Why BEST CAR RENTAL Succeeds

December 28, 2023

The car rental industry is a multi-billion dollar sector of the united states economy. THE UNITED STATES segment of the industry averages about $18.5 billion in revenue a year. Today, there are approximately 1.9 million rental vehicles that service the united states segment of the market. Furthermore, there are plenty of rental agencies besides the industry leaders that subdivide the total revenue, namely Dollar Thrifty, Budget and Vanguard. rent a car Unlike other mature service industries, the rental car industry is highly consolidated which naturally puts potential new comers at a cost-disadvantage since they face high input costs with reduced possibility of economies of scale. Moreover, the majority of the profit is generated by way of a few firms including Enterprise, Hertz and Avis. For the fiscal year of 2004, Enterprise generated $7.4 billion altogether revenue. Hertz came in second position with about $5.2 billion and Avis with $2.97 in revenue.

Level of Integration

The rental car industry faces a completely different environment than it did five years back. According to Business Travel News, vehicles are increasingly being rented until they have accumulated 20,000 to 30,000 miles until they are relegated to the car or truck industry whereas the turn-around mileage was 12,000 to 15,000 miles five years ago. Due to slow industry growth and narrow profit percentage, there is absolutely no imminent threat to backward integration within the industry. In fact, among the industry players only Hertz is vertically integrated through Ford.

Scope of Competition

There are lots of factors that shape the competitive landscape of the car rental industry. Competition originates from two main sources through the entire chain. On the vacation consumer?s end of the spectrum, competition is fierce not merely because the market is saturated and well guarded by industry leader Enterprise, but competitors operate at a cost disadvantage alongside smaller market shares since Enterprise has generated a network of dealers over 90 percent the leisure segment. On the corporate segment, alternatively, competition is quite strong at the airports since that segment is under tight supervision by Hertz. As the industry underwent a massive economic downfall recently, it has upgraded the scale of competition within almost all of the companies that survived. Competitively speaking, the rental car industry is really a war-zone as most rental agencies including Enterprise, Hertz and Avis on the list of major players engage in a battle of the fittest.

Growth

In the last five years, most firms have already been working towards enhancing their fleet sizes and increasing the level of profitability. Enterprise the company with the biggest fleet in the US has added 75,000 vehicles to its fleet since 2002 which help increase its number of facilities to 170 at the airports. Hertz, on the other hand, has added 25,000 vehicles and broadened its international presence in 150 counties as opposed to 140 in 2002. Furthermore, Avis has increased its fleet from 210,000 in 2002 to 220,000 despite recent economic adversities. Over the years following the economic downturn, although most companies through the entire industry were struggling, Enterprise on the list of industry leaders had been growing steadily. For example, annual sales reached $6.3 in 2001, $6.5 in 2002, $6.9 in 2003 and $7.4 billion in 2004 which translated right into a growth rate of 7.2 percent per year for days gone by four years. Since 2002, the industry has started to regain its footing in the sector as overall sales grew from $17.9 billion to $18.2 billion in 2003. According to industry analysts, the higher days of the rental car industry have yet ahead. Over the course of another several years, the industry is likely to experience accelerated growth valued at $20.89 billion each year following 2008 “which equates to a CAGR of 2.7 % [increase] in the 2003-2008 period.?

Distribution

Over the past couple of years the rental car industry has made a great deal of progress to facilitate it distribution processes. Today, you can find approximately 19,000 rental locations yielding about 1.9 million rental cars in america. As a result of increasingly abundant amount of car rental locations in america, strategic and tactical approaches are considered to be able to insure proper distribution throughout the industry. Distribution takes place within two interrelated segments. On the corporate market, the cars are distributed to airports and hotel surroundings. On the leisure segment, however, cars are distributed to agency owned facilities that are conveniently located within most major roads and metropolitan areas.

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