CHAPTER CASE STUDY: IONAL CAR RENTAL’S DEATH EXPERIENCE NATIONAL NEAR-DEATU go for a revenue-based..

CHAPTER CASE STUDY: IONAL CAR RENTAL’S DEATH EXPERIENCE NATIONAL NEAR-DEATU go for a revenue-based turnaround as op- We decided to go for a reu BENCE RAMAEKERS, TURNAROUND SPECIALIST based to a cost-cutting turnaround. -LAWRENCE RAMAEKERS. AND INTERIM PRESIDENT, NATIONAL CAR RENTAL SYSTEM, INC. ONE LAST CHANCE IN MOST Cases, Revenue Management is viewed as a means to generate additional reve- nues, but in some cases it can actually save a company from extinction. National Car Rental System is a case in point. By 1992, National had been losing money for at least a decade. That was fine when

CHAPTER CASE STUDY: IONAL CAR RENTAL’S DEATH EXPERIENCE NATIONAL NEAR-DEATU go for a revenue-based turnaround as op- We decided to go for a reu BENCE RAMAEKERS, TURNAROUND SPECIALIST based to a cost-cutting turnaround. -LAWRENCE RAMAEKERS. AND INTERIM PRESIDENT, NATIONAL CAR RENTAL SYSTEM, INC. ONE LAST CHANCE IN MOST Cases, Revenue Management is viewed as a means to generate additional reve- nues, but in some cases it can actually save a company from extinction. National Car Rental System is a case in point. By 1992, National had been losing money for at least a decade. That was fine when depreciation and tax write-offs were fi- nancial benefits for the owners or when National absorbed overproduction from its then parent, automaker General Mo- bors. But the situation changed dramatically whnounced a mind-boggling $3.4 yearthe biggest corporate lo changed dramatically when GM an- und-boggling $3.4 billion loss for its 1991 fiscal Best corporate loss in history. It was clear that control Logtion command 192 REVENUE MANAGEMENT National Car Rental’s Near-Death Experience es that GM Gobie Natal Nasjonal Cams M’s board There were to olished in a highly competitive and volatile did not yield revenue growth easily. Further, hile under extreme pressure from an owner the money-losing business units were a luxury th longer afford. In December 1992, the future of the Natie System unit was on the agenda at GM’s Twelve thousand jobs were on the line. The tions: liquidate National Car or take a gigan charge and give National one last chance to be and then be sold at a price high enough for GM some of its investment. Given the urgency of GM tion, it was a tough decision. Liquidation would billion hit on its balance sheet. Restructuring to give another chance meant that GM would have ping $744 million charge, and there was no guarante was accomplish place that did not was done while anded immediate results. Bigantico gigantic resto hance to become proble b for GM to of GM’s own would mean G COMPANY IN A CHANGING INDUSTRY CHANGING COMPANY would have to take a whnarphosisrivaline the National would survive. In the end, GM decided to give National one more com to live. Just two years later, the decision paid off brillid By early 1995, National had effected a $3 billion swin value and was experiencing an annual growth rate of about 20%. It had gone from being a liability to being an attractive asset for acquisition. According to those directing this tu around, Revenue Management was the single most importa factor. Previously, National had been the fifth largest aipat rental car company in the United States. Using RM, National achieved new power in the marketplace and was now i fourth place and rapidly closing in on the next largest con 1980s, the U.S. car rental business went through a met- sis rivaling those caused by airline and telecommuni- deregulation. Before 1986, owners of car rental firms them for large depreciation and investment tax write- s Profitability was not their first concern, and rental car companies typically did not make money from renting cars. They made money from manufacturers’ rebates on cars they purchased, selling cars after depreciating them rapidly and convincing renters to buy expensive “options” such as colli- in insurance. The depreciation write-offs evaporated be cause of U.S. tax code changes in the mid-1980s. Major automakers bought car rental companies to keep production lines going by supplying rental car fleets when overseas com- petition cut into U.S. retail sales. But shortly thereafter, new- car sales began to improve, and the automakers needed cars coming off the production line for retail sales, so they changed s and jacked up the prices for the rental car fleets. Once again, the basic economics of the car rental ic economics of the car rental industry anged because of circumstances beyond their contro In chapter 6, The Revenue Management Revolution, from your standpoint, share and discuss your most important take-a-way from this chapter (Be specific and brief, and relate it to any of the previous concepts/Tactics you have learned from any previous chapter. Further and much more specifically, Marriott found success through making sure they shielded (meaning they wouldnt necessarily open peak nights early for reservations) peak hotel nights during the week? Why is this such an important and solid strategy?

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