The encyclopedia · Strategy & Leadership · Technical decision · 1988–1995
Hertz yield-managed rental cars and lifted revenue per rental 1–5%
Hertz's YMS matched car availability to forecast demand across products and cities, raising average revenue per rental by one to five percent after 1990.
Hertz
the move
Car rental companies offer customers various combinations of car types, rental periods, and pickup and return locations, plus temporary insurance and refueling options. Hertz needed to decide the availability of these combinations over time, especially as leisure-based, low-priced entrants arrived.
Hertz developed its yield management system (YMS) to integrate information technology, sophisticated operations research, and existing decision support models for pricing, fleet planning, and fleet deployment. The system set availability across the product grid from demand forecasts rather than fixed rules.
Hertz first deployed the YMS in August 1990 and by July 1991 was using it in its largest 55 cities. Comparisons of average revenue per rental before and after showed incremental gains of one to five percent from the YMS — the first yield management system in car rental.
why it works
- Forecast-driven availability captured revenue fixed rules left behind.
- The product grid made many small decisions that summed large.
- Integration with pricing and fleet models made it operational.
what transfers
When your product is a grid of type, duration, and location, yield-manage the grid: forecast demand and ration low-yield availability, and revenue per sale rises without adding assets.
what came after
The YMS extended Hertz's pricing, fleet, and availability decision support through the 1990s, and the Interfaces article became the standard citation for car-rental revenue management.
references
- Evolutionary Change in Product Management: Experiences in the Car Rental Industry
- Evolutionary Change in Product Management: Experiences in the Car Rental Industry
- Evolutionary Change in Product Management: Experiences in the Car Rental Industry (archived copy)
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