Sixt on the move to make mobility more flexible
An exclusive Q&A with the multinational car rental firm reveals insights into emerging mobility landscape
Managing revenues in the car rental business is a complex and challenging business. In 2018, however, Sixt saw revenues rise by 12.6%. That was down to strong growth in Germany and abroad. A key driver of this were foreign operations where revenues jumped by 22.8% in the vehicle rental business, says Henrik Imhof, Senior Vice President Yield Management and Pricing, Sixt who will be speaking at the EyeforTravel Revenue and Optimisation Growth Summit (Nov 26-27).
EFT: In the car rental space, there is growing competition from the likes of car manufacturers (Ford and Tesla may rent cars directly to customers), from services like Uber, Bolt and Lyft and also peer-to-peer car sharing services. How are you tackling this?
HI: We are convinced that fragmented solutions for car sharing in metropolitan areas or transfer and ride hailing services are not enough. Instead, the various mobility services and offers are merging together, so that customers don't need a complicated array of different platforms, apps and brands but one offer from a single source as in a one-stop shop.
For this reason, Sixt has invested a significant amount over the last few years in the build-up of such an integrated offer and in the digitisation of the rental process. It is our aim over the coming years to have every vehicle in our fleet connected so that we can deploy the entire Sixt fleet highly flexibly. The starting gun to this unique mobility offer was sounded in February of this year with the presentation of the new Sixt app and our new mobility platform, ONE, which we showcased to customers, business partners, employees and the media. It opens up the entire Sixt product world of our mobility segment to our customers. In future, they can decide freely whether they want to pick up a car at a rental station, simply step into the next available car round the street corner or rather call a cab or a ride hailing service. Sixt rent (vehicle rental), Sixt share (carsharing) and Sixt ride (transfer services) are all coming together in one app and all under the unified brand of Sixt.
We are convinced that fragmented solutions for car sharing in metropolitan areas or transfer and ride hailing services are not enough
EFT: How is digitisation helping to drive revenue growth?
HI: Bundling our products in one app and the digital interconnection of our fleet open up significant cross-selling potentials, allowing us to use our marketing budgets more efficiently and enabling us to utilise our fleet still better. For example, since the presentation of the new app we see a strong uplift in app bookings not just for the new products but also for classical car rental.
EFT: How many app downloads have you had?
HI: We do not publish these figures. The app was very well received and used by both new and existing customers. The growth rate in our customer base by far exceeded our expectations.
EFT: It has been reported that Sixt is pursuing a demand-driven fleet policy. Can you explain in a bit more detail what the implications of this are?
HI: We use our yield management system to constantly align our purchasing activities with demand and to manage the availability of vehicles at the individual rental offices. Here, we rely on years of historic data in order to detect changes in up-coming demand as early as possible. As part of our risk management, we secure a large proportion of our fleet by means of buy-back-agreements with manufacturers and dealers. Demand-driven fleet planning not only refers to volume planning. It also means securing a high premium share in terms of make and model, catering for the different needs of leisure and corporate customers in different regions.
EFT: What is the role of AI, data and analytics in car rental RM? What specific benefits are you seeing from the application of innovative new technologies?
HI: We serve thousands of fixed rental locations as well as free float areas with dozens of car groups, for durations between minutes and months. So, naturally, there is a huge variability in our product range both in terms of day-to-day market conditions and cost structures. Although we serve millions of customers, almost every request is unique. Without advanced analytics it would not be possible to make reliable predictions and meet or even exceed our customers' expectations. As part of our AI-first-strategy, we replace, step-by-step, complex rule systems for pricing decisions with automated, data driven calculations in real-time and for each individual situation.
A large number of factors play a role in this. However, as in the entire travel industry, the main factors are the current local demand situation and the capacity utilisation of our vehicles. It is important to note that we always price the individual vehicle and not the individual private user since we do not include personal data of the individual user, in pricing. We take data protection very seriously and, of course, also comply with it in this respect.
EFT: Where do you see the opportunities for revenue growth?
HI: While we are still growing in our home market, Germany, as well as in Western Europe, we see a lot of potential in the USA, both in network coverage and market share. Also, the increased product range, including on-demand rental and car sharing, ride services, and partner offerings, generates new revenue opportunities within the mobility market, as well as cross-selling potentials and a positive impact on customer loyalty.
EFT: What would you like to see more of in research and development?
HI: We are ourselves much involved in R&D, not only through our big investments in IT and data science but also by collaboration with academic institutions. Last year, we received the bi-anually company award from the society for Operations Research, GOR, for these efforts. Current activities include AI based optimisation algorithms and machine learning forecasts.
EFT: What are your top priorities in the coming year?
HI: We will continue on the route to further integrate our mobility services both from the customer's perspective and in terms of operational efficiency. Further enhancement of our yield management system with AI based algorithms is a key element of that strategy.
EFT: What keeps you awake at night?
HI: If you want to develop complex fleet planning or pricing algorithms, you should better get some sleep at night. So much for my next New Year's resolutions! Actually, at Sixt we constantly ask ourselves the question if what we are doing really meets the needs of our customers now and in the future. Given the fast paced changes in mobility, this may result in sleepless nights, but it can also create a lot of energy to tackle another challenge the next day in the office.
Join us at the Revenue and Optimisation Growth Summit, Amsterdam, Nov 26-27 to hear more from SIXT and other leading travel brands and innovators such as Booking.com, Finnair, Louvre Hotels and many more