Car Rental Majors: Looking Forward

On their fourth quarter and full-year 2010 earnings calls, the three public car rental companies look into the crystal ball on prepaid rentals, franchising, new remarketing channels and growth opportunities.

The three public car rental companies, Hertz Corporation, Avis Budget Group and Dollar Thrifty Automotive Group, hold their annual earnings calls in late winter.

While the P&L scorecards grab the headlines, underneath the financial big picture, each company presents an operations analysis on what's new, what's working and what we might expect in the near future. Aggregated, this information is a good indicator of where the industry is headed.

The Merger

As of this writing, nothing has been announced. Both Dollar Thrifty and Avis Budget expect to have greater clarity around the FTC's official position "in the near future."  Based on statutory requirements dictated by the FTC and when both companies individually submitted their "certifications of substantial compliance" with the FTC's Second Request, the companies had expected feedback at the end of March and the first week in April.

Dollar Thrifty made it clear that there is no written or verbal agreement with Avis Budget at this time. If the companies sign a definitive agreement within the 12-month period from the announcement of the original Hertz deal, then a termination fee would be due Hertz. On Dollar Thrifty's call, CFO Cliff Buster said he believes the deal "runs off October 1."

Look to Avis, not Dollar Thrifty, as the point on all regulatory discussions.

No-show Fees to Prepaid Rentals

Avis Budget went public recently to say the company is shifting its efforts from instituting a no-show fee to enhancing its prepaid rentals model. Budget launched a prepaid option on its Web site in late 2009, followed by Avis in November of last year. Avis said it booked more than 20,000 prepaid reservations in January, its first full month of deployment. According to its earnings call, the company has begun offering prepay rates in its voice channel, one notoriously plagued by no-shows.

Avis Budget says its prepay revenue will "increase significantly in 2011," while its "no-show experience has improved remarkably" and the company is "realizing the cost savings in utilization..."

Hertz has had a prepaid product in place for a year and a half domestically that has generated $100 million in gross revenues for the company. Prepaid is more than 60 percent of Hertz's European revenues, and that includes direct consumer bookings as well as online agents and brokers. The model will be rolled out in 20 new countries during this quarter.

Hertz Corporation Chairman and CEO Mark Frissora called it "one of the important elements of our growth strategy" and he expects double-digit growth this year.

Dollar Thrifty is content to stay on the sidelines right now. "We are clearly the smallest of the big four players in the industry, and we certainly will follow the industry," said Scott Thompson, president and CEO. "But I think some of the other larger players have to lead on that particular issue."

A Growth in Franchising

Hertz is expanding its franchisee network "to accelerate growth in certain key U.S. car rental markets, which, we believe, can happen faster under entrepreneurial, local ownership," said Frissora in a recent statement.

Hertz franchisees currently operate from 278 locations in the U.S., including 47 airports. Initially, Hertz will transition select corporate markets to franchisee operations, which will convert $100 million in corporate revenue to franchise revenue. Frissora wouldn't predict an upside on additional revenues "until we really get more intelligence around that and continue to experiment with that concept."

Dollar Thrifty sees its franchise revenue growing by double digits in 2011 as it works to expand franchise opportunities overseas. However, franchises don't represent instant revenue, as they take time to implement and gain traction, the company maintains.

Thompson said the opening up of the credit markets will have a positive effect on entrepreneurs getting financing for a franchise operation, which is preferable to the company itself providing its own capital to franchise startups.

CONTINUED:  Car Rental Majors: Looking Forward
« Previous  |  1  2  |  Next »

Comment On This Story

Comment: (Max. 10000 characters)  
Please leave blank:
* Please note that every comment is moderated.


Newsletter: Sign up to receive latest news, articles, and much more.

Read the latest

Auto Focus Blog: A blog covering fleets, auto rental and the business of cars

Trends Moving the Truck Market

Storylines that emerged from the 2018 Work Truck Show include the increasing need for on-site productivity, inclusion of active safety systems in trucks, DPF frustrations affecting product decisions, data management, and the growing link between fleet management and company revenue.

MIT Study Reinforces the Newfound Importance of Fleet

Uber and Lyft drivers make far less when factoring vehicle expenses, though the actual numbers are now in dispute. A proper lifecycle cost analysis would’ve helped, and shows the benefit of collaboration with fleet professionals.

What a Connected Fleet Means to Avis (and Car Rental)

Counter bypass is just the beginning. The promise of a “data-driven ecosystem” that connects renters with the rental agency, retail services, and even the city is a better managed fleet, an improved user experience, and new revenue opportunities during the rental itself.

Job Finder: Access Top Talent. Fill Key Positions.