Avis takes a page from the airlines.

avis

For years the airlines have been perfecting the art of filling seats using algorithms and now Avis, the car rental company is doing the same. The car rental business has been a murky one and company’s have resorted to discounting their services to appeal to customers. Avis saw this as an opportunity to increase profits by improving upon their pricing tools. Now Avis has its own software, referred to as the “demand fleet pricing tool,” adjusting rental prices based on local data, past pricing, and other factors in 110 major markets. Airlines have been using similar technology to maximize revenue on air flights based on types of fares offered on that specific flight.

 

Top car rental companies Enterprise and Hertz have been less aggressive on their price increases. Nelson told analysts on a conference call. The pricing tool “accelerates and streamlines the decision-making process well beyond the capability of manual action.” Translation: Software is far more adept at extracting higher rental rates than humans, just like in the airline industry. According to a revenue airline manager under anonymity conditions says,”Each airline has a complex computer system based on algorithms that can maximize the profit on each flight based on the types of fares offered on that specific flight.” Airlines know that the system can use all available data to maximize profit. Information that cannot be predicted or computed by the algorithm requires the hand of a revenue airline manager, which is in charge of going into the system to adjust for events at certain destinations or weather conditions.

 

Avis saw a record breaking quarter this summer and forecasts predict to have a record breaking year. The more dynamic pricing for Avis is responsible for a 3 percent increase in prices which has generated 2.5 billion last quarter. Avis says each 1 percent increase in price represents $33 million to the company. Avis realizes that car rentals are part of travel expenses and is taking advantage by adjusting their pricing based on what is going on in the travel sector. Similarly to airlines that adjust seat prices based on the market, for example the a ticket price to Brazil in summer 2013 was not the same as summer 2014 when Brazil hosted the World Cup, Avis is using a similar approach.avisthailand.com

 

The increase in price for a car rental is hardly noticeable in the traveler’s overall trip expenses, less than a $2 increase in a typical four day trip. The ability to charge more for cars in North America, including for rentals made as part of corporate contracts, plays the largest role in Avis Budget’s improved financial performance. Avis is not revolutionizing anything, they did not reinvent the wheel all they did was improve on the systems in place and incorporate a new pricing tool, one that the airline industry has used for decades.

 

Can you think of other industries that can use this pricing tool? Have you used car rental services and was the price reasonable? Do you think this is a good idea to charge more for the same services? Do you think the increased profits will continue? Why or why not?

 

 

http://www.businessweek.com/articles/2014-10-30/avis-prices-rental-cars-like-airline-seats-and-youre-paying-more

http://www.foxnews.com/travel/2011/12/08/confessions-airline-revenue-manager/

Green Innovations – Affecting How and Where We Travel?

“When you travel these days, you’re doing so in a more environmentally friendly fashion than you did a decade ago- and you probably can’t even tell.”

Today, many business industries are changing the way they operate their business by placing more emphasis on environmental sustainability. For example, hotels are using motion sensors, key cards that control lights, fluorescent bulbs and ceiling fans aimed at saving energy. They are installing low-flow shower heads and toilets, while also recycling more and replacing individual shampoo bottles with large dispensers. Although these things may seem small and almost unnoticeable, they truly make a huge difference. “Green buildings use, on average, 26% less energy, emit 33% less carbon dioxide, use 30% less water, and produce 50% to 75% less solid waste, according to the building council.”

Element Hotels- use eco-friendly materials as often as possible and are applying for LEED certification.

When looking at other industries such as the airline and rental car businesses, they too are making a larger effort to surpass the minimum legal requirements and become more sustainable. Since 2000, Airlines have saved more than $33 Billion on fuel and prevented the release of 670 Billion pounds of greenhouse gases.  The Airline industry has adopted new technology and practices to reduce their carbon footprints. For instance, US Airways are replacing gas-powered ground vehicles that transport bags with electronic ones at its Philadelphia hub and adding a new building to house the vehicles at Philadelphia Airport that is made of 20% recycled materials.

Moving on, another industry, the car rental industry is also taking many new steps in order to be more “green.” Today the enterprise has more than 5,000 hybrids and electric vehicles for rent in 70 different locations. Lisa Marini, a spokeswoman says that “we will continue to add hybrids and EV’s to our fleet based on consumer demand and availability from manufacturers.” Furthermore, David Eastes, a director at VroomVroomVroom.com who tracks the industry, says he has seen an increase in the number of companies dedicated solely to renting out hybrid and electronic vehicles and “that’s never been seen before.”

Moreover, business in these three industries are making the change to be more green not only because they have been forced on the industry by the threat of government action, sheer economics or consumer demands, but some companies say its just good business. Paul Snyder, Vice President of corporate responsibility for IGH proclaims that, “we actually have customers who are asking, ‘What’s the carbon footprint of our meeting.” With so many people today becoming more and more knowledgeable and concerned about sustainability, making every effort to go more green, no matter how small, and even if it goes unnoticed, is extremely important.

In sum, How do you judge companies based on their sustainability efforts? And how do these efforts change your opinion of the company’s reputation? What sustainability efforts have you experienced from hotel, airline, and rental car businesses?

Reference: http://www.hotelmanagement.net/green/green-innovations-are-changing-the-face-of-travel-20076