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The Car Rental Industry





The automobile rental industry is a multi-billion dollar sector of the US economy. The US segment of the industry averages about $18.5 billion in revenue per year. Today, there are approximately 1.9 million rental vehicles that service the usa segment from the market. Moreover, there are numerous rental agencies in addition to the industry leaders that subdivide the complete revenue, namely Dollar Thrifty, Budget and Vanguard. Unlike other mature service industries, the rental car companies are highly consolidated which naturally puts potential newbees with a cost-disadvantage given that they face high input costs with reduced chance for economies of scale. Moreover, most of the profit is generated by a few firms including Enterprise, Hertz and Avis. For the fiscal year of 2004, Enterprise generated $7.4 billion altogether revenue. Hertz came in second position about $5.2 billion and Avis with $2.97 in revenue.

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There are lots of factors that shape the competitive landscape of the car rental industry. Competition emanates from two main sources during the entire chain. Around the vacation consumer’s end from the spectrum, competition is fierce not merely as the information mill saturated and well guarded by leader in the industry Enterprise, but competitors operate at a price disadvantage as well as smaller market shares since Enterprise has established a network of dealers over 90 percent the leisure segment. On the corporate segment, on the other hand, levels of competition are very good in the airports since that segment is under tight supervision by Hertz. Because the industry underwent a massive economic downfall recently, they have upgraded the size of competition within almost all of the firms that survived. Competitively speaking, the rental car market is a war-zone as most rental agencies including Enterprise, Hertz and Avis on the list of major players engage in a battle in the fittest.

During the last couple of years the car hire industry has made a great deal of progress to facilitate it distribution processes. Today, there are approximately 19,000 rental locations yielding about 1.9 million car rentals in the united states. Due to increasingly abundant variety of car hire locations in the usa, strategic and tactical approaches are looked at in order to insure proper distribution throughout the industry. Distribution takes place within two interrelated segments. About the corporate market, the cars are given to airports and hotel surroundings. On the leisure segment, conversely, cars are given to agency owned facilities which might be conveniently located within most major roads and metropolitan areas.

Previously, managers of car hire companies used to rely on gut-feelings or intuitive guesses to generate decisions regarding how many cars to possess in the particular fleet or even the utilization level and performance standards of keeping certain cars a single fleet. With that methodology, it absolutely was tough to keep a level of balance that might satisfy consumer demand as well as the desired level of profitability. The distribution process is rather simple through the entire industry. Firstly, managers must determine the volume of cars that must be on inventory every day. Just because a very noticeable problem arises when lots of or otherwise not enough cars can be obtained, most car rental companies including Hertz, Enterprise and Avis, make use of a "pool” which is a band of independent rental facilities that share a fleet of vehicles. Basically, with all the pools available, rental locations operate more proficiently simply because they prevent low inventory or even eliminate rental car shortages.
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