Avis' chief innovation officer explains how the car-rental giant is fighting to stay relevant in the face of Uber, Lyft, and peer-to-peer car-sharing
- Major car-rental companies have had a stranglehold on the market for years, causing no shortage of grief among customers forced to pay exorbitant fees, wait in long lines, and follow seemingly arbitrary rules.
- Lyft and a host of startups are coming for their lunch because of it.
- We talked with Arthur Orduña, Avis' chief innovation officer, about how the company is working to stay ahead of Silicon Valley — and where he's hoping to work with them.
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Renting a car is, by any definition, a headache. It's Arthur Orduña's job to change that.
As tech companies flush with venture capital circle like vultures around the long-established and highly conventional industry, Orduña feels right at home. Before Avis, he held similar roles at other old-guard companies that aren't exactly synonymous with innovation: ADT and Canoe Ventures, an adtech venture by the country's largest cable operators.
"If there's a common thread through all of this, it's like watching the evolution of connectivity across different devices and different spaces," Orduña said in an interview with Business Insider.
"It's almost like the hospitality/cable industry if you think about it," he added. "It's 600,000 hotel rooms on wheels."
But, of course, hotel chains haven't been immune to outside disruption either. The industry's largest companies have fought tooth and nail against Airbnb as the startup continues to have a higher valuation than Hilton, Hyatt, and other major hotels.
To keep pace with Uber's and Lyft's encroachment on rental cars, and keep Turo, an app now valued at nearly half of Avis' entire business, Orduña went to Kansas City, Missouri.
"We said let's take one market and make the entire fleet for that market connected and see how it changes them," he said. "Let's see how it changes, how we configure our fleet, what kind of tools we need to use. Suddenly we had to start using this thing called a smartphone. We're going to be talking to these cars, and they're going to be talking back to us — 'what are we going to say?'"
Kansas City was an ideal market not only because of its size, about 5,000 cars, but also because the cars remain there (that is, they aren't picked up and dropped off in different cities). Once the fleet was connected, Avis' "mobility lab" was born.
But as many established corporate players have learned, simply acquiring data doesn't mean the established systems will be adept enough to learn from, use, and evolve with the newfound information.
"Those all hit our EBITDA and hit our margins," Orduña said. "They're not sexy, but they do change the business."
Pain points
As anyone who has rented a car knows, there are plenty of what the company calls "pain points."
"The first thing we did, and it was ugly, is we mapped our customer journey from a perspective from booking to returning the car and everything in between," Orduña said.
Bypassing the counter, and anywhere else there was a line, was at top of the list of problems to tackle.
When it came to exit gates, where the company has to ensure the right customer is in the right car, things got even more complicated. Avis needed 100% authentication, a process that was previously possible only with human agents.
For a high-tech solution, it turned to Bluetooth and short-loop authentication. It wasn't working every time like it needed to.
"We said, 'OK, what works all of the time regardless of low-light conditions or rain and snow?'" Orduña said. "And we were like, 'Oh! QR codes.'"
Elsewhere, the company is experimenting with location-aware apps that can surface tourist destinations or parking available to customers using geofences.
Those small wins have so far helped Net Promoter Scores, a customer-satisfaction measure used by companies in a wide variety of industries, increase for Avis in Kansas City relative to other markets. Now it's time to roll it out nationwide, and the timing couldn't be more prescient.
Uber and Lyft aren't necessarily the enemy
Uber's business segment is growing quickly and assumedly eating into plenty of rental-car demand (not to mention leisure travelers who forego a car in favor of hailing a ride). Lyft, meanwhile, is testing traditional rental-car options in California.
Avis, for its part, isn't worried — at least, not yet.
The company owns ZipCar, an early offensive in 2013 that gave it a slight leg up on Hertz, its largest competitor, as the companies began to broach the digital age.
"There are actually relatively few true competitors," Orduña said. "Yes, National and Hertz. But Turo and Getaround, they're not rental-car companies. Even though they're attacking rental, I've got to look at it and say, 'That's freaking smart.'"
It's Orduña's job to see which of those new entrants could be a partner. Avis supplies cars to Lyft's "express-drive" program that allows drivers to rent cars to use on the app, without having to own their own. It's also a part of Uber's vehicle solutions for similar driver options.
"How does that enlarge my market?" Orduña said. "It's all about complementary technologies."
SEE ALSO: Lyft has been quietly offering a car-rental service in 3 California cities