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, you can find approximately 1.9 million rental vehicles that service the united states segment of the market. Furthermore, there are lots of 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 since they face high input costs with reduced chance for economies of scale. Moreover, a lot 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 totally different environment than it did five years ago. According to Business Travel News, vehicles are being rented until they will have accumulated 20,000 to 30,000 miles until they are relegated to the used car 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. In fact, among the industry players only Hertz is vertically integrated through Ford.
Scope of Competition
There are numerous factors that shape the competitive landscape of the automobile 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 only because the market is saturated and well guarded by industry leader Enterprise, but competitors operate at a cost disadvantage along with smaller market shares since Enterprise has generated a network of dealers over 90 percent the leisure segment. On the organization segment, alternatively, competition is quite strong at the airports since that segment is under tight supervision by Hertz. Because 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 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 amount 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 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 luxury car rental miami 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 days gone by four years. Since 2002, the has began 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 better days of the rental car industry have yet to come. Over the course of another several years, the is likely 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.?
Over the past few years the rental car industry has made a lot 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. Because of the increasingly abundant number of car rental locations in the US, 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, on the other hand, cars are distributed to agency owned facilities that are conveniently located within most major roads and urban centers.