Dollar Thrifty Automotive Group: Online Discounting Case Solution

1. At what level of discounting (on Dollar.com and Thrifty.com) is DTAG indifferent to reservations made on a third-party website? 

For calculation of break-even level of discounting, we have calculated the individual revenue that would be generated for both scenarios i.e. from reservations made via third party websites and reservations made using DTAG's website. To do so, an estimate for a number of reservations in a day has been calculated using the revenue graph (2003 figure) provided in Exhibit - 1 in the case. Table - 1 in the excel sheet shows revenue, cost and profit calculations if third party websites were being used to make reservations. Table -2 displays the revenue, cost and profit figures when reservations are made using company website.

As mentioned in the case, DTAG's North American target market consisted majorly of price sensitive consumers who did not like to avail added perquisites, unlike usual business travelers. We have therefore looked up and retrieved the low cost rental fares from both websites (Dollar.com and Thrifty.com). Dollar.com has a “Lock Low and Go” package which seemed to be the most economical out of all types. The rental rate for this type is US$28.2 for its Pay Now service (Dollar Rent A Car, Inc, 2016). As for Thrifty.com, an economical rate of US$51.50 for Specialty Wild Car has been selected for analysis (Thrifty Car Rental, Inc, 2016). We have averaged out the two rates to get a single rate of US$40 for calculation purposes in Table -1.

Notice that the discount rates used to calculate the cost in both cases differ as given in the case and Exhibit - 2.  In Table - 3, a breakeven has been calculated for the level of discounting where DTAG would be completely indifferent between the two options primarily because, at this particular discount rate (.748 or 74.8 percent), profit from either option would be the same. Hence, no one option would then be given a preference over the other.