How the Airbnb of Car Rentals could affect Rental companies when planning resources

Turo is one of the newest up and coming startups from Silicon Valley. As they grow larger, they are ruffling quite a few feathers in the rental car industry. As we saw with Uber and local Taxis, startups tend to try to out perform traditional companies by claiming they don’t fall under the same sort of regulations.

Turo offers car-owners an opportunity to make money off cars that might otherwise sit in the driveway. For drivers, they provide a fast, customized way of renting a car. By filling out forms on the app before hand, drivers can get their car right as they walk out of the airport. Turo is trying to make the renting process more efficient while also allowing customers to have any car from a Tesla to a Honda accord. One car owner earned about $1,500/month from renting out his two Audis. While this all seems great for consumers, the rental companies aren’t so pleased.

Since Turo doesn’t own any of the cars they are renting, they claim that they are not a traditional rental company and therefore should not have to follow the regulations set by law. Rental companies, on the other hand, are claiming that ignoring these rules would create extreme danger on the roads as people may not know about recalls or have their safety inspections up to date.

Aside from the rental car companies who will be directly losing business as a result of Turo, airports are also could face a loss. Airports generate huge revenues from selling space for rental car companies to use. Roughly 10% of airports revenue comes from rental companies. With all this lost revenue at risk, members of the American Car Rental Association (ACRA) as well as Transportation authorities from different cities are beginning to take Turo to court and lobbying against them in Congress. The City of San Francisco is personally suing Turo for ignoring the traditional car rental ways and picking up customers at the curb.

Between pending court cases, congressional bills, and cease-and-decist orders, the future is extremely unclear for all relevant parties. With this unexpected new competitor, both airport corporations and rental car companies are going to have to begin to shift their allocation of resources or risk major losses. The rental car companies could face steep holding costs if their cars sit in the lot unused. Airports face losing leases to rental companies that may not be able to afford their rent anymore. Turo may lose all their court cases and face fines as well as increased regulations and restrictions for the government. Will all this uncertainty, planning resources is more important now than ever. Although it may be expensive, changing the master scheduling now will likely serve all these parties better in the long run.


7 thoughts on “How the Airbnb of Car Rentals could affect Rental companies when planning resources

  • April 3, 2018 at 11:24 am

    ew competition in the market can always have an impact on a company’s forecasts. The same thing happened with most rental companies when Turo entered the market. During spring break, my friend and I got a Turo instead of a rental car and our main reason for doing this was the cost. Turo is significantly cheaper than most rental companies and can be be picked up from a location of your choice for a small charge. On the other hand, one has to find and visit a rental company to rent a car the conventional way. After we got Turo, we realized how overpriced cars are from most rental companies. I think Turo’s entrance in the rental car market could significantly benefit customers because it will increase competition in the market which will result in lower prices. I disagree that Turo can be riskier for users. The fact that you are renting someone’s car provides assurance that the car’s maintenance will be up to date. Also you get a chance to actually see the condition of the car before you use it so you can always decline driving the car if you think it has been compromised. Also, even though airports will initially lose out potential revenues and profits if rental companies lose their share in the market, airports can always choose to end their lease for parking spaces for rental companies and cut their lease costs. For airports that own the extra parking space, they can either sell the space or provide more affordable parking to customers to generate revenue. Overall, I think Turo is a great addition to the rental market.

    • April 3, 2018 at 11:25 am

      *New competition

  • April 3, 2018 at 3:42 pm

    As I see the car rental industry, they have inventory that they rent; not sell. So that inventory comes back to them once the renting period is over. Still, they have to forecast and plann how many cars they need to have on hand and how many cars, on average, are being rented every period. They also need to take into consideration the depreciation of the cars; in X years they will have to replace the car. So, when we talk about ordering inventory we are looking at inventory that will stay in the company for many years; until is fully depreciated.
    If this wasn´t the case and the inventory was simple sold, they could face the problem of the new competitor Tury by simply decreasing the amount of orders per period; because the increase of the demand of Turo´s car is decreasing the demand of the rental car companies.
    The problem is that they alredy have those cars, and they do not make daily orders because, as I have already mentioned it takes year for a car to depreciated. So what can they do? They need to decrease the amount of inventory on hand because the demand is decreasing and they have cars that are been unrented. They can´t do much about the inventory that they order because even if they reduce the orders they will see the decrease of inventory in a very long term. So, in order to decrease the inventory on hand (the cars that they already own) I though, in an accounting perspective, that they could increase the depreciation per year, so the life of the cars would decrease. If the cars have less life the inventory will decrease if the do not replace those cars. So, by doing this, they could realocated the inventory so there would not be cars unrented.

  • April 4, 2018 at 8:05 pm

    It must be hard for new companies to manage and plan their resources. Even with extensive market research, it’s hard to know how consumers will react to a product once it is released. At the same time, it must be even harder to plan for resources when the resources are provided by the customers who use the app. In this case, I think Turo’s resources would be the number of cars that are available for rent.
    I think Turo is a good example of why having a plan is good, but ultimately the ability to adapt and create new plans is even more important. No company can ever truly know what obstacles they will face in the market, especially new companies. In Turo’s case they’re facing lawsuits that they probably did not expect. It is hard to predict how customers will react to the lawsuits, like whether or not it will discourage people to put their car up on the app for rent.

    • April 5, 2018 at 8:54 am

      Jordan brings up an interesting point about planning. A plan can be written on a piece of paper and it can theoretically be a great idea, but at the end of the day it can all fall apart in such a changing environment. Therefore, it is key for companies to be flexible and able to adapt in all situations, specifically new companies. As Jordan mentioned, it is extremely difficult for new firms to manage and plan their resource, especially if they are a firm like no other in the current market. Due to this, new firms must be willing to make mistakes during their early years. They should constantly be learning and developing their processes as they make mistakes. During the start, it should be a trial and error operation.

  • April 4, 2018 at 9:31 pm

    I think the point Jordan makes about the difficulties in planning is incredibly applicable to Turo. Similar to Uber and Airbnb, the concept of renting out one’s property to a stranger is tricky, as you have to gauge both demand and supply and make sure they are aligned. Furthermore, although renting out one’s home may be similar in the case of Airbnb, renting out one’s car may be more difficult to predict as to whether people will accept or reject the idea in terms of lending their cars out. Cars are mobile, and despite there most certainly being some sort of tracker, I could still see people being hesitant to simply let their car be driven around wherever by a complete stranger. It will certainly be interesting as to how these court cases turn out, and I’m sure the safety factor will play a big role in the outcome along with the strong pushback from rental companies and airports.

  • April 5, 2018 at 9:12 am

    I was really excited because this article helped me learn about a new type of car rental. My friends and I are traveling to Iceland after graduation, and with the hassle of traditional car companies (due to the fact that we are all under 25), Turo is a fantastic idea. I actually looked up cars in Iceland using the site and may potentially book! I was skeptical about the service before, and do still have my apprehensions about it. First, the service relies much on the respect and good will of renters. There’s a high expectation that people will respect your car the way that you do. Then, it has much of the car-sharing attitude like Zipcar, which relies on users to return and pick up cars promptly. In my experience, Zipcar was a bit unreliable because of people not always returning on time, even with the risk of incurring a hefty late fee. However, Turo has much potential. And in regards to planning resources, the company benefits from more people leasing their car to others. In this way, there are more options to rent. The available to promise resources will fluctuate due to random renting of the cars, but more inventory would be available for customers to rent with the more cars leased.

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