The Car Rental Industry
The vehicle rental market is a multi-billion dollar sector of the US economy. The US section of this business averages roughly $18.5 billion in revenue per year. Today, there are roughly 1.9 million rental vehicles that service the US section of this marketplace. In addition, there are many rental agencies aside from the industry leaders who subdivide the total earnings, namely Dollar Thrifty, Budget and Vanguard. Unlike other mature service industries, the rental car industry is highly consolidated which naturally puts potential new comers in a cost-disadvantage since they face high input prices with reduced possibility of economies of scale. Moreover, most of the gain is made by a few companies including Enterprise, Hertz and Avis. For the fiscal year of 2004, Enterprise made $7.4 billion in earnings.
Level of Integration
In accordance with Business Travel News, vehicles have been leased until they’ve gathered 20,000 to 30,000 miles till they are relegated to the used car industry whereas the turn-around mileage was 12,000 to 15,000 kilometers five years back. Because of Car Rental Cleveland Ohio and narrow profit margin, there is not any impending threat to backward integration within the industry. In reality, among the industry players just Hertz is vertically integrated through Ford.
Scope of Competition
There are many elements that form the competitive landscape of the car rental market. Competition comes from two chief sources throughout the chain. On the holiday customer’s end of the spectrum, competition is fierce not simply because the market is saturated and well guarded from industry pioneer Enterprise, but competitors operate at a cost disadvantage along with smaller market shares since Enterprise has established a network of traders over 90 percent the leisure segment. Since the industry underwent a huge financial downfall lately, it has upgraded the scale of competition inside most of the companies which survived. Competitively speaking, the rental vehicle industry is a war-zone as many rental agencies such as Enterprise, Hertz and Avis among the significant players participate in a battle of the fittest.
Over the previous five years, most companies have been working towards enhancing their fleet sizes and increasing the amount of profitability. Enterprise currently the firm with the largest fleet in america has additional 75,000 vehicles to its fleet since 2002 that help raise its number of amenities to 170 at the airports. Hertz, on the other hand, has added 25,000 vehicles and broadened its international presence in 150 counties as opposed to 140 in 2002. Over the years following the economic downturn, although most companies across the industry were struggling, Enterprise one of the industry leaders had been growing steadily. For instance, annual earnings 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 the previous four years. Since 2002, the business has started to recover its footing in the industry as total earnings grew from $17.9 billion to $18.2 billion in 2003. According to industry analysts, the greater days of the rental vehicle sector have yet to come. Over the course of the upcoming several decades, the industry is expected to undergo rapid growth valued at $20.89 billion each year following 2008”which equates to a CAGR of 2.7 % [increase] in the 2003-2008 period.