BEST CAR RENTAL Expert Interview

The car rental industry is really a multi-billion dollar sector of the US economy. The US segment of the 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. In addition, there are plenty of rental agencies besides 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 since they face high input costs with minimal possibility of economies of scale. Moreover, the majority of the profit is generated by way of a few firms including Enterprise, Hertz and Avis. car rental 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 totally different environment than it did five years back. According to Business Travel News, vehicles are 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, on the list of 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 price disadvantage alongside smaller market shares since Enterprise has established a network of dealers over 90 percent the leisure segment. On the organization segment, alternatively, competition is very 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 the majority of the companies that survived. Competitively speaking, the rental car industry is really a war-zone because so many rental agencies including Enterprise, Hertz and Avis on the list of major players take part 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 amount of profitability. Enterprise the company with the largest fleet in the US has added 75,000 vehicles to its fleet since 2002 that assist 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. In addition, Avis has increased its fleet from 210,000 in 2002 to 220,000 despite recent economic adversities. Over time following the economic downturn, although most companies throughout the industry were struggling, Enterprise on the list of industry leaders have 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 a 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. In accordance with industry analysts, the better days of the rental car industry have yet ahead. Over the course of the next several years, the industry is expected to experience accelerated growth valued at $20.89 billion every year following 2008 “which equates to a CAGR of 2.7 % [increase] in the 2003-2008 period.?

Distribution

Over the past few years the rental car industry has made a great deal of progress to facilitate it distribution processes. Today, there are approximately 19,000 rental locations yielding about 1.9 million rental cars in the US. As a result of increasingly abundant amount of car rental locations in the US, strategic and tactical approaches are considered to be able to insure proper distribution through the entire 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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