The car rental industry is really a multi-billion dollar sector of the united states economy. The US segment of the industry averages about $18.5 billion in revenue per year. Today, you can find approximately 1.9 million rental vehicles that service the US segment of the market. Furthermore, there are various rental agencies aside from the industry leaders that subdivide the total revenue, namely 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 given that they face high input costs with minimal chance for economies of scale. Moreover, London luxury car hire 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 in total 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 back. In accordance with Business Travel News, vehicles are increasingly being rented until they will have accumulated 20,000 to 30,000 miles until they’re 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 absolutely no imminent threat to backward integration within the. In fact, on the list of industry players only Hertz is vertically integrated through Ford.
Scope of Competition
There are numerous factors that shape the competitive landscape of the car rental industry. Competition originates from two main sources throughout the chain. On the vacation consumer?s end of the spectrum, competition is fierce not merely 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, however, competition is quite strong at the airports since that segment is under tight supervision by Hertz. Because the industry underwent an enormous economic downfall recently, it has upgraded the scale of competition within a lot of the companies that survived. Competitively speaking, the rental car industry is really a war-zone as most rental agencies including Enterprise, Hertz and Avis among the major players engage in a battle of the fittest.
Growth
In the last five years, most firms have already been working towards enhancing their fleet sizes and increasing the level of profitability. Enterprise currently the company with the largest fleet in america has added 75,000 vehicles to its fleet since 2002 which help increase its amount of facilities to 170 at the airports. Hertz, alternatively, has added 25,000 vehicles and broadened its international presence in 150 counties instead of 140 in 2002. In addition, Avis has increased its fleet from 210,000 in 2002 to 220,000 despite recent economic adversities. Over time following the economic depression, although most companies through the entire industry were struggling, Enterprise on the list of 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 into a growth rate of 7.2 percent a year for days gone by four years. Since 2002, the industry has started to regain its footing in the sector as overall sales grew from $17.9 billion to $18.2 billion in 2003. In accordance with industry analysts, the higher days of the rental car industry have yet ahead. Over the course of another several years, the industry is likely to experience accelerated growth valued at $20.89 billion each year following 2008 “which compatible a CAGR of 2.7 % [increase] in the 2003-2008 period.?
Distribution
Over the past couple of 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 amount of car rental locations in the US, strategic and tactical approaches are considered so as to insure proper distribution throughout the industry. Distribution occurs within two interrelated segments. On the corporate market, the cars are distributed to airports and hotel surroundings. On the leisure segment, however, cars are distributed to agency owned facilities that are conveniently located within most major roads and urban centers.