June 12, 2021

The Car Rental Industry

Market Overview

The vehicle rental industry is a multi-billion dollar sector of the US economy. The us message of the industry averages about $18. 5 thousand in revenue a year. Today, there are approximately 1. 9 million rental vehicles that service the us message of the market. In addition, there are many rental agencies besides the industry leaders that subdivide the entire revenue, that is https://exoticmiamirentals.com/brand/lamborghini-car-rental-miami/ Dollar Thrifty, Budget and Vanguard. Unlike other mature service industries, the rental car industry is highly consolidated which naturally puts potential new comers at a cost-disadvantage simply face high input costs with reduced possibility of economies of scale. Moreover, most of the profit is generated by a few firms including Enterprise, Hertz and Avis. For the monetary year of 2004, Enterprise generated $7. 4 thousand in total revenue. Hertz came in second position with about $5. 2 thousand and Avis with $2. ninety-seven in revenue.

Level of Integration

The rental car industry faces a fully different environment than it did five years ago. According to Business Travel News, vehicles are increasingly being hired until they have accumulated 20, 000 to 30, 000 miles until they are relegated to the car industry whereas the turn-around gas mileage was 12, 000 to 15, 000 miles five years ago. Because of slow industry growth and narrow profit border, there is no forthcoming threat to backward integration within the industry. In fact, among the industry players only Hertz is vertically integrated through Honda.

Scope of Competition

There are many factors that shape the competitive landscape of the car rental industry. Competition comes from two main sources throughout the archipelago. On the vacation consumer’s end of the array, competition is fierce not only because the market is saturated and well secured by industry leader Enterprise, but competitors operate at a cost disadvantage along with smaller market shares since Enterprise has built a network of dealers over 90 percent the leisure message. On the corporate message, on the other hand, competition is very strong at the airfields since that message is under tight direction by Hertz. Because the industry undergo a massive economic downfall in recent years, it has upgraded the scale of competition within most of the companies that made it through. Competitively speaking, the rental car industry is a war-zone as most rental agencies including Enterprise, Hertz and Avis among the major players engage in a battle of the fittest.

Growth

Over the past five years, most firms have been working towards enhancing their navy sizes and increasing the quality of earning. Enterprise currently the company with the largest navy in the usa has added 75, 000 vehicles to its navy since 2002 that assist increase its number of facilities to 170 at the airfields. Hertz, on the other hand, has added 25, 000 vehicles and widened its international presence in a hundred and fifty counties as opposed to one hundred and forty in 2002. In addition, Avis has increased its navy from 210, 000 in 2002 to two hundred and twenty, 000 despite recent economic adversities. Over the years following the economic depression, although most companies throughout the industry were struggling, Enterprise among the 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 thousand in 2004 which translated into a growth rate of 7. 2 percent a year for the past four years. Since 2002, the has begun to regain its ground in the sector as overall sales grew from $17. 9 thousand to $18. 2 thousand in 2003. According to industry analysts, the better days of the rental car industry have yet to come. Over the course of the next several years, the is expected to experience accelerated growth valued at $20. fifth 89 thousand each year following 08 “which means 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 containing about 1. 9 million rental cars in the usa. Because of the increasingly abundant number of car rental locations in the usa, strategic and tactical approaches are taken into consideration in order to insure proper distribution throughout the industry. Distribution occurs within two interrelated portions. On the corporate market, the cars are distributed to airfields and hotel surroundings. On the leisure message, on the other hand, cars are distributed to agency owned facilities that are easily located within most major roads and places.

In the past, administrators of rental car companies used to rely on gut-feelings or intuitive guesses to make decisions about how many cars to have in a particular navy or the employment level and performance standards of keeping certain cars in one navy. With that technique, it was very difficult to maintain a straight of balance that would satisfy consumer demand and the desired level of earning. The distribution process is reasonably simple throughout the industry. To begin with, administrators must determine the number of cars that must be on inventory on a daily basis. Because a very noticeable problem arises when too many or not enough cars are available, most car rental companies including Hertz, Enterprise and Avis, use a “pool” which is a group of independent rental facilities that share a navy of vehicles. Basically, with the costly in place, rental locations operate more efficiently simply reduce the risk of low inventory if not eliminate rental car shortages.

Leave a Reply

Your email address will not be published. Required fields are marked *