Posts Tagged ‘Car rental’

"Fill Those Empty Seats." Car Sharin...

“Fill Those Empty Seats.” Car Sharing is a “Must”^ – NARA – 514256 (Photo credit: Wikipedia)

Yesterday, car-sharing business Relay Rides announced they will be opening their first airport car-sharing/parking facility at SFO, upping the ante in the ongoing lawsuit SFO filed against SFO’s original, and still quite new, car sharing business, Flight Car. As some may recall, I wrote about SFO’s lawsuit against Flight Car a few weeks ago, and had a chance to talk with Flight Car’s CEO Rujul Zaparde about the case and the hurdles faced in not just starting a new business, but an entirely new type of business. What it essentially gets down to is that the car-sharing model doesn’t fit neatly into other previously established business models, straddling the line between rental service, parking facility and valet, where one is simultaneously a customer and supplier; SFO wants to classify these new businesses as car rental facilities, which would allow them to levy the maximum amount of fees and charges on these businesses but would also put a much larger financial burden on these businesses than the same rules do on traditional car rental businesses. SFO

‘s suit against Flight Car is poised to set the precedent for how other airports will classify and charge these new businesses; Boston-Logan and LAX have already said they are watching San Francisco closely to determine how they will respond to car-sharing businesses at their locations. Flight Car already pays to SFO the fees typically associated with off-site parking businesses, and Relay Rides has said they will be paying 10% of their profits to the airport, the typical arrangement for most businesses with airport-focused services. Primarily at issue is the $20 per customer that SFO charges traditional car rental businesses, a fee that both Flight Car and Relay Rides says shouldn’t apply to them.

While there are many similarities between Flight Car and Relay Rides, they are far from carbon copies of each other. Where as Flight Car has a lot that can accommodate hundreds of cars, Relay Rides’ facility, which opens August 9th, can accommodate only 30 cars; Flight Car pays any customer who’s car is rented out, Relay Rides does not; Flight Car uses a car service to pick up and drop off customers anywhere within ten minutes of their facility, Relay Rides uses hotel shuttles to get their customers to and from the airport. While starting with a seemingly more modest venture in San Francisco, Relay Rides has already announced plans to open similar facilities in four other airports, including Boston and LAX, two other locations that will put them head to head with Flight Car once again. It’s a shrewd move; by letting Flight Car be the trailblazer by just a few months it’s allowed them to open their business without having to spend the time, energy and capital on carving out a place for themselves in the airport industry, and if a place for car-sharing can’t be made they are looking at far less of a loss on their investment. As yet, there has been no word on whether Relay Rides will file an Amicus brief in the Flight Car/SFO suit to aid in the legal fight to make a place for car-sharing at the airport.

Regardless of the outcome, nothing is likely to stop the momentum that the sharing economy is steadily and rapidly gaining. As more and more entrepreneurs invent and re-invent business models, laws and municipalities are going to adapt and embrace these businesses, staying ahead of the curve and pre-emptively making spaces and rules for these businesses instead of lagging behind and only reacting, letting the courts and lawyers decide how to manage the emerging sharing economy. Obviously, the best outcome, both monetarily and societally (I and many others think that sharing-based businesses are great for communities for a whole host of reasons), is for municipal authorities to anticipate these businesses and make a place for them, but the cynic in me (and sadly the vast majority of the stories I’ve written about in this blog) would bet that, at least in most cases, we’ll be seeing a reactive, combative attitude toward these emerging sharing businesses. This won’t stop the sharing economy, but it will slow it down at a time in this country where we should be fostering and cheering for any new innovation that creates jobs, helps the environment, infuses money into local economies and makes life easier for the average person; you know, common sense. But if common sense and government were on speaking terms, we wouldn’t have the bath-salts caucus in congress, so there you go.

For now, it seems everyone will have to wait and see how SFO v. Flight Car turns out. But however that pans out, it’s very likely that a car-sharing business, and the opportunity to save hundreds when you travel, will be coming to an airport near you sooner rather than later.

 

On Friday, I had the opportunity to speak with FlightCar CEO and co-founder Rujul Zaparde and get the latest on their battle with SFO, how the company has been doing and where he sees it going in the future. For those of you who aren’t familiar with FlightCar, it’s a peer-to-peer car sharing business that was started by three teenage college students in February which has been making waves and getting lots of attention thanks to its innovative business model and a suit recently brought against them by SFO airport.

One of the first things we talked about was how FlightCar went from idea to reality. There’s been quite a bit written about when the lightning first struck in February of 2012, but I was more curious about the time between then and when FlightCar actually opened its doors in February of 2013, and Rujul was happy to fill me in. Rujul and his friends Kevin Petrovic and Shri Ganeshram, had all been fascinated with the rapidly emerging sharing economy being spearheaded by companies like AirBNB, and it was one day in February, while talking about travel hassles over lunch at a Panera, that they had the idea to bring the sharing economy to traveling, specifically parking and car rentals. It made perfect sense; everyone going to the airport was leaving their cars there or a nearby parking facility, and many of the people arriving were renting cars to use, so why not kill two birds with one stone and rent out cars that people weren’t using while they were traveling? Rujul, Kevin and Shri, researched and played with the idea for a couple months, and Rujul says it was during the following May that the idea really went from a pipe dream to reality, when they all said “Let’s do it!”

What followed was a whirlwind of activity. The teens applied for and were accepted in a startup accelerator called Brandery, which gave them hands on training in creating and developing a brand, as well as $20,000 in seed money to get them started. Even more importantly, the program gave them connections to people throughout the business world, connections which helped them hammer out a solid business model and line up investors who were excited about this new entry in the sharing market. Rujul, Kevin and Shri went on to participate in another startup accelerator, one which was also very helpful, though not as hands on as Brandery. After that, it was a mad dash to line up investors, such as AirBNB co-founder Brian Chesky, and getting the business actually setup and ready to go. By February of 2013, only a year after having the idea, Rujul and his friends had officially opened FlightCar for business.

While the business is steadily growing, as I mentioned last week it has not been without some speedbumps, mainly the suit brought by SFO. Rujul was able to shed some light on the dispute and share some details that bolster their case far more than what was apparent until now. The crux of the matter gets down to whether or not FlightCar is defined as car rental business under SFO regulation. While on the surface FlightCar may seem to be just that, that’s an oversimplification of their business. Rujul thinks the best label for their business is peer-to-peer car sharing. Unlike the actual car rental businesses that operate at SFO, FlightCar, has no desk there, and in fact is prohibited from having any kind of advertising at the airport. On top of that, despite the fact that they pick up and drop off customers at the airport, this is all handled through a third-party car service, so no FlightCar employees are ever on the property; so in essence, their interaction with the airport is more like that of a taxi service or an offsite parking facility. Now here’s where the SFO case really falls apart: FlightCar has been paying the airport access fee the airport charges for each car that picks up or drops off a customer, meaning that SFO has already been charging and treating FlightCar like something other than a car rental service and that slapping them with the usual rental business fees would be essentially double-taxing them. The final nail in the coffin is that FlightCar doesn’t operate exclusively at the airport and will pick up and drop off customers anywhere within ten minutes of the facility.

While these facts severely undermine SFO’s case, Rujul said that they are still very much open to dialogue and negotiation, and they’d much rather come to a mutual agreement with SFO than have a court make a final decision that may not be amenable to both parties. Whatever the outcome, it will set the precedent for how other airports classify and respond to FlightCar as they continue to expand to new locations (they’ve already opened a Boston location and have one in the works for Los Angeles). If worse comes to worse and FlightCar is saddled with a host of new fees, Rujul doesn’t foresee the costs being passed onto customers. He points out that rental companies spend 25% or more of revenue on maintaining their fleets, a cost they don’t have to contend with, thereby dramatically lowering their overhead. The one change he is concerned may happen if the case doesn’t go their way I that they’ll have to switch from a car service to a shuttle service for transporting their customers, which he feels would detract from the customer experience. But all that said, Rujul and his friends aren’t sweating the SFO suit; “It doesn’t help us to start worrying about what the airport thinks and what these guys think,” says Rujul.

So what are they focused on? The future. FlightCar already overcame one of its first major hurdles last week with the 4th of July. One of the concerns about FlightCar’s model was whether they could deal with demand during a busy travel time such as a major holiday, and last week proved that they could manage that challenge easily. They had more than a 100 cars come in for the 4th, and they had staffed up in anticipation of the increased demand. The week went smoothly without any major hiccups and posting some of their best numbers yet. Down the road, Rujul hopes that FlightCar will be like a gateway to the sharing market for the general public. As he explains it, some like Relay Rides or AirBNB is big life impact, involving a lot of planning, logistics and trust, whereas FlightCar is a very minor impact, as most people are already used to leaving their cars or renting cars when they travel so using FlightCar is already a familiar process. As enthusiastic a Rujul is about the sharing market, he doesn’t foresee FlightCar trying to expand into other types of markets. As he puts it they want to “focus on one thing and do it really well.” From where I’m standing, I’d have to say that Rujul and his friends are doing exactly that.