When Airbnb, an American company based in San Francisco, launched an online marketplace for lodging, homestays for vacation rentals, and tourism activities, in 2008, the hotel industry yawned. Who would ever stay in private lodging when hotels offer so many services?
Yet, in 2019, the year before Covid, Airbnb had the last laugh, reporting sales of over $4.5 billion, taking every dollar away from the established hospitality industry.
Airbnb offers advantages that hotels do not. A family of four has to book two rooms in a hotel. One can book a single 2 or 3 BR apartment at a far lower price at Airbnb. Most Airbnb places have access to kitchens, so frugal travelers on more extended stays do not have to eat out daily. Airbnbs also offer washer and dryer facilities — these cost extra at a hotel. And there’s something refreshing about renting from someone in the neighborhood who knows the place and is friendly with advice about neighborhood dining and attractions.
Turo, another online company in San Francisco inspired by Airbnb, started in 2010 as a peer-to-peer car sharing company. Working mainly behind the scenes, the company now operates in 56 countries, offering convenient online and mobile interfaces to “hosts,” the people who loan their cars out, and “guests,” who rent their vehicles. Getaround, another San Francisco start-up, says that as of 2019, it had five million users and approximately 20,000 connected cars in nine countries.
Tracing Turo’s journey
Like Airbnb, Turo’s is a fascinating business model. Users who sign up for the service are quickly validated for address, driver’s license information, age, credit card information, and other particulars. The validation takes no more than three minutes and is all online. The guest then searches for various car types available in the desired city. Prices are much lower than the established rental car behemoths, like Hertz or Avis. More importantly, the service is far superior.
Consider something as simple as adding a driver, such as a spouse, to a rental. Most large companies attach a daily fee to exploit the family’s vulnerability. Vacations aren’t as enjoyable when only one person assumes all driving duties. Besides, having another designated driver in the vehicle makes sense during unexpected situations. Turo not only does not charge extra for additional drivers; it lets the guest, at least in the US and Canada, add a driver when already out on a rental, all through the app.
For some journeys, the vehicle type becomes paramount. Wouldn’t it be nice to rent an open-top convertible for a coastal drive in California or Hawaii? Or a rugged Jeep 4x4 for a mountain vacation in Utah or Colorado? Or a Tesla to test-drive for a couple of days before deciding to own one? A search on Turo’s website shows that glamour cars are available at unbelievable discounts over similar vehicles at the big companies.
Once guests book a car, they can directly chat with the host, creating a person-to-person experience that a rental car company can never match. The feeling elevates to borrowing a car from a friend where mundane requests, often denied at the big firms, are easily met.
On a recent Turo trip, I wanted to rent a larger SUV at a host’s home 35 miles away from my house for a day trip. I asked the host if I could park my car at her place when I was out in her vehicle for the rental. She instantly responded by a chat message within the Turo app that she would be glad to take care of my car.
Frictionless experience
Hosts are eager to build up their service reputations on the Turo app so that more people will rent from them. A friend told me that he recently rented a car from Atlanta airport. The host asked him for the flight information and had the car waiting for him at the short-term parking lot across the terminal building. Three days later, he texted the host: “I forgot to fill fuel before I returned the car. How can I send you the money?” The host replied, “Oh, don’t worry, I will take care of it! Thanks for renting from me.”
There’s a small fee for insurance, which hosts often impose before they loan out their cars. Such insurance could be overkill in many areas of the world because primary insurance through the guests’ own vehicles at home and secondary insurance through credit cards often cover the cost of damage and theft. Regardless, Turo says it offers free emergency roadside assistance available 24/7.
Turo makes even cancellations hassle-free. Customers can get a full refund up to 24 hours before trips start. This feature flies in the face of companies like Priceline or Hotwire that demand payment in full at the time of the booking with no chance of a refund. If guests book a trip with less than 24 hours notice, Turo allows them one hour after booking to cancel free of charge - a remarkably fair deal.
Self-drive rental cars on a P2P car sharing basis are becoming popular in India too. In Bengaluru, Drivezy offers such a service, including motorcycles. However, customer service levels may not approach the same as the established Bay Area start-ups.
A large corporation can never match the Adam-Smith-inspired hidden hand motivations of customer service and raw capitalistic success of a host attempting to make extra cash by loaning their car. This alone is reason enough to explore P2P business models and abandon the big companies.