Car rental surges in importance as airline ancillary revenue source

US. Car rental is moving ahead as a key source of ancillary revenue for airlines and the travel industry, according to a report released by airline ancillary revenues consultancy IdeaWorks.

Titled “˜Planes, Cars, and Ancillary Revenues’, the 13-page report focuses on the opportunities afforded by car-hire activities and how the US$35 billion (€26.45 billion) global car rental industry is driving ancillary revenue for the airline industry.

The success of any car rental company has traditionally been determined by the health of the airline industry, the report states. Today car rentals are among the top commission-generating services sold on airline websites, together with hotel bookings and travel insurance.

These commission-based services have become as important as the internal à la carte services sold by revenue-savvy carriers such as checked baggage, priority boarding, seat assignments and pre-order meals, said IdeaWorks.

Car rental commissions ranked among easyJet’s top three ancillary revenue generating sources in 2007

Airlines now have many choices of how to offer car rental services to customers, the report notes. Multi-supplier and broker methods provide more choices for consumers, while exclusive relationships limit brand choice to a single supplier.

Hertz is one of the leaders in the category of exclusive deals. For example, it is the sole booking partner for Aer Lingus, Air France and Ryanair. The company paid €29.9 million to Ryanair for the carrier’s fiscal year ended 31 March 2010 – an attractive boost for any carrier’s bottom line, the report notes.

Virgin Blue chose the multi-supplier method and offers Europcar, Hertz and Thrifty as preferred partners along with more than 550 leading and independent car rental suppliers. When given the choice, consumers respond positively to a larger array of brands, vehicles and prices, the report highlights.

The report adds that Virgin Blue “exemplifies best practices” by making car rental a part of the online booking process and by rewarding customers with bonus frequent flier points. In turn it was rewarded with better results: the airline Virgin Blue experienced a +38% increase to its rental bookings when it moved from a single supplier relationship.

Click here to read the full 13-page industry analysis “˜Planes, Cars, and Ancillary Revenues’.

Click here to view the enlarged image (then hover over graphs with your cursor and click for full detail)

About IdeaWorks

IdeaWorks was founded in 1996 as a consulting organisation building brands through innovation in product, partnership and marketing, and building profits through financial improvement and restructuring. Its international client list includes the hotel, airline, marine and consumer products sectors. IdeaWorks specialises in ancillary revenue improvement, brand development, customer research, competitive analysis, partner-marketing strategies, cost reduction programmes and business restructuring.



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