The Car Rental Industry

  • The car rental companies are a multi-billion dollar sector of the US economy. The US segment of this marketplace averages about $18.5 billion in revenue 12 months. Today, there are approximately 1.9 million rental vehicles that service the united states segment of the market. Additionally, 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 marketplace is highly consolidated which naturally puts potential new comers in a cost-disadvantage because they face high input costs with reduced chance of economies of scale. Moreover, the majority of the profit is generated by a number of firms including Enterprise, Hertz and Avis. To the fiscal year of 2004, Enterprise generated $7.4 billion altogether revenue. Hertz arrived second position with about $5.2 billion and Avis with $2.97 in revenue.


    There are lots of factors that shape the competitive landscape in the car hire industry. Competition emanates from two main sources through the entire chain. For the vacation consumer’s end from the spectrum, competitors are fierce not only because the companies are saturated and well guarded by industry leader Enterprise, but competitors operate at a price disadvantage together with smaller market shares since Enterprise has established a network of dealers over Ninety percent the leisure segment. Around the corporate segment, conversely, level of competition is very strong with the airports since that segment is under tight supervision by Hertz. For the reason that industry underwent a massive economic downfall in recent times, they have upgraded the dimensions of competition within a lot of the businesses that survived. Competitively speaking, the rental car market is a war-zone since several rental agencies including Enterprise, Hertz and Avis one of the major players embark on a battle in the fittest.

    During the last number of years the rental-car industry makes significant amounts of progress to facilitate it distribution processes. Today, around 19,000 rental locations yielding about 1.9 million car rentals in america. Due to the increasingly abundant quantity of rental-car locations in the usa, strategic and tactical approaches are looked at to be able to insure proper distribution through the entire industry. Distribution comes about within two interrelated segments. For the corporate market, the cars are given to airports and hotel surroundings. Around the leisure segment, conversely, cars are distributed to agency owned facilities which can be conveniently located within most major roads and metropolitan areas.

    During the past, managers of car hire companies utilized to depend upon gut-feelings or intuitive guesses to produce decisions about how many cars to get in the particular fleet or the utilization level and performance standards of keeping certain cars in a fleet. Achievable methodology, it absolutely was hard to maintain a a higher level balance that will satisfy consumer demand along with the desired level of profitability. The distribution process is reasonably simple during the entire industry. Firstly, managers must determine the number of cars that must definitely be on inventory on a daily basis. Want . very noticeable problem arises when a lot of or not enough cars are available, most car hire companies including Hertz, Enterprise and Avis, utilize a "pool” which is a number of independent rental facilities that share a quantity of vehicles. Basically, with all the pools in place, rental locations operate more effectively given that they prevent low inventory or even eliminate car rental shortages.
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