The car rental industry 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. Nowadays, there are roughly 1.9 million rental vehicles that support the US section of this marketplace. Additionally, there are Luxury Car Rental Cleveland of rental agencies aside from the industry leaders that subdivide the entire revenue, namely Dollar Thrifty, Budget and Vanguard. Contrary to other mature service businesses, the rental car industry is highly consolidated which obviously puts potential new comers at a cost-disadvantage since they face high input costs with reduced chance of economies of scale. Moreover, most of the gain is generated by a few firms including Enterprise, Hertz and Avis. For the fiscal year of 2004, Enterprise generated $7.4 billion in total revenue.
Level of Integration
According to Business Travel News, vehicles are being leased until they have accumulated 20,000 to 30,000 miles till they are relegated to the used car sector whereas the turn-around mileage was 12,000 to 15,000 kilometers five years ago. Due to slow industry growth and narrow profit margin, there is no imminent threat to backward integration inside the industry. In fact, among the industry players only Hertz is integrated through Ford.
Scope of Competition
There are lots of factors that form the competitive landscape of the auto rental market. Competition comes from two main sources throughout the series. On the vacation consumer’s end of the spectrum, competition is fierce not only because the market is saturated and well guarded by business leader 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 section. On the corporate section, on the other hand, competition is very strong at the airports because that segment is under tight supervision by Hertz. Because the business underwent a massive financial downfall in recent years, it has updated the scale of competition inside the majority of the businesses which survived. Competitively speaking, the rental car market is a war-zone as most rental agencies including Enterprise, Hertz and Avis among the significant players engage in a battle of the fittest.
Over the previous five decades, most firms have been working towards enhancing their fleet sizes and increasing the level of profitability. Enterprise now the company with the largest fleet in america has added 75,000 vehicles into its fleet since 2002 which help raise its number of facilities to 170 at the airports. Hertz, on the other hand, has additional 25,000 vehicles and broadened its international presence in 150 counties as opposed to 140 in 2002. Over the years after the economic downturn, although most companies across the industry were fighting, Enterprise one of the industry leaders were growing steadily. As an example, 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 per cent a year for the previous four decades. According to industry analysts, the better days of the rental car sector have yet to come. Over the course of the upcoming several years, the industry is expected to experience accelerated growth valued at $20.89 billion each year following 2008”that equates to a CAGR of 2.7 % [increase] in the 2003-2008 period.
THE CAR RENTAL INDUSTRY