Loyalty programs can help save rental car companies — here’s how

Jul 22, 2020

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Rental car companies have been hit hard by the coronavirus pandemic. Industry giant Hertz filed for Chapter 11 bankruptcy earlier in the year and Enterprise Holdings — the parent company of Alamo, Enterprise and National — recently laid off over 2,000 staff.

It’s easy to understand why. With fewer people flying, fewer are renting cars. This is especially true for business travel. Consultants are a key market for rental car companies and virtually none of them are traveling now.

That said, I think rental car companies have room to grow during the pandemic. With road tripping on the rise, legacy rental car companies need to find a way to curate their business toward these customers.

Related: 10 tips for anyone taking a road trip right now

Likewise, these companies need to find ways to actually monetize their loyalty programs for extra income. Moreover, this will help them through the pandemic and become an important income source for years to come.

Here, I’ll discuss why and how loyalty programs can save the rental car industry. I’ll also provide some insight into how I’d like to see these changes be made — let’s dive in!

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Loyalty programs are insanely profitable

Delta Airlines planes taxi at Hartsfield-Jackson Atlanta International Airport in Atlanta, GA, on Wednesday, September 15, 2010. (Photo by Ramin Talaie/Corbis via Getty Images)
(Photo by Ramin Talaie/Corbis via Getty Images)

Loyalty programs have been cash cows for airlines and hotels for years now. In fact, the American Airlines AAdvantage program is currently valued higher than Airbnb. On the other hand, Delta expects its cobranded credit card partnership with Amex to be worth over $7 billion by 2023.

These loyalty programs are so profitable because of their partnerships. For example, every time you transfer points, spend on a cobranded credit card or shop through a shopping portal, the airline gets a check for the value of the points.

This doesn’t always happen in real-time, however. Just a few months ago, we learned that American Express bought $1 billion worth of Hilton Honors points upfront to help the company through the coronavirus travel downturn.

Related: Chase, Amex spending millions on points and miles — what it means for the future of loyalty programs

How rental car companies can cash in

(Photo by Lou Armor/Getty Images)
(Photo by Lou Armor/Getty Images)

Interestingly enough, none of the major rental car companies have a cobranded credit card. Likewise, none of the rental car loyalty programs partner with transferable currencies like American Express Membership Rewards or Chase Ultimate Rewards.

Consequently, I think there’s a market for cobranded rental car credit cards and partnerships. On the cobrand side, I’d like to see one of the major rental car companies introduce a mid-range credit card that not only earns points but provides benefits too.

For example, Hertz could offer a credit card with Hertz Free-To-Go membership and elite status. This card could have a $99 annual fee, which is the cost of a Hertz Free-To-Go membership. Those who rent cars frequently can justify the cost with these added benefits.

Other interesting benefits could be fee waivers (for tolls, one-way rentals, etc), free tanks of gas and access to preferred rates. These would entice me to continue renting with a single rental car company, even if it’s marginally more expensive than the competition.

To sum it up, a rental car rewards card would be a win-win for everyone. Rental car companies would make money from the points they “sell” to banks and the people spending on these credit cards would have a reason to rent with the company.

However, not all consumers will want to move spending to a cobranded rental car credit card. For these consumers, a partnership with a transferable points currency makes a lot of sense. I would personally take advantage of this. This would create a long-term, sustainable revenue stream for rental car companies.

Related: How to never pay full price for a rental car

Customers need a reason to come back for more

(Photo by Zach Griff/The Points Guy)

The major issue I’ve had with rental car elite status is that it’s, well, not very useful. I’m a top-tier Hertz President’s Circle elite member, but the limited benefits don’t make me loyal to the company.

Let’s be real: at best, I get bonus Hertz points and a better selection of cars in the Ultimate Choice President’s Circle lot. That said, the latter benefit is hugely inconsistent — sometimes I drive off with a Chrystler 300S and other times with a Ford EcoSport.

This makes rental car elite status feel like a gimmick. In turn, this leads many travelers to simply book whatever is cheapest, regardless of rental car elite status. I’ll admit that I’m in this boat (car?) too; even a $10 difference would get me to go with the cheapest available option.

Rental car companies need to change their loyalty programs for the better to retain their most loyal customers. This is especially important for leisure travelers. While a large company may have a corporate partnership, leisure travelers will go with whoever offers the best price and benefits.

Related: Your points, miles and loyalty guide to Hertz car rentals

Here’s how rental car companies can revamp loyalty programs

I think a good place to start is by offering truly confirmed upgrades for customers. Sure, picking from the Ultimate Choice lot or Emerald Aisle is nice. But it’s worthless if the available cars aren’t a cut above what the customer actually reserved.

One interesting way of rolling this out could be with virtual car selection for elite members. In a perfect world, elite members could view inventory ahead of time and digitally reserve a specific car from the lot — not being stuck with whatever is available on arrival.

Alternatively, rental car companies with “pick your own car” policies could implement a choice policy. You’d have the option of either picking a car from the lot or confirming a one-class (or higher) upgrade ahead of time. This would ensure that upgrades are actually confirmed, not subject to change.

I’d like to see rental car companies add other elite status benefits too. A few that come to mind include fee waivers for tolls, complimentary gas fill-ups and free car drop-off. These features are convenient and make rental car elite status feel truly premium.

Rental car companies need to streamline their redemptions

Finally, rental car companies need to make it easier to redeem points. Nowadays, rental car point redemptions are extremely convoluted. Hertz is a good example of this. While 750 points are technically enough for a free rental day, it’s only for very specific dates. Even worse? These dates vary by location.

To make these redemptions worthwhile, rental car companies need to standardize their award charts. They can start by implementing on and off-peak dates that actually make sense and are streamlined across all locations.

Sure, this makes redemptions easier and less cost-effective for the company, but it would also entice customers to earn these points. This is especially important if a rental car company rolls out a credit card or transfer partner.

Related: National vs. Hertz: which car rental program is best?

Bottom line

In an unpredictable travel world, travel companies need to do whatever they can to entice travelers, build loyalty and plan for the future. When it comes to rental cars, these companies need to find a way to revamp their loyalty programs to be true marketing tools and moneymakers, both for now and in a post-coronavirus world.

Featured photo by Khairil Azhar Junos/Shutterstock

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