The auto rental industry is a multi-billion dollar sector of the US economy. The united states segment of this marketplace averages about $18.5 billion in revenue a year. Today, there are approximately 1.9 million rental vehicles that service the US segment of the market. Moreover, there are many rental agencies in addition to the industry leaders that subdivide the total revenue, namely Dollar Thrifty, Budget and Vanguard. Unlike other mature service industries, the car hire marketplace is highly consolidated which naturally puts potential newbees at the cost-disadvantage because they face high input costs with reduced potential for economies of scale. Moreover, most of the profit is generated by a few firms including Enterprise, Hertz and Avis. For that fiscal year of 2004, Enterprise generated $7.4 billion in total revenue. Hertz started in second position with approximately $5.2 billion and Avis with $2.97 in revenue.
There are several factors that shape the competitive landscape of the car rental industry. Competition comes from two main sources through the entire chain. Around the vacation consumer’s end in the spectrum, levels of competition are fierce not simply because the marketplace is saturated and well guarded by leader in the industry Enterprise, but competitors operate at a price disadvantage as well as smaller market shares since Enterprise has produced a network of dealers over 90 percent the leisure segment. About the corporate segment, on the other hand, competitors are very strong in the airports since that segment is under tight supervision by Hertz. Since the industry underwent a tremendous economic downfall in recent times, it’s upgraded the scale of competition within the majority of the companies which survived. Competitively speaking, the rental-car industry is a war-zone as most rental agencies including Enterprise, Hertz and Avis among the major players engage in a battle with the fittest.
In the last couple of years the rental-car industry makes significant amounts of progress to facilitate it distribution processes. Today, around 19,000 rental locations yielding about 1.9 million rental cars in the united states. Due to the increasingly abundant amount of car hire locations in america, strategic and tactical approaches are taken into account as a way to insure proper distribution throughout the industry. Distribution happens within two interrelated segments. Around the corporate market, the cars are provided to airports and hotel surroundings. For the leisure segment, however, cars are provided to agency owned facilities that are conveniently located within most major roads and metropolitan areas.
During the past, managers of rental car companies utilized to depend on gut-feelings or intuitive guesses to generate decisions about how exactly many cars to possess inside a particular fleet or the utilization level and performance standards of keeping certain cars in a fleet. With this methodology, it was difficult to keep a a higher level balance that would satisfy consumer demand and also the desired level of profitability. The distribution process is reasonably simple during the entire industry. To start with, managers must determine the amount of cars that must be on inventory each day. Just because a very noticeable problem arises when a lot of or otherwise enough cars can be obtained, most rental car companies including Hertz, Enterprise and Avis, utilize a "pool” that is a gang of independent rental facilities that share a fleet of vehicles. Basically, using the pools set up, rental locations operate more effectively since they reduce the risk of low inventory or else eliminate rental car shortages.
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