BEST CAR RENTAL? It’s Easy If You Do It Smart
The car rental industry is a multi-billion dollar sector of the US economy. The US segment of the industry averages about $18.5 billion in revenue per year. Today, you can find approximately 1.9 million rental vehicles that service the united states segment of the market. In addition, there are many rental agencies aside from the industry leaders that subdivide the full total revenue, namely Dollar Thrifty, Budget and Vanguard. Unlike other mature service industries, the rental car industry is highly consolidated which naturally puts potential newbies at a cost-disadvantage given that they face high input costs with minimal chance for economies of scale. Moreover, a lot of the profit is generated by 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 ago. In accordance with Business Travel News, vehicles are increasingly being rented until they will 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 margin, there is 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 several factors that shape the competitive landscape of the car rental industry. Competition comes from two main sources through the entire chain. On the vacation consumer?s end of the spectrum, competition is fierce not only as the market is saturated and well guarded by industry leader Enterprise, but competitors operate at a price disadvantage along with smaller market shares since Enterprise has established a network of dealers over 90 percent the leisure segment. On the corporate segment, however, competition is quite strong at the airports since that segment is under tight supervision by Hertz. As the industry underwent an enormous economic downfall in recent years, it has upgraded the scale of competition within the majority of the companies that survived. Competitively speaking, the rental car industry is a war-zone because so many rental agencies including Enterprise, Hertz and Avis among the major players engage in a battle of the fittest.
In the last five years, most firms have been working towards enhancing their fleet sizes and increasing the level of profitability. Enterprise currently the company with the biggest fleet in america 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 instead of 140 in 2002. In addition, Avis has increased its fleet from 210,000 in 2002 to 220,000 despite recent economic adversities. Through the years following the economic downturn, although most companies throughout the industry were struggling, Enterprise among the industry leaders had been growing steadily. For instance, 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 the past 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. In accordance with industry analysts, the higher days of the rental car industry have yet ahead. Over the course of another several years, the is expected to experience accelerated growth valued at $20.89 billion each year following 2008 “which compatible a CAGR of 2.7 % [increase] in the 2003-2008 period.?
Over the past few years the rental car industry has made a lot of progress to facilitate it distribution processes. Today, you can find approximately 19,000 rental locations yielding about 1.9 million rental cars in the US. Because of sports car rental miami of car rental locations in the US, strategic and tactical approaches are taken into account to be able to insure proper distribution throughout the industry. Distribution takes place within two interrelated segments. On the organization market, the cars are distributed to airports and hotel surroundings. On the leisure segment, on the other hand, cars are distributed to agency owned facilities which are conveniently located within most major roads and metropolitan areas.