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Are Lost Rental Days Eating Up the Profit of Your Car Rental Business?

It is a general perception that running a car rental business is just about renting out vehicles and upselling services related to them. In reality, the cars and additional services serve the product that the operator deals in — rental days. To run a profitable business, operators must maximise the number of rental days they sell. Lost rental days are not just lost opportunities, but also a loss of revenue and cut down on profits.

Now, you might be wondering: What exactly are rental days? What do lost rental days mean? How can rental businesses avoid them? Let us explain.

Understanding rental days

Just like a hotel sells room nights, a car rental company sells rental days. In simple language, the rental days of a vehicle are the number of days it is available for rent. So, if you have one car that is available for one day, you have one car rental day to sell. If you have a fleet of 100 cars available for a day, you have 100 rental days at your disposal, and so on.

The success of your rental business highly depends on your ability to sell maximum rental days. As a rental company, you have to keep two aspects in mind: one, managing your fleet so that each vehicle is available for rent on every possible day; two, the actual ability to sell the rental days.

However, expecting 100% utilisation of every vehicle of your fleet might be overly optimistic, given that external factors also affect operations. You have to make an achievable prediction on how much you can sell in a given timeline, say, in a month. These will be your targeted rental days for sale. Once you are able to set that right, you can proceed to profitably price your rental days and devise your sales strategy accordingly.

What are lost rental days?

A lost rental day is when you fail to rent out a vehicle for an available rental day. Consider that your pricing strategy has been based on the prediction that you will be able to sell 100 rental days in a week, but you managed to sell only ninety of them. The remaining ten days account for your lost rental days. Why do businesses lose rental days, though?

Perhaps the car broke down on the way back to your garage or took a day longer than expected at the service station. Or maybe a client sent in their requirements at the end of the day, and it was not possible to arrange a pick-up or drop-off at such short notice. In such cases, you end up losing days despite the demand for the rental vehicle.

How do you make up for lost rental days?

Lost rental days are perishable in nature, which means they cannot be regained in the future. Still, that does not mean you can’t make up for the revenue loss. You can recover your losses with a robust contingency plan in place. Plus, even if you have managed to meet your target and did not incur any loss in rental days, such strategies will add to your profit anyway. So, what are some strategies you should consider?

  • Focus on incremental sales: Upsell add-on services or products that a client may not have intended to purchase in the first place. Add-ons not only enhance the client’s experience but also become another source of revenue for your company.
  • Set daily targets and track them: Tactfully devise your daily sales targets in a way that allows you to achieve your intended profit levels and keep an eye on the progress your team is making. If a particular day did not turn out to be as successful, put in extra effort to make up for it in the coming days.
  • Increase the number of rental days: Keep an eye for opportunities and roll out special offers and discounts when you can to encourage customers to rent a car for an additional day or two.
  • Integrate a car rental management software: Car rental management software simplify the process of tracking sold rental days, creating business reports, calculating daily averages, and generating sales insights. You can also analyse your monthly performance, from the good days to the bad, and strategically approach the next month to earn more profit.

In conclusion: Take one car at a time

Whether you are beginning your business with a single car or already have a fleet of vehicles in place, remember to pay individual attention to each car, keeping track of its maintenance, allocation, location, and safe return to your garage. A vehicle in good condition will help you avoid lost rental days caused by damage or breakdown. At the same time, take some time to build personal connections with your clients before you rush into converting leads. Such an approach will aid you in creating sustainable, long-lasting customer relationships and credibility in the market.

Mauro Chiarugi

Mauro Chiarugi

CEO of Dogma Systems

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