Why revenue management helps you optimise your car rental revenue.
When speaking of neglected areas in rental management, we cannot fail to highlight revenue management.
“The president of Rate-Highway, Michael Meyer, surmises that the perceived complexity leads many charterers to neglect what is instead a fundamental process.“
Revenue management was born for application to specific sectors and later expanded to the car rental sector. That is why this business meets many of the parameters required for the application of revenue management.
One of these requirements is, for example, the criterion of perishability: this is applicable when the sale of the product/service has a short expiry date and is therefore calculated daily and not on general sales.
In the case of car rental, we speak of rental days: rental days that are sales per vehicle. The aim is to sell as many rental days as possible in a year. To do this, you need to keep an eye on demand which, for instance, can vary according to seasonality.
You can accomplish this by implementing a series of well-thought-out price changes that do not result in devaluing the product; on the contrary, it will make it most attractive to a given type of demand at a given time of year or season. Another requirement concerns the need for advance or pre-booked purchases. Therefore, it is possible to make purchase forecasts.
There are many systems and software to manage revenue, but this process is often greatly neglected. We must bear in mind that good revenue management accompanies companies toward long-term success.
How to keep everything under control?
Probably the main difficulty concerns the choice of parameters and metrics to be analyzed to structure a strategy. The rental company produces a multitude of data, and some of these seem very important and positive for us.
In reality, they are just vanity metrics: we are happy to see them going in the right direction, but they don’t give us any information on how we are optimizing revenues.
Metrics to be considered must respond to the following characteristics: measurability, simplicity, comprehensibility, and overall relevance.
What to base it on?
Mainly on market and company data by relying on specific reports.
MyRent, for instance, provides analytical reports on costs and revenues, which are detailed and easy to read.
In addition, MyRent also offers the possibility of integrating the management system with Amazon Quick Sight: a cloud service that allows data to be customized, grouped, and shared with all employees so that it can be analyzed and discussed effectively. Other reports that may be of interest, and that can easily be consulted via MyRent, are those on sales data and product availability.
To conclude, another frequent mistake is keeping the department dealing with inventory and the department dealing with pricing per period separate. Everything must work in an integrated way: pricing decisions made independently of fleet availability and customer demand will probably delay revenue generation.
Therefore, everyone should have access to metrics, data, and key performance indicators (KPIs) because everyone’s possible contribution could be beneficial in determining the strategy.
One must never forget that the training and involvement of one’s employees – one’s team – are central to defining the right revenue management strategy and carrying it out successfully.