Let's take the Formula 1 Abu Dhabi grand prix as an example. No doubt that it is a big and special event, gathering a lot of people from all around the world.
No doubt that a Formula One Grand Prix is a big (very big) special event, gathering a lot of people from around the world. Optimizing such a sports event when you are a car rental operator is not an easy task. Here are some easy tips to maximize revenue and utilization.
Before setting the appropriate strategy, it is essential to review the previous results in terms of overall performance (utilization, revenue, rpd). But it is even more important to dig into the missed opportunities called revenue spoilage in yield management. Global utilization for one particular day (like the Saturday or the Sunday of the Grand Prix) can be high, but a lot of upgrades may have been generated due to lack of inventory controls or low revenue per day (RPD) due to last-minute price reduction.
Alternatively, an excellent global performance may hide low profitability. If most of the reservations went through a third party with a high commission base, the net profit generated on this event might be lower than expected.
Another source of spoilage may come from the cost side. If a high utilization is estimated on these days, the operator intends to bring more cars on the spot with a significant increase in the transport and parking costs. Not compensated by some higher selling prices, the overall operation may become unprofitable.
Last but not least, pay attention to revenue integrity. If some or most rentals are booked via a discounted or a corporate negotiated rate, it is a revenue loss.
Usually, these large events are known far in advance. If not, check the PEC Calendar Intelligence application to get these dates enough time in advance.
Then it is really important to freeze all specific pricing conditions that could potentially impact the on-rent over these days. For the corporate or assistance segments, you can exclude the days from any negotiated conditions. But make sure to block enough days in advance and not only the weekend dates of the Grand Prix.
No doubt that the Grand Prix race takes place on Sunday. But a Grand Prix requires a stronger organization on the team side, on the manager of the Grand Prix. Their demand is specific to the needs of this type of event. They may need more vans than cars; they may need chauffeur service; the public may require small vehicles from the airport to the circuit location. Logistically, the rental operator has to pay attention to its stock.
Setting an automatic rate query is easy and pretty cheap. If you cover the most demanded rental durations and most of the sites of the brands and the brokers, you will have a regular systematic feed of how the market is behaving. And you will be more proactive to adapt to any market condition changes.
For these important pick-up days, it is mandatory to have proper reservation monitoring. Not only using the extra out of the operating system as it will just show the confirmed part of the business.
Via a revenue management automation tool, demand tracking will more efficient as it will compare instantly and automatically the situation of this year and last year at the same equivalent reservation date to identify if you are in advance or late for the same rental periods.
Do not forget to manage the inventory controls appropriately to avoid any overbooking. Ideally, the best is to set some car allotment by market segment to be sure to keep enough cars on the last minute-low elasticity customers.
In the above illustration, at WeYield set a rate shop last May to track precisely the retail prices on Abu Dhabi airport for departure in the previous Formula One Grand Prix.
On the left-hand side of the graph, prices available in May for the F1 rental date of 25 Nov 2017. It is clear that none of the rental operators available were tackling the F1 as a high-demand opportunity. This situation has last until early October when suddenly Hertz (light yellow) and Budget (dark blue) increased their price. There were not followed by any of their competitors until early November when Avis (red) and Europcar (green) updated their prices.
In practice, what happened:
For sure we have no reservation records to illustrate demand book pace, but we can assume that overall price optimization was not very aggressive.
If we dig further down by car category, we see clearly on the graph above that some operators were forced to put Intermediary cars in stop sell (Hertz in light yellow, Europcar in green). This situation generates a significant revenue opportunity missed.
A lack of demand tracking and competitor monitoring by some or all operators has generated a static pricing strategy for a big event like the Formula One Grand Prix of Abu Dhabi.
Also, waiting until the last minute to position your pricing strategy gives a wrong signal to the customers that they should wait for the end to book.