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The Car Rental Industry




  • The car rental market is a multi-billion dollar sector of america economy. America segment of this marketplace averages about $18.5 billion in revenue annually. Today, around 1.9 million rental vehicles that service the united states segment of the market. Moreover, there are many rental agencies besides the industry leaders that subdivide the entire revenue, namely Dollar Thrifty, Budget and Vanguard. Unlike other mature service industries, the rental car market is highly consolidated which naturally puts potential newbees at the cost-disadvantage given that they face high input costs with reduced potential for economies of scale. Moreover, the majority of the profit is generated by a few firms including Enterprise, Hertz and Avis. To the fiscal year of 2004, Enterprise generated $7.4 billion as a whole revenue. Hertz arrived second position with about $5.2 billion and Avis with $2.97 in revenue.

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    There are numerous factors that shape the competitive landscape of the car hire industry. Competition comes from two main sources throughout the chain. For the vacation consumer’s end of the spectrum, competitors are fierce not merely as 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 established a network of dealers over 90 % the leisure segment. Around the corporate segment, on the other hand, level of competition is very strong on the airports since that segment is under tight supervision by Hertz. As the industry underwent a huge economic downfall lately, they have upgraded the scale of competition within almost all of the companies which survived. Competitively speaking, the rental car industry is a war-zone since many rental agencies including Enterprise, Hertz and Avis on the list of major players embark on a battle of the fittest.

    Over the past few years the rental car industry makes quite a lot of progress to facilitate it distribution processes. Today, around 19,000 rental locations yielding about 1.9 million car rentals in the US. Due to the increasingly abundant quantity of rental car locations in the united states, strategic and tactical approaches are considered as a way to insure proper distribution throughout the industry. Distribution takes place within two interrelated segments. About the corporate market, the cars are distributed to airports and hotel surroundings. About the leisure segment, alternatively, cars are distributed to agency owned facilities that are conveniently located within most major roads and metropolitan areas.

    During the past, managers of car hire companies accustomed to rely on gut-feelings or intuitive guesses to make decisions about how many cars to own in a particular fleet or even the utilization level and gratifaction standards of keeping certain cars in one fleet. Your methodology, it absolutely was very difficult to conserve a degree of balance that could satisfy consumer demand and the desired a higher level profitability. The distribution process is fairly simple throughout the industry. To start with, managers must determine the number of cars that must be on inventory on a daily basis. Because a very noticeable problem arises when a lot of or otherwise not enough cars are available, most car hire companies including Hertz, Enterprise and Avis, work with a "pool” the band of independent rental facilities that share a quantity of vehicles. Basically, together with the pools available, rental locations operate better simply because they reduce the risk of low inventory or else eliminate rental-car shortages.
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