Thursday, October 24, 2013

Bad Service is Profitable: The Case of Budget Rental Car

Bad service is profitable, that's why we see so much of it. 

Whether it is that your eggs were cold when the waitress gave you your food, or that you spent five hours sitting on the tarmac with no explanation, bad service is rampant.

Here is why .... the restaurant makes more profit if they have fewer people working. Of course, that means that you, the customer, have to sit there longer or get cold food, but, hey what's it to them. Maybe you won't come back, but if it you are traveling, it's likely you won't be back in that location soon anyway, so who cares. They'll just serve the next sucker.

Let me give you a recent example. I flew into Las Vegas, and thought I would just rent a car to save waiting in line for 45 minutes for a cab. I pre-paid for the car using Travelocity, so I thought that they would have a car for me - that sort of being implied when you PAY FOR SOMETHING that you will get it.

I showed up at 9 pm and there was a 40 minute wait to even talk to a person at the counter. They were saying they were out of cars. No problem, I figured, I had paid for mine in advance. When I got to the counter (finally), I was informed that my car, a white Sonic,  was being washed and to go wait in this parking space and they would bring it out in a few minutes. I waited there for 25 minutes. No car. (We're now over an hour wait.). I asked someone in a booth and he said they were washing it and even pointed to what he said was "my car", it would just be a few more minutes. After 20 minutes more standing in the parking space, I go back to the same person in the booth and tell him it is stupid for me to stand 45 minutes in  a parking space, I'm going to sit down and they can bring the car over to the bench. After another 20 minutes, someone brings up a white car and I start to get in. They say that's not my car. That's when I started yelling that I wanted to talk to someone who worked there. A tall redheaded man who was washing cars came over and asked what the problem was. He explained that the car I had been waiting for nearly  two hours for now had already been driven away by someone else. After about another 10 minutes, the manager shows up with a different car.

40+45+20 + 10 = 115 minutes

Does it strike anyone reasonable that I should wait nearly two hours for a car I had already paid for, 45 of it standing in a parking space? No. They completely screwed up and the only person who was not completely clueless was the guy washing cars.

I left my card. Did I get an apology? No. Nothing. And I'm sure their profits are higher because they don't have to have enough cars to supply everyone nor enough staff to provide service.

Here is where we, the buying public can make a difference. For your own peace of mind, I recommend that you never EVER go to Budget Rental Car at the Las Vegas airport. It will save you two hours of aggravation. I certainly will never use them again.

Also, if you are treated to this kind of abysmal customer service yourself, call them out. If bad service starts to actually hurt profits, companies will have an incentive to correct it.

I'm also emailing travelocity, where made the reservation. Again, maybe if they get enough complaints, something will happen.

If we keep accepting horrible service, then it will keep being profitable.


johnlichtenstein said...

Airports are perfect islands of asymmetric information and market power. Don't fly. If you have to fly, avoid the airport businesses. You are flying to see someone and I am sure the someone is happy to give you a ride.

Dr. AnnMaria said...

Unfortunately, I have to fly for work - a lot. Avoiding airport businesses as much as possible is good advice.

Anonymous said...

That is absolutely not true. What you're describing sounds more like someone who's given up on their business and just wants to pocket as much money as they can before it all collapses. Anyone who understands business knows that bad service is unprofitable. If you want to make more profit, then you take one step backwards to move several forwards and invest in your business to make it grow. As someone who not only owns a successful business but is also a business mentor who gets paid for evaluating businesses and make a strong seven-figures per month, I think my two cents on the subject might be worth something. Bad service will kill your business, especially nowadays with the internet. Sometimes, people will only write reviews if they're dissatisfied with the service.

A few years ago, I was planning to take my son out to dinner to a place he'd never been before. We had often hear of this restaurant called "Ciao! Baby" and everyone talked about how great it was. When my wife and I looked online at the reviews, we began to worry. There was all sorts of talk about how long the lines were and how they were made to wait and how horrible the food was and this, that and the other. But something didn't make sense. How could a restaurant that had such bad food be so crowded? My darling wife, Kate was concerned, but I convinced her to take a leap of faith and trust me on this one. Being the supportive woman she was, she did just what I said and what happened? It was the best restaurant we'd ever eaten at! It was family style Italian dining, they put a pound of pasta in every dish and it was delicious! It was designed to look like the places Sinatra used to hang out in! It took us days to eat the doggie bag and it tasted better refrigerated! They even had a singer come to our table and sing my boy happy birthday on a microphone! The waitress was friendly and nice and when she came over to check on us after we had gotten our food and were eating I said to her "everything couldn't be more perfect, but hey, y'know every single review we read about this place says it's horrible. How can anyone say that about such a good restaurant, this is the best place we've ever eaten at, I swear, I aint just say'in that to be polite!" She smiled, thanked me and explained that people only write reviews when they're angry. My boy is now a young man, and we still eat there once a month at least. I tell this to all of my clients who I consult, "you'll make more money with one satisfied customer than you will with 100 dissatisfied customers". In business, I don't care what kind of business you got, what business model you use, what whatever, retaining customer loyalty is everything! That's the problem with America these days, too many business owners think like employees, not like entrepreneurs. They treat their business more like a job that they own rather than a serious business.

Anonymous said...

Become a Hertz gold member or use uber

Dr. AnnMaria said...

I certainly agree with you in the wanting to pocket as much money as possible before it collapses. I also agree that too many business owners think like employees and that's a serious problem.

It's not true, though, that people only write negative reviews. I've written positive reviews of places I thought were really good and I have read plenty of positive reviews.

I've also read reviews that were glowing and then gone to a place and had it been a complete dive. That happened recently when I went to a bar with a group of friends. The place was SO different from the reviews on Yelp we all couldn't help laughing.

dsimon3387 said...

I have to fly a lot and I just purchased a motor home....I figured after the TSA Bullshit, the amount of time it takes to start and exit via a flight, the size of the seats....I am Big not fat and have to squeeze in, the hassle with rentals, by the time you turn around, the time savings is not that different! I mean when you could catch a flight in twenty minutes, take a few things you need with you, things were different. Now? the whole industry is so unpleasant.

A motor home is not cheaper, although it is commensurate when buying a ticket at regular price...But these idiots are talking about charging for everything, making people buy more than one seat, and god knows what next!

Rental cars? In some states the tax paid is almost as much as the car (I use travelocity and Price Line). Its out of control thats my take.

Anonymous said...

Car rental companies use a very high utilization formula to generate profits. The less cars sitting means the higher the rate per unit. The problem with this concept is that when big conventions come into town, rental cars are gobbled up in their wake. Rental car companies also have a high no-show rate so they push the reservation bookings to an extreme where there are way more reservations than cars that day. Sometimes they have a high no-show ratio and sometimes everyone shows up which complicates what they have on hand. Another added variable to this equation is the status of the returning car. Maybe the rental car on return needs some sort of maintenance that can't get serviced right away or the vehicle comes back to the rental company damaged. Sometimes, car manufacturers can have a major safety recall and place 10% of their rental fleet out of action until the problem is resolved. Sometimes it's an easy fix and sometimes the vehicle can sit for 10 days while they wait for parts to fix the recall. The last problem that can cause a rental car company to not have your car is that the customer before does not return the car at the time they stated on their rental agreement. This can be a problem sometimes. I know that in your mind there should be no excuse for overbooking reservations that cause excessive waits, but that's the way the rental market has become since the financial collapse in 2009. Manufacturers are supplying 25% less fleet to car rental companies than before. It doesn't matter that you reserved your car 6 months ago or 6 days ago, it's a first come first service business. And yes rental car companies try and accommodate their reservations and make reservation sell-outs when needed. This happens to ALL rental car companies. They all operate with this formula. No rental car company is immune to running out of cars. Yes, rental car companies have to make money, just like every other business but unfortunately the way it affects the customer is terrible. It's how the car rental company handles the situation that sets the company apart. That's how they keep their customers. I can tell you the worst rental companies that will leave their reservations high and dry. Budget isn't one of them but the Las Vegas one is a privately owned Budget so who knows how they operate. A good operations management team will minimize these problems. A bad operations team will lose customers.

Arshad Amin said...

Hi Annamaria

As anonymous wrote in the comments "She smiled, thanked me and explained that people only write reviews when they're angry." That makes sense, I read your post title and I was curious, but it seems like you wrote all that in a bad mood ;p

Jaxon Smith said...

Wow! You’ve certainly done a great job by posting this bit of information for the benefit of us viewers. It’s so great to know that the Internet is not a dumb place after all.