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3 steps to implement a hassle-free Yield Management strategy in your car rental business

Implementing a revenue management methodology or tool is often seen as pretty complex and adapted only to large corporations with a lot of resources; either technical or human. True or false?

Emmanuel Scuto
June 15, 2021

False! And guess what? The main problem is not about your size or your technical expertise… It’s about you, your state of mind! I mean: do you permit yourself to think like an expert? Are you willing to invest time and give up the “secured old recipes”? And the good news is that it’s up to you to make a difference!

1- Decide to change the organizational structure of your optimization

The main first question you will have to ask yourself is “Do I really want to be successful?” It seems to be an obvious question but the answer is not that clear. Otherwise, all car rental companies would already have implemented yield management techniques like the airlines' companies or hotel chains did decades ago. Why did they not?

So first, it is important to admit that the way you have been doing over the last years is good but no longer sufficient to be successful. Otherwise, you would be already with the best performance ever. Most car rental owners are frustrated with the discrepancy between the level of information they have and the level of information they would like to have to increase their performance.

Secondly, you have to admit that the way you have been doing over the years can not continue. You feel more under the control of the business than driving it. The reservations are coming later and later at a cheaper rate. Simultaneously, the car manufacturers keep their cars for their direct sales channels and increase the holding cost of each unit sold to the car rental segment. This creates a scissors effect: more business at cheap(er) revenue per day with high(er) capacity costs to serve it!

2- Think big and the positive energy will emerge

have recently watched an Arte documentary talking about a huge decision that was taken by the Swedish government in the early ’60s. They decided to change the way the cars were driven and flip all cars from the left side of the road to the right side of it. At this time, Sweden was the only mainland European country having the steering wheel on the left and driving on the left too. 

The goal was clearly defined by the Swedish authorities in 1963: as of the 3rd of September 1967 at 4:00 am, all drivers will drive on the right side of the road. Can you imagine the changes in all the drivers’ minds, all the habits to unplug and replug? The task was huge as driving is even not a question of habit but a reflex. It is so engraved into our brain (system 1) as we do not even think anymore about what to do. We simply do it.

Then it took four years for the government and the administration to prepare for the change: educate the drivers, communicate intensively on what will change and how to get prepared, invest money in producing new street signs, and on the floor paintings. All aspects were precisely planned to guarantee the transformation to be a success. And it could not be any other way as human lives were in balance.

After this long, big and detailed preparation, they went live. During the night of the 3rd of September 1967, they removed all covers on the new signs, all plastics on the street paintings to display the driving signals with the help of Administrative staff, Army servants, and Volunteers engaged in this switch. During the night at 3:50 am, all the cars that were driving were asked to stop where they were. At 4:00, policemen gave the signal to cross the lane and drive on the right side. On the following morning, all drivers slowly took the habit to drive on the new side of the street with few difficulties. How different it must have felt for Swedish drivers the first time they drove this new way?

3-Prepare your revenue management transformation

There are a lot of similarities between this Swedish plan and the decision for a car rental owner to implement a successful revenue management strategy. They can be summarized as follows:

  1. decide to change and accept full responsibility for the decision
  2. Focus on what you want and not on what you do not want. 
  3. Get prepared with a transformation plan and be assisted by an expert to avoid mistakes and implement faster
  4. onboard all stakeholders as a company project: select staff members to manage the project and communicate to others but also to clients and suppliers
  5. Go live on the d-day during low season and test small results during a small event (like Spring vacations for European countries)
  6. Measure performance and adjust what needs to be changed

Every negative thought related to the decision or the project (like ‘not possible to achieve’, ‘to buy at this price’, ‘not possible to install’) creates the conditions not to make it. While if you determine that you can do it, you send energy ahead to pave the highway and set up the response to get it done because you tell others how to think. It is simple as the law of gravity.

You could also say or let your little voice whisper: “what about my environment? my competitors?” Yes, it is a common thinking and it is called resignation. Because if you do not change, it becomes the background like it has always been. You have the choice. But you can decide to start, to copy what has been a success to the other companies who did it before you. The success will come as the Swedish drivers completed their switch with great success. 

It is not magic. Successful revenue management is a process, an approach to conduct the business.

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Emmanuel Scuto

Expert in Revenue Management and Pricing in the Car Rental industry for 20 years, I aim to share my optimization experience with our customers throughout the world. I am specialized in revenue maximization, pricing strategy, yield management, reporting based on AI.

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