Olympic Car Rental Case Study

Olympic Rent-A-Car Case Study

Olympic Rent-A-Car was founded in 1976 by John Uelses and was almost totally a franchising operation which allowed for rapid growth and profitability. In 2012 they had approximately 7% of the rental car market share. Their initial strategy was to price lower than Hertz in every market no matter what. Primary operations were conducted at airports and downtown locations of major cities and by 2012 had 464 rental car location and an operational fleet of 108,000 vehicles. Recently the market leader, Enterprise, had changed its loyalty rewards program so that it’s regular customers would receive free rental days on any car, with no blackouts, and announced a shift from rewarding days rented to dollars spent. Enterprise had begun making inroads in capturing more of the crucial business travel market. Olympic Rent-A-Car began to wonder if it needed to change its Olympic Medalist Rewards program and how or keep its reward program “as-is” and perhaps even eliminate it.

The loyalty reward programs had been around since the 1900s and stared with the Green stamp program, then continued on to the airline industry. The benefits of the loyalty program rewards were favorable tax treatment since they weren’t counted as income and they were viewed as perks by leisure and business travelers alike, so business travelers opted for their favorite providers even though it cost the company more.

In 2012 the rental car industry growth rate was about 2-3% per year. This growth and the increase in customer spending were due more to increased prices than to a rise in bookings. The two major market within the industry were airport rentals and local rentals. Airport rental made up half industry revenue while the other half came from local offices, dealerships, and repair shops. Enterprise had more than 50% of that market. Finally, the supply and demand of fleets had reached a balance in the industry by 2012.

The consumer in 2012 tended to rent compact cars. Regional differences manifested into differences in rental differences and was important to franchisees. Rentals in leisure areas averaged longer rental days and more miles and business area rentals were shorter and less miles. The leisure traveler wanted larger cared and generated less revenue. Business travelers paid more per day but varied based on many factors including contracted rates. Consumer booking habits had also changed. Online bookings for leisure and personal business booking was up $29 billion in three years and mobile devices would account for 32% of all bookings. About half of leisure travelers booked online and approximately 46% of all business renters and third-party traveler consolidators became larger players in the field. Best price was the main reason for company online bookings and convenience was the main reason for third-party consolidators. This online trend lead to pricing and profitability pressures as consumers were getting better at finding the lowest prices and best deals.

The main competition had been consolidated into the biggest players Enterprise, Hertz, and Avis, with Enterprise have the largest market share and dominating in off-airport rentals. For business travel at airport 20% of business travelers contributed to 80% of the revenue. Hertz has the largest business market at 30%, Avis with 26%, Enterprise with 20% and Olympic at 8%.

First, Olympic is not setup to follow or duplicate Enterprises strategy and doing so would further reduce profit