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Chinese car rental companies need to explore supplementary distribution avenues

07/21/2015| 9:39:22 PM| ChinaTravelNews 中文

Car rental operators in China are looking at strengthening their distribution mix and related technology expertise as they target newer ways of revenue generation.

ChinaTravelNews, Ritesh Gupta - Travel suppliers are increasingly becoming adept at meeting the overall trip requirements of their customers. Brands are diligently trying to ensure that the traffic that reaches their direct channels identifies with the travel products that are relevant to customers’ journey, and hence ends up buying core as well as ancillary offerings. 

In China, some of the trip elements, such as car rental and other ways of ground transportation, are relatively new vis-à-vis airlines, hotels etc. 

So for a segment like car rental, as operators aggressively expand their respective rental fleet as well as network coverage, a core aspect is distribution of car rental price, inventory and availability to capitalize on e-commerce capabilities of various partners. Considering the fact, each supplier and intermediary spends substantial budget on tapping online traffic, being relevant during every stage of the booking funnel is a top priority. Car rental fits in quite well, as indicated by specialists that over one-third of car rental globally is captured via airline passengers’ booking process. So this also means opportunity for car rental companies, as various partners can package or cross-sell to their core product offering. 

It is also imperative for car rental operators to manage operations efficiently – work out apt identification and movement of rental car fleet, evaluate the availability of vehicles at designated sites and assess which movements need to be done; work out periodical forecasts to monitor fleet trends etc. 

Chinese car rental companies need to come to grips with planning an apt distribution mix as soon as possible. Simply because the level of  capital expenditure that is being incurred owing to procuring of vehicles, geographical expansion in the quest to acquire new customers or technological advancements, is putting pressure on financial performance. 

eHi acknowledges that players are competing aggressively on the pricing front, ensuring there is no loss of rental volume at any given point of time. Also, the car rental industry tends to suffer owing to seasonality, too, as vehicle deployment gets impacted during public holidays.  While revenue goes down, pressure on financial performance goes up owing to certain fixed expenses such as depreciation, rent etc. So there is a need to sustain flow of revenue  to support growth strategy. 

Running a car rental business entity, and sustaining a fleet of cars is a demanding proposition in China, says Healy. “Optimization of fleet utilization is must,” says Dublin, Ireland-based Bobby Healy, CTO, Cartrawler. 

Dealing with fragmentation 

The pace with which Chinese market is moving can be gauged from the fact that the segment is quite competitive.

“This business is fragmented in China, with over 10000 car rental companies competing in the domestic market. And over 1000 companies have over 100 cars,” says Healy, who is scheduled to speak at the upcoming 2015 TravelDaily Conference, slated to take place in Shanghai (September 16-17). 

Reaching out to so many operators in a diverse market like China is extremely challenging, but this also means there is a chance to take this inventory to international suppliers, especially airlines outside China. Also, with companies like CAR Inc and eHi exposing customers to the concept of car rental over the years, Chinese carriers can tie-up with car rental companies abroad to fulfil the needs of travellers from this part of the world. A point in case – CAR Inc with its operating fleet size of 69,067 vehicles at the end of March this year is poised to grow further.  

Entry of specialists 

Sensing opportunity, B2B distribution specialist Cartrawler is vying for car rental content and inventory, and local players can benefit from such expertise. 

No brand can afford to offer an irrelevant car type, price point etc. as experience matters a lot today in the e-commerce arena. This can also have a direct impact on the conversion rate. So a booking engine or an algorithm should be the basis of an online offering, that tailors the product and price to match a traveller’s need. 

“Technology counts a lot in this in the car rental category, as it can result in offering what travellers are looking for in order to fulfil their travel requirements. Cartrawler enables car rental companies to retain control of their product – can make changes in a short span, responding to a real-time bidding system,” says Healy. He adds that over a period of time, quality nudges ahead of price for any supplier, and this means the brand benefits from offering a superior experience. “So essentially it is more customers, more revenue for our partners. It should be noted that the fleet utilization shouldn’t dwindle during the shoulder season, and that’s where supplier can hurt a lot. So this lets strengthen their indirect distribution for better yield,” he says. 

Talking of airlines, Cartrawler facilitates ancillary revenue generation. The company handles eight million customer interactions across 174 countries daily. Healy says airlines can’t really focus on car rental aggregation on their own. “Team can’t work on contracting in an extensive manner, and if it does it won’t manage more than a few partners. Whereas for a market like China it is imperative to have a an entity that has access to inventory spanning across the nation.” He says looking at the distribution environment today, the role being played by meta-search engines is gaining prominence in the decision-making, and also if OTAs end up in an advantageous position when it comes to fulfilling overall trip requirements then airline direct proposition is weakened in comparison. “It is proven that by working with multiple suppliers and offering choice to travellers, airlines end up improving their conversion rate three times. It has been witnessed across Europe, Australia, the U. S. etc.,” he says. 

Unique requirements of China 

Cartrawler currently doesn’t have any tie-up with a Chinese carrier at this juncture, though the company has been associated with the likes of Tigerair, Air Asia and Scoot in Asia for a couple of years or so. “We also have a number of partners such as Emirates, Hotels.com, Swiss Airlines, Webjet and Finnair that all have customers flying into China on a daily basis. Our product in China services these customers and this has been a growing business for us. These are international inbound passengers that suppliers in China can get access to for free via our system,” says Healy. 

As for making inroads into the Chinese market, it is mandatory for one to speak Chinese. “Ours is a mature business, with over decade-old expertise in handling this segment of travel. We manage entire operations from Dublin, but it’s been an unusual situation for us as far as China is concerned. We have an eight-member team, based on Beijing and Shanghai, for contracting. The focus is working out deals with companies for self-drive, chauffer driven segments as well as private transfer.” 

Car rental suppliers can come on board on to Cartrawler’s platform, and if they are equipped with apt resources for IT integration then they gain immediate access to the system and B2B partners, including 85 airlines from all over the world. “We also offer connectivity via an extranet, and car rental companies can swiftly manage their price and inventory. There is no set-up, software or licensing fee required,” shared Healy.   

He adds, “We are targeting to have tie-ups with 500 car rental companies in China by the end of next year. At this juncture, we are mainly focusing on the airport environment and not much on downtown business (for those who don’t cars or want to go for a weekend getaway).” 

As for challenges, Healy pointed out that coordinating with the local team is quite important. “The major challenge as of now is the distance between Ireland and China. It is important to have the core strategy team on the ground. As of now, the team from Dublin does visit 5-6 times a year.”

As for catering to alternative payment methods that are popular in China, and embracing them as part of the booking process, Healy mentioned that the team has sorted out several methods, including Alipay and UnionPay. Support for WeChat would be finalized soon. 

Bobby Healy, CTO, Cartrawler is scheduled to speak at the upcoming 2015 TravelDaily Conference, slated to take place in Shanghai (September 16-17). 

TAGS: car rental | Cartrawler | eHi | CAR Inc
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