Demand Prediction:
the superpower your car rental
business needs

If you could choose any superpower for your car rental business, what would it be?

Perhaps, the ability to see the future might be helpful.

Running a car rental business is challenging. You don’t really know what cars people need and when they need them. Yet, you should be able to answer questions like when you should decrease or increase inventory, how will this projection change over time, and what the optimal price should be for a vehicle during a specific time. Hence, knowing the future of your rental car will help you plan things accordingly.

Now, what if we told you that there was a way you could predict the future with regard to these aspects? Well, with demand prediction, you can do precisely that.

However, before we delve into demand prediction, let’s look at why the car rental industry needs this technology.

The pandemic and the rental car crisis

The COVID-19 pandemic destroyed economies worldwide, and the impact was felt by enterprises across industries, especially transportation services that were on the verge of damage. In most cases, the challenges posed by lockdown were enormous and intractable. In addition, the increasing fuel and diesel prices in developing countries hindered market expansion.

With the pandemic crushing demand and keeping people home, most car rental companies chose to shed cars and cut dollars in planned purchases to survive.

According to Jefferies Group, an investment bank, major rental car operators sold off over 770,000 cars in 2020. Furthermore, it was found that one of every three rental cars that were in service pre-pandemic is no longer available.

However, now that the economy is back on its feet and growing faster, people want to travel again, and car rental companies are struggling to find enough vehicles.

In the summer of 2021, the car rental industry witnessed a surge in demand. However, due to the closure of car building facilities, most travelers experienced supply shortages, highlighting the importance of accurate demand forecasting and precise fleet management. This gap between supply and demand limited revenue maximization opportunities for car rental companies. Additionally, it also made it challenging to understand future demand.

Demand Prediction: the AI-driven solution

Currently, the car rental business is a game of demand and supply. Data is considered the new oil for most industries, and it has created significant opportunities to deal with the crucial challenge of demand prediction.

By leveraging AI-based technology, demand for your car rental services can be predicted in real-time, and you can get long-term insights that can help you become more proactive in planning and optimizing fleet utilization.

Typically, most data sources that affect demand are already available, like weather, demographics, traffic, social events, airport schedules, hotel occupancy, etc. Nevertheless, correlations with various data sources vary based on different locations and countries. And the AI-based demand prediction models can adjust themselves according to specific scenarios.

Planning your operation and inventory management are not the only things that can benefit from demand prediction. It can also help with other aspects like maintenance, price optimization, and revenue management.

  • Price optimization

Sometimes supply is a given, and can’t be changed on short notice. During such instances, the only way to achieve an equilibrium between demand and supply in real-time is by changing the pricing. Termed price optimization or demand pricing, this method helps mitigate lower demand, or maximize revenue when there is a higher predicted demand.

Sometimes supply is a given, and can’t be changed on short notice. During such instances, the only way to achieve an equilibrium between demand and supply in real-time is by changing the pricing. Termed price optimization or demand pricing, this method helps mitigate lower demand, or maximize revenue when there is a higher predicted demand.

  • Maintenance

There are several parameters that can affect when a vehicle will require maintenance. While some of them have to do with fixed thresholds like time or mileage, others can be difficult to analyze and address cost-effectively, such as customer driving patterns, weather conditions, and real-time fleet telematics data.

AI-based models make it possible to predict outcomes by analyzing various data sources and can therefore help car rental companies implement predictive maintenance. By synchronizing maintenance with the overall demand, vehicle rental companies can maximize utilization and ensure efficient operations.

  • Revenue management

AI models predict vehicle depreciation and suggest the best time to de-fleet and sell assets. Furthermore, AI engines can regularly go through the entire fleet data to ensure the rent prices meet the demand for services.

One aspect of a revenue manager’s job would be to run around, shop rates, and log in new prices without AI. AI tools work like a skilled analyst. They have the power to automatically optimize car rental rates and improve pricing management according to the pricing goals. In addition, they also keep close track of depreciation. Hence, by using AI tools, revenue managers can review valuable insights like ongoing forecasting and optimization and focus on managing higher-level tasks.

CloudMade’s Demand Prediction offering for car rental companies

CloudMade leverages AI and predictive analytics to enhance your operations through highly accurate demand forecasting. We offer the following:

  • We help you plan smarter by offering customized demand forecasting models that align with your business goals and limitations. Our predictive vehicle demand model helps car rental businesses better understand how much extra capacity they need to meet the unexpected demand days and weeks in advance.
  • While your historical data is enough to develop an accurate demand prediction model, we take demand forecasting a step further by incorporating external data. Our model analyzes external factors relevant to your car rental business like weather, holidays, and financial market data to offer the most accurate predictions.
  • We keep things flexible because we understand unpredicted factors like a new big client signing up for your rental services can significantly alter your demand. Hence, our models allow manual forecast input and learn from it, offering your business a tool that efficiently reacts to the changing business environment.

Interested in learning more about the benefits which CloudMade can bring to your business?

Let’s get in touch

Interested? Let’s get in touch.

Contact us