Thriving in the New Economy

When rental fleet sales are projected to dip to 1 million units this year (down from 2 million in 2006), when the wholesale market suffers 12 straight months of year-over-year declines and when the Big Three now stands for Toyota, Honda and Nissan, you know the auto rental industry is in an era of unprecedented change.

While news of declines in fleet, workforces and stock prices at the major RACs play out in the national media and SEC filings, Auto Rental News has gone local. We surveyed small franchisees and independent operators around the country for an analysis of how those serving the local market are getting along in the current economy. Their pulse is still beating; in fact, many are thriving.

While rentals are down 10-15 percent across the board, the pullback on leasing, the tight credit market for car loans and a steady stream of insurance replacement rentals are all having a positive effect on rental volume. Operators that are aggressively adapting to these new opportunities are reaping the rewards.

Riding the Economy
Operators report that holiday travel has been down—as much as 30 percent—and truck rentals have been hit hard. But most rental businesses are riding the wave of the local economy.

“The fishing lodges, guide captains and fishing captains are looking at a 20-40 percent drop in clientele this summer,” says Ryan Fahey of North Star Rent A Car in Sitka, Alaska. “So we adjusted our fleet about 20 percent.”

Fahey says he’s fortunate to have a captive audience and only one competitor, a major RAC, in town. The diversity of the national corporate store and value-priced independent is a comfortable mix, he says.

“Our cars are a lot busier than our trucks are,” says Herman Selmon of Justin Rentals in Trenton, N.J.

Tom Pendergast of Rent A Wreck in San Francisco sees the same shift. “Our commercial business is down quite a bit,” he says. “Businesses are not doing much around here now. But the car rental, surprisingly, is fairly strong.”

Pendergast says he gained some business when a competitor ceased renting 12-passenger vans to a local caterer. Pendergast put them in minivans; he may even pick up new minivans on the cheap.

Pendergast has had success with workers coming to San Francisco on temporary contracts, such as traveling nurses, which has resulted in month-long rentals.

“I’ve stayed pretty steady and I’ve even grown,” says Liesel Carter of Affordable Auto Rental in Portland, Ore. “A large part of this economy is based on agriculture, which is probably the least affected.”

Carter’s location is benefitting from a newly built plant with 2,000 construction workers who need temporary housing and transportation for themselves and their families.

CONTINUED:  Thriving in the New Economy
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