RelayRides changes direction to focus on airport and long-term car rentals

RelayRides is veering off the road it’s been on since 2010 and taking a different route.

The car-sharing startup grew by a factor of three in 2013, fueled by surging demand for airport and long-term car rentals. An astounding 95 percent of its revenue came from this part of the business, so RelayRides decided to get rid of hourly rentals all together.

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“We have come to the conclusion that the peer-to-peer model is not compatible with very short-duration rentals from a financial standpoint,” RelayRides director of communications Steve Webb said to VentureBeat. “Hardware installation, lower owner earnings, high operational costs, and complexities for the instant mobility/short-duration market is not where the peer-to-peer car sharing model is best suited to thrive.”

RelayRides started out in 2010 as a peer-to-peer, on-demand car-sharing service. People could offer their cars for hourly, daily, or weekly rentals on the marketplace for other people to use as an alternative to rental cars and Zipcar.

However, the metaphorical car-sharing market has gotten pretty crowded over the past couple years, not to mention difficult. RelayRides had to suspend its service in New York City earlier this year after receiving a cease-and-desist letter from regulators.

The company launched a peer-to-peer rental service at the San Francisco International Airport in June in an effort to stand out from the competition.

Owners dropped off their car at a parking lot and take a free shuttle to and from the terminal. Meanwhile, arriving travelers can rent these cars for use until they depart again, and all vehicles get a complimentary carwash.

Ever since this effort, RelayRides started to soar in terms of customers and transaction values. The service is now active in 229 airports around the United States.

With this new model, RelayRides competes from FlightCar and SilverCar which both focus on airport car rentals.

Webb said that the long-term car rental market is worth $30 billion, and there’s a lot of untapped opportunity there. RelayRides customers can expect to pay as much as 40 percent less than traditional car rental companies.

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“By focusing on longer-term rentals and airports, we are now bringing the efficiencies of our peer-to-peer business model to a much larger market, which means greater potential for growth,” he said.”

RelayRides is based in San Francisco and has raised $19 million to date. It recently closed $5.9 million in new funding from August Capital, Google Ventures, and Zipcar president Mark Norman, which partly supported the acquisition of competitor Wheelz in May.

RelayRides formed a partnership with General Motors in 2012, whereby renters could unlock OnStar enabled cars from their phones. Webb said GM will no longer be integrated into the RelayRides reservation system but will still stay on as investors and advisors.