Market Overview
The vehicle rental industry is a multi-billion dollar industry of the US economy. The US segment of the business averages about $18.5 billion in revenue per year. Nowadays, there are approximately 1.9 million rental vehicles that service the US segment of this marketplace. In addition, there are lots of rental agencies besides the industry leaders who subdivide the total earnings, namely Dollar Thrifty, Budget and Vanguard. Unlike other mature service industries, the rental car market is highly consolidated which obviously puts prospective new comers in a cost-disadvantage since they confront high input prices with decreased possibility of economies of scale. Moreover, the majority of the gain is generated by a few firms including Enterprise, Hertz and Avis. For the financial year of 2004, Enterprise made $7.4 billion in earnings.
Level of Integration
The rental car industry faces a completely different environment than it did five decades ago. According to Business Travel News, vehicles are being leased until they’ve gathered 20,000 to 30,000 miles till they are relegated into the used car industry whereas the turn-around mileage was 12,000 to 15,000 miles five decades ago. Because of slow business growth and narrow profit margin, there is not any imminent threat to backward integration within the industry. In fact, among the industry players only Hertz is integrated through Ford.
Scope of Competition
There are lots of factors that shape the competitive landscape of the car rental industry. Competition comes from two chief sources throughout the series. On the holiday customer’s end of the spectrum, competition is fierce not simply because the market is saturated and well guarded by business leader Enterprise, but opponents operate at a price disadvantage along with smaller market shares since Enterprise has established a network of traders over 90% the leisure section. On the corporate section, on the other hand, competition is quite strong at the airports because that section is under tight supervision by Hertz. Since the business underwent a massive financial downfall lately, it has updated the scale of competition inside the majority of the businesses that survived. Competitively speaking, the rental vehicle market is a war-zone as most rental agencies such as Enterprise, Hertz and Avis one of the significant players participate in a battle of the fittest.
Within the previous five decades, most firms have been working towards enhancing their fleet sizes and raising the amount of profitability. Enterprise currently the firm with the largest fleet in the US has additional 75,000 vehicles into its fleet since 2002 that help raise its number of facilities to 170 in 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 Exotic Car Rental Ohio after the economic recession, although most companies across the sector 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 percent annually for the previous four years. According to business analysts, the greater days of the rental car sector have yet to come. Over the course of the next several years, the business is expected to experience accelerated growth appreciated at $20.89 billion annually following 2008”that equates to a CAGR of 2.7 percent [increase] in the 2003-2008 period.