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Has Consolidation Killed the Car Rental Entrepreneur?

In the midst of a new round of car rental company buyouts, the successful independent is becoming a rare commodity.

Just when you thought the car rental industry was safe from further consolidation, think again. The ground is shifting under our feet, yet again. This isn’t the forum for those details. But let’s just say we’re in the midst of another round of smaller companies being devoured by bigger ones.

Good times, these are in car rental. We’re all grateful for them. But the good times are also good times to sell.

Any time a successful independent is taken over, or even when a successful franchisee is bought out by its parent company, it makes me a little sad. These are entrepreneurs, the ones who took a chance and hung their own shingle, those who built their own unique service offering in an era of increasing commoditization.

Like most folks, I get whimsical at the thought of a disappearing American Main Street, along with diners, drive-ins and the local farmer.

But like most consumers, I don’t shop local just to take a stand for the little guy; I do if it’s convenient, if there’s a value-add or if I’ve established a personal relationship. In other words, nostalgia is of little use when it comes to a sustainable business model.

Consolidation is a natural, inevitable consequence of any maturing industry. The companies built by those entrepreneurs prevailed because of convenience and value, and it is logical that they’d be bought out by larger companies with convenience, value and economies of scale.

In the business-to-business media world, consolidation isn’t viewed too happily. It’s good to have diverse viewpoints to write about and a diverse advertiser base as well. The touch-points for 97% of the car rental industry have been reduced to three headquarter cities: St. LouisParsippany, NJ and Estero, Fla. For the uninitiated, it’s a scary thought.

On the other hand, consolidation (among other factors) has brought a sustained period of positive pricing, which has aided profit margins and spurred excitement in the investment community to a level not seen in many years. And that helps everyone, large and small.

While rental rates are up, customer service levels are too. In J.D. Power & Associates’ annual survey, customer satisfaction scores among the major car rental companies have risen each year since 2008. I’d like to think that consumers are beginning to understand the value of their dollar when it comes to renting a car.

Sure, there’s a great temptation to stand on a lonely Main Street and sigh. But that turns a blind eye to the need to adapt to change.

The entrepreneur hasn’t gone away. Entrepreneurship springs anew in new business models that challenge the transportation status quo yet again. And I believe there is still room in this new landscape for the upstart to thrive.

Sharon Faulkner, executive director of the American Car Rental Association, says she gets more and more inquiries these days from individuals looking to start a car rental company.

In another positive metric, the Car Rental Show – designed for the franchisee, the independent and the entrepreneur – is thriving, having doubled attendance in the five years coming out of the Recession. The Car Rental Show has grown its traditional North American base and expanded into a truly global event, as an increasing number of foreign car rental companies make the pilgrimage each year to learn from the world’s most mature market.

This expansion has created opportunity for a new event, Auto Rental Summit, which will grow again in its third year.

As the way we get around continues to emerge, there will always be room for the entrepreneur. As technology levels the playing field, the opportunity for the newcomer is greater than ever before. Those who find a niche, adapt a solid plan and offer superior customer service will have more than a fighting chance to survive.

We’ll be here to write about it.

Comments

  1. Neil Abrams [ August 26, 2014 @ 12:51PM ]

    Agree with your conclusion. As long as there is capitalism, there will be entrepreneurs. My firm was founded with the goal of providing guidance to car rental entrepreneurs. Today, 32 years later, we are doing more business with more entrepreneurs than ever before. Go figure.

  2. Nick DiPrima [ August 28, 2014 @ 05:33AM ]

    I've been lucky to work with some great start-ups in both airport and local markets, and am also seeing smaller companies now expanding to new cities, cautiously. There's certainly room in the market for the entrepreneur today.

  3. Casey Skelton [ September 2, 2014 @ 09:57AM ]

    With regards to further M&A activity, who is even left to feed on for the Big 3?

  4. Dave Funston [ September 5, 2014 @ 09:06AM ]

    A timely editorial and was a great introduction to the article on Fox's 25th Anniversary. I too really miss all the independents and licensees that were so helpful in launching my career in rental fleet.

  5. Ken Elder [ September 11, 2014 @ 08:57AM ]

    "Deja Vu..." Back in the '60s and '70s, there were the three big companies and they were effective in keeping most of the RAC business just for themselves. Lack of any real competition allowed them to raise rates, get a little sloppy, and still make money. A bunch of entepreneurs seized that opportunity and started Budget, Dollar, Thrifty, and dozens of start-ups. These folks developed new markets and business models to the extent they were soon able to nible at the under bellies of the big guys. The big guys tried and tried to emulate the little companies, with mixed results. Sooo...it became apparent, that it would be better to buy and consolidate in order to become the big three "All over again". (Amazingly, the Govt OK'd the deals.)

    It is probably a good bet--that the lack of any real competition will allow big guys to raise rates and get sloppy again. Attention: Entepreneurs--keep your eyes open. (Thanks Yogi Berra, for inspiring these thoughts.)

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Author Bio

Chris Brown

Executive Editor

Chris is the executive editor of Business Fleet Magazine and Auto Rental News. He covers all aspects of the fleet world.

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