The Car Rental Industry

  • The car rental market is a multi-billion dollar sector of the usa economy. The usa segment of this marketplace averages about $18.5 billion in revenue a year. Today, roughly 1.9 million rental vehicles that service america segment with the market. Additionally, there are several rental agencies in addition to the industry leaders that subdivide the entire revenue, namely Dollar Thrifty, Budget and Vanguard. Unlike other mature service industries, the car rental companies are highly consolidated which naturally puts potential new comers at a cost-disadvantage because they face high input costs with reduced possibility of economies of scale. Moreover, almost all 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 in total revenue. Hertz started in second position with approximately $5.2 billion and Avis with $2.97 in revenue.


    There are several factors that shape the competitive landscape of the rental-car industry. Competition arises from two main sources throughout the chain. Around the vacation consumer’s end from the spectrum, levels of competition are fierce not simply as 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 generated a network of dealers over 90 percent the leisure segment. About the corporate segment, conversely, competition is very strong with the airports since that segment is under tight supervision by Hertz. Since the industry underwent a huge economic downfall in recent years, it's got upgraded the scale of competition within most of the companies that survived. Competitively speaking, the car rental marketplace is a war-zone since several rental agencies including Enterprise, Hertz and Avis among the major players engage in a battle from the fittest.

    Over the past number of years the rental-car industry has produced a great deal of progress to facilitate it distribution processes. Today, roughly 19,000 rental locations yielding about 1.9 million car rentals in america. Because of the increasingly abundant variety of rental-car locations in the united states, strategic and tactical approaches are considered to be able to insure proper distribution throughout the industry. Distribution comes about within two interrelated segments. For the corporate market, the cars are distributed to airports and hotel surroundings. For the leisure segment, conversely, cars are distributed to agency owned facilities which are conveniently located within most major roads and metropolitan areas.

    Before, managers of car rental companies utilized to depend upon gut-feelings or intuitive guesses to generate decisions about how exactly many cars to possess inside a particular fleet or the utilization level and satisfaction standards of keeping certain cars in a single fleet. With that methodology, it absolutely was tough to have a level of balance that would satisfy consumer demand and the desired a higher level profitability. The distribution process is fairly simple through the entire industry. To begin with, managers must determine the number of cars that really must be on inventory on a daily basis. Because a very noticeable problem arises when a lot of or otherwise not enough cars can be obtained, most rental-car companies including Hertz, Enterprise and Avis, work with a "pool” the group of independent rental facilities that share a fleet of vehicles. Basically, with the pools in position, rental locations operate better since they reduce the risk of low inventory otherwise eliminate car hire shortages.
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