To Rent or Not To Rent? -- Chuck Marzahn -- There are certainly challenges to running a successful RV Rental operation. Some dealers dabble with the idea of having a rental fleet. Many try it for a while and leave. Others have made a Rental Department an integral part of their operation. What are the items to consider from a strategic sense? Does renting RVs make sense for you? Looking for challenges? Yes, the renting of an asset of yours to a stranger has them. There is a general sentiment that if it’s a “rental” it’s okay to abuse it to some degree. “After all,” thinks the customer, “it isn’t like someone I know owns this thing.” The financial and legal exposure is immense. Think about someone who isn’t familiar with the pitfalls that has the kids in the cab-over bunk and makes a sudden stop… Remember the last time you rented a car? Think about how many times you had to initial a line to indicate that you “had been told” some detail of the contract. That was to make the case stronger in court. Why do you think they need to worry about that? One could imagine that such focus comes from past experiences in court. The level detail required to protect your business must be balanced against the need to keep the business simple and customer friendly. Several dealers, who focus primarily on the rental business have adopted very structured ways of interacting with customers. Major concerns are the points of setting the reservation, pickup and orientation and at the point of unit return. Care must be taken initially to see that the renter is going to take the unit. In a way, you are also selling time, sort of like a time share, and if the unit isn’t booked you lose the money. That means getting a deposit that is “strong enough” to assure that the renter will actually show up or the forfeiture will offset some loss to non-occupancy. A deposit should always be taken as security against damage. Some dealers go to the point of using a video to do the orientation so they can document EXACTLY what was said to and expected of the customer should it come to a court case. Others tape the delivered unit with the customer to document the unit condition at departure. This relationship tone starts as potentially adversarial, doesn’t it? The business model is simple. You buy an asset. You rent it for a term to someone else. You take profit on the transaction. You depreciate the asset. At some future point, you sell the asset and, with the help of that depreciation, you make a profit on the disposition (selling) of that unit. There is also a consideration for the amount of damage sustained which is balanced against your ability to recover the money to fix the damage from the customer or an insurance company. The folks who seem to be most successful in rental are those who commit to it, do it right and make it a primary focus of the day to day operation. They usually have a manager and a small staff devoted only to renting. There is one dealer who has salespeople handle the renting of units. That strikes me as a fundamentally bad idea. Salespeople are not widely known for high levels of accuracy on detailed transactions. While you might think of a rental customer as an “up,” it is time consuming and takes from time that they could be working with a bona fide sales prospect. The majority of cases where a dealer goes into and leaves the rental business are those when the dealer’s intent is to test the waters. Let me just say, “It ain’t for the faint of heart!” If you aren’t committed long-term, don’t do it. If you are still reading and I haven’t yet scared you away, perhaps you have a genuine interest in making rentals a part of your operation. It can be quite rewarding. Strategically, as I’ve mentioned, you want to commit to full-time, year-round staff. Pick a certain type and model of unit and make all your fleet to be the same. It helps on turning the units between rentals if you have parts that fit all units. It helps if there is consistency with regard to how all things work. That consistency helps in both explaining operation to the rental customer and in speed of turnaround by knowing where everything is and how it works and how it appears. If all the units are the same, differences really stand out at check-in. That makes it much easier to identify damage or other problems. Use checklists for everything. Making the details easy to grasp through structured interaction with renters is certainly a key to success in rental operations. When you do the same thing over and over in the same way, you can hope to get good at it. Conventional wisdom is to put the rental fleet in a different building, with a different address and phone number and into a different corporation. This is done to strengthen the corporate veil in the event of litigation. Or should I say, the eventuality of litigation? If you want to learn the rental business, RVDA has a great rental education track at the convention. What’s the attraction of being in the rental business? I asked that question at a 20 group meeting recently. Those in the rental business responded that they are involved because it gives them access to a steady source of used units. Most of us know how hard it is to get quality used units. With a rental fleet, you can exercise a reasonable amount of control over used where, typically, no such control exists. You control what models come to you, at what price and at what time. Rental dealers offer a very compelling reason to get into rentals with that thought. Is the rental business for you? Look at the exposure to litigation you are willing to stand. Look at the steps you can take to bring consistency and detail to the execution of very demanding business. Look at the sources, types and cost of available rental units. Look at the market to see why folks would rent from you. Are you a destination with NASCAR, tourist sights and so forth? What units will rent well and hold a good price at disposition? Answer all those and you’ll have a rough idea if there is a future for you in rentals. Chuck Marzahn and Tom King are well known and recognized consultants and trainers in the RV Industry. They have worked with many dealers at all levels of dealership operation throughout the United States and Canada. They welcome your comments at firstname.lastname@example.org.
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