck one partnership after an- have a heck of a lot of time.”
other with Big Tech’s boldface names. In June
2017 it landed a deal with Waymo, Alphabet’s VIS HAS BEEN AHEAD of the curve on
autonomous-vehicle division, to manage its many occasions since its debut.
growing fleet of self-driving cars. Soon after, A The company was founded in
it teamed up with Amazon and Google so 1946—well before air travel went
customers could use voice tech to make or mainstream—on the idea that
change reservations. And this August, Avis rental cars should be available at airports. In
announced it would begin renting thousands 1987, Avis was the first rental-car company
of cars to Lyft drivers. CEO L A RRY to introduce a key-drop return process that
Underlying all those partnerships, there’s a DE SHON IS bypassed the counter; in 1996, it was the first
bigger project at Parsippany, N.J.–based Avis: P USH I N G to offer online reservations.
an endeavor to connect the bulk of its fleet to TO G E T AL L But in recent years, being the Most Innova-
the Internet by 2020. That’s a more aggressive 600 , 000 tive Rental-Car Company has been like being
deadline than any of its rivals have embraced. the Fastest Turtle. The Big Three have a com-
And it’s no small task for a company that of- CAR S I N bined 94% share of the $30 billion U.S. rental
fers 250 different makes of vehicles, scattered TH E AV I S market, but that dominance hasn’t trans-
across almost 4,400 locations in the Ameri- BU DG E T lated into pricing power. The giants all offer
cas alone. But it’s an urgent one, because car FLEE T vehicles from the same carmakers, so they
connectivity is a cornerstone of the industry’s C O NNE C T E D struggle to differentiate themselves. Income
efforts to keep up with the automobile sector’s TO TH E from incidentals like GPS and toll-paying de-
dramatic changes. IN T E RNE T vices has waned, even as those add-ons have
That hassle-free airport experience, for BY 2 0 2 0 . annoyed customers. The upshot: IBIS World
starters, depends on connectivity. It’ll help expects the industry’s U.S. revenues to grow
Avis wring more revenue out of its cars by just 2% annually through 2023, far slower
increasing their time in service, cutting main- than the broader travel industry.
tenance costs, and pitching ads and services Avis hasn’t been immune to the malaise.
to drivers. Above all, connectivity will provide In 2010, the company earned $41.70 per car
the infrastructure to support more self-driving per “rental day,” by 2017, that had fallen to
cars—a technology that will inevitably shake $40.03. None of the rental companies scores
up the rental industry. well on customer surveys, but Avis ranks
Shareholders would certainly like to see a slightly below its rivals on that front. That
shake-up: They’ve driven Avis’s and Hertz’s makes its tech reinvention that much more

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