Friday, 31 May 2013

Cheap Car Rental: Booking Holiday and Business Car Rental

When seeking cheap car rental, many people prefer to book holiday or business car hire in advance. Car hire is usually a must for most business trips, unless you are being picked up at the airport. Driving a company car is fine for short trips, but when you have long distances to travel, or even overseas, then you have to hire a car and you want something appropriate for your needs.
Holiday car rental can be even more important to most people, particularly if they have large families involving two adults and three or four children. It's bad enough having two children in the back of a small car let alone three! You likely know what I mean!
On vacation you might need a 4x4 or even a people carrier (strange name) that can fit your whole family comfortably and without complaints the whole way! These are not always available at airports, so you could have a problem if you don't book in advance. The same is true of more prestigious business cars such as 7-Series BMW, Mercedes or similar, and for these you will almost certainly have to book your business car rental in advance.
That's fine if you are seeking cheap car rental in your own country, but you may have difficulty doing so when traveling abroad. It's difficult enough booking a car in Hawaii when you live in Colorado, but try making an advance booking in Kenya when you live in Australia! Wouldn't it be great if you could find a simple way to book business car hire or a car for your holidays from your own home? Or have your secretary do it for you without tearing her hair out?
Most people prefer to book their car in advance when going on vacation or for business trips. Cheap car rental is easier to get by booking early online, and by doing so they make sure they get the car they need, and not just 'what's available'. Others don't seem to bother about forward booking of hire cars: they will book air tickets and train tickets in advance but leave their cars to luck!
Cheap Car Rental Cost Advantage
There are several advantages of booking your holiday car rental in advance, not the least being cost. Most car hire firms will charge less for an advance booking than if you simply turn up at the desk, so booking your vacation or business car rental in advance will probably save you money - particularly if you book a car online. Sometimes that's not possible with business trips, but you should at least know when your flight is due to arrive at its destination. You can book your car online in advance for that time and likely get a better price than somebody walking off the plane and trying to get cheap car rental at the desk.
Better Choice of Cars
There are other advantages though, not the least being the choice of cars you may be offered. Booking car hire in advance enables you choose the car you want - at least up to a point. If you hire a car from the airport you are restricted to what they have available: not just what is available for airport car rental, but to what is left, particularly if you are near the back of the queue!
It's not easy to find a car to suit you if you have five or six in your family, and lots of luggage. In fact, you might not find anything and have to pay for a couple of taxis to your hotel so that they can help you out with renting a car big enough for your needs. It is far better to have booked your holiday car rental in advance.
Cheap Car Rental Price Comparisons
If you know the type of vehicle you need, you should be able to compare cheap car rental prices across car hire firms and also across models that meet your specifications. By hiring a car in advance you should be able to achieve that by entering your needs into a search engine and be offered a range of vehicles in order of price for any country you want.
Perhaps you have different collection and drop-off points, so how would that affect the cost of your car hire? Is it easy to search over a number of car hire firms or do you have to visit the web pages of each separately? How about searching over a range of countries? If you live in the USA and are traveling to Austria or Switzerland for some skiing, wouldn't you like to be able to book the car you want and be able to get the best price for it?
3 Kids and a Mini!
These things are not easy to do and people generally settle for trying to get as near the head of the queue as possible at immigration and customs, and reach that car hire desk as quickly as they can. Then you have the problem of how many others have hired cars that day, and is the type of business car rental you need still available. It's all worry and stress you can do without. What if you can't get a car? It doesn't bear thinking about! 3 kids and a wife, and you failed to get anything but a mini! That might be taking cheap car rental a step too far!

Budget Car Rental: Awesome Success Story

Budget Car Rental company, known as Budget Rent A Car System, Inc, has been renting out automobiles since 1958. With 1900 locations worldwide, Budget Car Rental is one of the best known rental companies in the world. The company is a subsidiary of a publicly traded corporation, the Cendant Corporation. Cendent is a global provider of services for business and consumers alike in both the travel and real estate markets.
Budget Car Rental was originally created in 1958. The idea was that a company needed to exist for the "budget minded" renter. The company took off, and today is a leader in the car rental industry. The company attributes its success to continuing to appeal to budget minded renters by offering quality vehicles and great customer service.
Budget car rental not only rents out cars to the budget minded traveler, but they also rent out moving trucks for hauling. With the same philosophy that helped the car rental business to take off, Budget car rental has managed to become one of the leaders in the moving industry for those looking to get a vehicle to use to move them. Cheaper than a mover, the company offers trucks in a variety of sizes in addition to rental and purchase of moving accessories like boxes, tape, dollies, straps, and cloths to cover your belongings in the move.
When it comes to car rentals, though, that is where budget care rental really shines. For many people, selecting from the models of cars, trucks, and SUVs they have available is the best part. Budget offers small, medium, large, SUV, and specialty vehicles for rent. Small cars refers to compact economy models, mediums are intermediate full sized sedans, large are premium luxury sedans, SUV.s are full sized, and specialty vehicles include vans, mini-vans, and convertibles. So there is something there for everyone.
As for location, budget car rental can be found almost anywhere you might need to rent a vehicle. They are readily available at most every major airport worldwide. They are also available in many high traffic locations and near auto repair centers so that renting a car to use while yours is being worked on is quick and easy. In many cases, the cost may even be covered by your insurance company.
Budget car rental also is a great partner for website affiliation or if you are a travel agent. For those who want to advertise Budget on their website, commissions are earned each time a rental is made from their site. Travel agents can also sign up to earn commission and rewards when they help to book rentals through Budget.

Best Car Rental Tips - Savings and Great Rental Service Guaranteed

Many of us think that renting a car is quite expensive. Well, you do not really get a rented car for free but you can shave off a few dollars from the rent amount if you know how to get cars rental discounts. Aside from that, you can always maximize the amount of money you pay by getting the best car rental service around. Here are some of the best cars rental tips that you can use the next time you book yourself a car for personal or business reasons:
1. Book online.
If you want to have both convenience and savings at the same time, then you might want to book and reserve online. The best car rental companies often have websites where you can get not only useful rental information but also a means to book and make a reservation. Bigger companies even have online car galleries where you can choose your preferred rental car. Booking online gives you this convenience plus savings on the amount or rental money you have to pay. By booking online, you can make use of coupon codes and discounts. You can shave off 5% to 15% of the rental charge instantly if you enter a valid coupon code upon booking.
2. Book early but return the rented car on time.
Some of the best car rental companies often offer the early bird or early booking promo to all customers. If you book well in advance then you can shave off a neat amount from the car rental fee. However, it is also important to know that you must return the car on time to avoid late return charges. Booking your reservation early can also help you choose the car you prefer. This is applicable especially to smaller rental companies which often have limited car options. Booking early can also help you avoid the rental rush during peak seasons.
3. Avail of Loyalty or VIP memberships.
Car rental agencies usually offer loyalty programs as well as VIP memberships. These are meant to encourage return customers. If you are the type of person who rents cars often then it would be more practical to avail of these promos. As a loyalty program member, you can get discounts upon cars rental bookings. Also, some companies which often get the services of cars rental agencies are given automatic VIP membership for their employees. Check with your company so you can get the best car rental price or package for business or personal use.
4. Understand the rental terms.
Reading the terms and conditions of cars rental agreements seem to be pretty obvious but not all of us take the time to actually understand them. Sometimes, we are surprised by hidden costs or surprise charges. The best way to avoid them is to carefully understand the agreement or cars rental contract. That way, you will never have to pay more than what you expect and get the best car rental experience in return.
5. Opt for long term bookings.
You can also get a discounted car rental rate if you book for longer periods. If you know that you will need a rental service for a number of days, then you should already book the desired car for the entire duration. Booking by the day can lead you to a more expensive accumulated car lease amount.

Major Car Rental Companies

Choosing the right car rental company depends on several factors. The top car rental companies provide fast, friendly, and efficient services. The introduction of the Internet has made locating car rental companies simpler than ever before. With the listing of top and reliable car rental companies available, individuals can find the one that perfectly suits their needs.
Selecting the top car rental company is not a difficult job, provided the car rent strategy is planned well in advance. It is advisable to rent cars in advance to get a reasonable rate. Cars can also be rented online. Those who travel often can always rent car online. In such cases, it is advisable to stick to one particular car rental company. Some companies provide good services even at discounted rates.
Top car rental companies offer extensive car fleets to their clients. They also arrange for specific car models if needed by their clients. In order to rent any luxurious car models, individuals have to book well in advance.
Along with all these aspects, individuals also have to keep the insurance needs in mind. Top car rental companies usually offer rental car insurance together with their services. Some companies convince individuals to go for those insurance policies. Hence, it is important to be careful while reviewing all those insurance policies. Individuals can get in touch with representatives of car rental companies to get more information on the insurance offers.
When individuals decide to rent a car, they will have to sign a contract with the car rental company. Hence, it is important to closely read the contract before signing. The contract will contain terms as regards the time the car has to be returned and responsibilities of users while the car is in their possession. The contract may also include how far individuals can travel, what they can and cannot use the car for and the responsibilities of the rental company.
Top car rental companies may provide child seats, delivery and collection options, fuel buy options, and ski racks if individuals need them. There are several top car rental companies ready and willing to serve customers. It is important to shop carefully, compare prices, check on the company's credibility, and be aware of the rules established by the chosen company.

Car Rental Lowest Rates Vs Good Bargain

Many people approach Car Rental as a lowest-price-possible contest rather than to concentrate on the value of the deal they eventually would get, in terms of what type of car, what's included (air conditioning, automatic gear shift etc') as well as what type of service they are buying.
The thing is, Car Rental market is very competitive one and rates differences for comparable quality and service are relatively small, sometimes as small as $10 to $20. These minuet price differences are going to vanish in the wind when you consider the long lines and lost time at the cheapest renter counter, drop charges for remote destinations, late return fines, and gasoline inflated rates as well as other service charges you didn't think about when you shopped for the "best deal".
Don't get us wrong, we don't like to pay higher prices more than you do. We do recommend to shop around and check the various rates available, especially when it's so easy to do it via the Internet at comparison sites.
All we say here you need to consider other things beside the price and when you compare please make sure you compare apples to apples and not apples to pears.
Things to consider when ordering a rented a car
Who is using the car, are you by yourself on a business trip or you are traveling with the whole family? How much luggage are you going to have, does the car you are thinking about is big enough to have you all plus all your hand luggage and big suitcases? If not, consider to change to a mini van or a car with extra large trunk.
Do you need an Infant seat or a child booster? make sure it is mentioned clearly with your order, usually there is a shortage of these seats and they are provided for extra charge. Check the state laws for where you are traveling.
A new law in Denver for instance, requires Booster Seats for all 4 and 5 year olds who are not 55 inches tall.
Do you actually need the car in the town or city at the first few days? If not, consider to take a taxi, a bus, a train or the hotel shuttle into the city and when it's time for you to go out of town and travel around, then, rent the car from the city location and by that save up to 15% on Air-Port charges as well as on city parking fees.
Are you going to a very warm and humid destination? If yes, it's recommended to order a car with air conditioning, usually the price difference is negligible, the problem is that it's not available in all destinations like in some European countries.
Most major rental car companies allow for unlimited mileage in the same state, but it's a good idea to check their policy before confirming. Many smaller local independent companies charge mileage after 100-200 free miles per day.
As mentioned before price is not the only factor to consider when choosing a car rental company. If you choose a very small, no-name company, don't expect them to provide you with service across all nation or continent, what would you do if the car is needed to be replaced or serviced for some reason?
Frequent or Preferred Renter Programs and affiliations
Frequent renter programs, Like airlines and hotels, major car rental companies track their customers' rental histories and offer preferential service to loyal customers. Most of the major companies offer frequent renter programs that are similar to airline frequent-flyer programs and hotel frequent-guest programs.
Preferred renter clubs, Most major car rental companies also offer preferred renter programs or clubs (one example is the Hertz #1 Club). When you belong to one of these clubs, you get preferential treatment, including automatic upgrades when those cars are available. You can join these programs at any time, even if you are a first-time renter with that company.
While basic-level club memberships are often free, higher-level memberships (as in the Hertz #1 Gold Club, which allows you to bypass the rental counter) generally come with a price tag. What most people don't realize is that it's often possible to avoid the membership fee by simply writing or calling your car rental company and asking them to waive it. They will do it because the car rental industry is very competitive, and they want your business
If you're still faced with a steep rate, try getting discounts based on your affiliations with organizations like AARP, AAA or others. These discounts are usually not great, but they are better than nothing.
In addition, always check for corporate rates if applicable to your situation.
Car Rental Insurance
Some of the Insurance terms seem to be confusing, let's try to clear them out first.
CDW - Collision Damage Waiver.
LDW - Loss Damage Waiver.
PDW - Physical Damage Waiver.
PAI - Personal Accident Insurance.
PEC - Personal Effects Coverage.
ALI - Additional Liability Insurance.
Many of the Credit Cards have most of these coverage, therefore it's not mandatory to purchase excessive coverage. It's better to check this issue with your travel agent, insurance agent and your credit card company a head of time. Some Car rental companies require that you show proof of insurance.
Also be aware that your personal insurance probably doesn't apply to your rental car when traveling overseas. All this is somewhat complicated and at times confusing because there are no industry standards for terminology and policies vary by locations.
Important things to check and do before leaving the Air-Port
After a long flight and the waiting in lines for your luggage and afterwards for your keys at the car rental counter, it is understandable you just want to take the rented car and drive away to your hotel, but wait! Here is a list of things you must check first.
Start by making a careful check around the car, look for any small dents or scratches, in case you find some, don't be lazy, go back to the office and ask a representative of the rental company to write down all of these dents, ask for a copy of that report. Other wise you might be responsible for damages you didn't perform.
Open the trunk, make sure you have a spare tire, a jack and set of tools, there is noting more irritating than to find out in the middle of nowhere that you don't have a jack when you need to replace a flat tire.
Many car companies will provide you with an extra key if you ask for one. This can come in handy for some of us who are absent minded.
It is recommended to spend some time to get acquainted with the cars' features and switches, make sure you know where the lights switches are, how to operate the windshield wipers, the air conditioner and even set your favorite radio stations as well as set your side mirrors. It might be quiet frustrating to fight with the new switches while driving, when all of a sudden it starts raining.
Make sure you have a map and it's better to spend few more minutes and plan your driving route.
Last but certainly not least, If you have a lot of luggage, don't park the car in the parking lot and go for lunch, in many countries, this is an easy target for
the thieves, It's better to buy some sandwiches and beverages in the air-port, or stop somewhere along the way for refreshing but never leave the car unattended.
In case you are involved in a Car Accident
These are the most important pieces of information to collect from the involved parties: full name, mailing address, telephone number, insurance details, and drivers' license number.
Also try to get the names and contact information of anyone who witnessed the accident. Make a note of the vehicle's make, color, brand and license plate number.
Try to pinpoint the exact time and location of the accident. If the police get involved, ensure that you receive a copy of their report. Don't forget to inform your insurance agent immediately and notify the car rental company.
They will let you know about their accident procedure.
If you purchased insurance through the car rental company, they will have to make the claim. If there is damage to the rental car, there will be much paper work to complete
Make sure any involved parties are ok. Any injuries should be taken care of ASAP.
Call the police and/or ambulance (if necessary), and then call the car rental agency. Be as cooperative as possible. The car rental agency will have its own policies regarding accidents.
Exchange information with the affected parties.
Try to record everything on the scene. Your notes should include details of the accident, identification of the autos and people involved, and the names and badge numbers of all emergency personnel.
Take pictures if possible. If you are on vacation, you will probably have a camera handy already.
File an accident report with the police, and report the claim to your own credit card company or insurance company.
When returning the Car
Make all necessary arrangements to return the car on time, that includes looking the location in the map especially if you return the car in a foreign city.
Late return charges are high and arbitrary, secondly, if you are late, you probably won't have the time to fill the car with gasoline yourself and the rental company will charge you exorbitant inflated gasoline rates.
In case you return the car in a city location on Sunday, it might be that the station will be deserted, it will let you in via automated gate, make sure to take the card and leave it over the dashboard, this is your recorded time of arrival.
In addition, lock the car, take the keys plus your rental contract and insert them into the designated box.

Car Rental Industry

Market Overview
The car rental industry is a multi-billion dollar sector of the US economy. The US segment of the industry 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. In addition, there are many rental agencies besides the industry leaders that subdivide the total revenue, namely Dollar Thrifty, Budget and Vanguard. Unlike other mature service industries, the rental car industry is highly consolidated which naturally puts potential new comers at a cost-disadvantage since they face high input costs with reduced possibility of economies of scale. Moreover, most of the profit is generated by a few firms including Enterprise, Hertz and Avis. For the fiscal year of 2004, Enterprise generated $7.4 billion in total revenue. Hertz came in second position with about $5.2 billion and Avis with $2.97 in revenue.
Level of Integration
The rental car industry faces a completely different environment than it did five years ago. According to Business Travel News, vehicles are being rented until they have accumulated 20,000 to 30,000 miles until they are relegated to the used car industry whereas the turn-around mileage was 12,000 to 15,000 miles five years ago. Because of slow industry growth and narrow profit margin, there is no imminent threat to backward integration within the industry. In fact, among the industry players only Hertz is vertically integrated through Ford.
Scope of Competition
There are many factors that shape the competitive landscape of the car rental industry. Competition comes from two main sources throughout the chain. On the vacation consumer’s end of the spectrum, competition is fierce not only because the market is saturated and well guarded by industry leader Enterprise, but competitors operate at a cost disadvantage along with smaller market shares since Enterprise has established a network of dealers over 90 percent the leisure segment. On the corporate segment, on the other hand, competition is very strong at the airports since that segment is under tight supervision by Hertz. Because the industry underwent a massive economic downfall in recent years, it has upgraded the scale of competition within most of the companies that 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 of the fittest.
Growth
Over the past five years, most firms have been working towards enhancing their fleet sizes and increasing the level of profitability. Enterprise currently the company with the largest fleet in the US has added 75,000 vehicles to its fleet since 2002 which help increase its number of facilities to 170 at 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. In addition, Avis has increased its fleet from 210,000 in 2002 to 220,000 despite recent economic adversities. Over the years following the economic downturn, although most companies throughout the industry were struggling, Enterprise among the industry leaders had been growing steadily. For example, annual sales 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 a year for the past four years. Since 2002, the industry has started to regain its footing in the sector as overall sales grew from $17.9 billion to $18.2 billion in 2003. According to industry analysts, the better days of the rental car industry have yet to come. Over the course of the next several years, the industry is expected to experience accelerated growth valued at $20.89 billion each year following 2008 "which equates to a CAGR of 2.7 % [increase] in the 2003-2008 period.”
Distribution
Over the past few years the rental car industry has made a great deal of progress to facilitate it distribution processes. Today, there are approximately 19,000 rental locations yielding about 1.9 million rental cars in the US. Because of the increasingly abundant number of car rental locations in the US, strategic and tactical approaches are taken into account in order to insure proper distribution throughout the industry. Distribution takes place within two interrelated segments. On the corporate market, the cars are distributed to airports and hotel surroundings. On the leisure segment, on the other hand, cars are distributed to agency owned facilities that are conveniently located within most major roads and metropolitan areas.
In the past, managers of rental car companies used to rely on gut-feelings or intuitive guesses to make decisions about how many cars to have in a particular fleet or the utilization level and performance standards of keeping certain cars in one fleet. With that methodology, it was very difficult to maintain a level of balance that would satisfy consumer demand and the desired level of profitability. The distribution process is fairly simple throughout the industry. To begin with, managers must determine the number of cars that must be on inventory on a daily basis. Because a very noticeable problem arises when too many or not enough cars are available, most car rental companies including Hertz, Enterprise and Avis, use a "pool” which is a group of independent rental facilities that share a fleet of vehicles. Basically, with the pools in place, rental locations operate more efficiently since they reduce the risk of low inventory if not eliminate rental car shortages.
Market Segmentation
Most companies throughout the chain make a profit based of the type of cars that are rented. The rental cars are categorized into economy, compact, intermediate, premium and luxury. Among the five categories, the economy sector yields the most profit. For instance, the economy segment by itself is responsible for 37.7 percent of the total market revenue in 2004. In addition, the compact segment accounted for 32.3 percent of overall revenue. The rest of the other categories covers the remaining 30 percent for the US segment.
Historical Levels of Profitability
The overall profitability of the car rental industry has been shrinking in recent years. Over the past five years, the industry has been struggling just like the rest of the travel industry. In fact, between the years 2001 and 2003 the US market has experienced a moderate reduction in the level of profitability. Specifically, revenue fell from $19.4 billion in 2000 to $18.2 billion in 2001. Subsequently, the overall industry revenue eroded further to $17.9 billion in 2002; an amount that is minimally higher than $17.7 billion which is the overall revenue for the year 1999. In 2003, the industry experienced a barely noticeable increase which brought profit to $18.2 billion. As a result of the economic downturn in recent years, some of the smaller players that were highly dependent on the airline industry have done a great deal of strategy realignments as a way of preparing their companies to cope with eventual economic adversities that may surround the industry. For the year 2004, on the other hand, the economic situation of most firms have gradually improved throughout the industry since most rental agencies have returned far greater profits relative to the anterior years. For instance, Enterprise realized revenues of $7.4 billion; Hertz returned revenues of $5.2 billion and Avis with $2.9 billion in revenue for the fiscal year of 2004. According to industry analysts, the rental car industry is expected to experience steady growth of 2.6 percent in revenue over the next several years which translates into an increase in profit.
Competitive Rivalry Among Sellers
There are many factors that drive competition within the car rental industry. Over the past few years, broadening fleet sizes and increasing profitability has been the focus of most companies within the car rental industry. Enterprise, Hertz and Avis among the leaders have been growing both in sales and fleet sizes. In addition, competition intensifies as firms are constantly trying to improve their current conditions and offer more to consumers. Enterprise has nearly doubled its fleet size since 1993 to approximately 600,000 cars today. Because the industry operates on such narrow profit margins, price competition is not a factor; however, most companies are actively involved in creating values and providing a range of amenities from technological gadgets to even free rental to satisfy customers. Hertz, for example, integrates its Never-Lost GPS system within its cars. Enterprise, on the other hand, uses sophisticated yield management software to manage its fleets.
Finally, Avis uses its OnStar and Skynet system to better serve the consumer base and offers free weekend rental if a customer rents a car for five consecutive days Moreover, the consumer base of the rental car industry has relatively low to no switching cost. Conversely, rental agencies face high fixed operating costs including property rental, insurance and maintenance. Consequently, rental agencies are sensitively pricing there rental cars just to recover operating costs and adequately meet their customers demands. Furthermore, because the industry experienced slow growth in recent years due to economic stagnation that resulted in a massive decline in both corporate travel and the leisure sector, most companies including the industry leaders are aggressively trying to reposition their firms by gradually lessening the dependency level on the airline industry and regaining their footing in the leisure competitive arena.
The Potential Entry of new Competitors
Entering the car rental industry puts new comers at a serious disadvantage. Over the past few years following the economic downturn of 2001, most major rental companies have started increasing their market shares in the vacation sector of the industry as a way of insuring stability and lowering the level of dependency between the airline and the car rental industry. While this trend has engendered long term success for the existing firms, it has heightened the competitive landscape for new comers. Because of the severity of competition, existing firms such as Enterprise, Hertz and Avis carefully monitor their competitive radars to anticipate Sharpe retaliatory strikes against new entrants. Another barrier to entry is created because of the saturation level of the industry.
For example, Enterprise has taken the first mover advantage with its 6000 facilities by saturating the leisure segment thereby placing not only high restrictions on the most common distribution channels, but also high resource requirements for new firms. Today, Enterprise has a rental location within 15 miles of 90 percent of the US population. Because of the network of dealers Enterprise has established around the nation, it has become relatively stable, more recession proof and most importantly, less reliant on the airline industry compared to its competitors. Hertz, on the other hand, is utilizing the full spectrum of its 7200 stores to secure its position in the marketplace. Basically, the emergence of most of the industry leaders into the leisure market not only drives rivalry, but also it varies directly with the level of complexity of entering the car rental industry.
The Threat of Substitute
There are many substitutes available for the car rental industry. From a technological standpoint, renting a car to go the distance for a meeting is a less attractive alternative as opposed to video conferencing, virtual teams and collaboration software with which a company can immediately setup a meeting with its employees from anywhere around the world at a cheaper cost. In addition, there are other alternatives including taking a cab which is a satisfactory substitute relative to quality and switching cost, but it may not be as attractively priced as a rental car for the course of a day or more. While public transportation is the most cost efficient of the alternatives, it is more costly in terms of the process and time it takes to reach one’s destination. Finally, because flying offers convenience, speed and performance, it is a very enticing substitute; however, it is an unattractive alternative in terms of price relative to renting a car. On the business segment, car rental agencies have more protection against substitutes since many companies have implemented travel policies that establish the parameters of when renting a car or using a substitute is the best course of action.
According to Tracy Esch, an Advantage director of marketing operations, her company rents cars up to a 200-mile trip before considering an alternative. Basically, the threat of substitute is reasonably low in the car rental industry since the effects the substitute products have do not pose a significant threat of profit erosion throughout the industry.
The Bargaining Power of Suppliers
Supplier power is low in the car rental industry. Because of the availability of substitutes and the level of competition, suppliers do not have a great deal of influence in the terms and conditions of supplying the rental cars. Because the rental cars are usually purchased in bulk, rental car agents have significant influence over the terms of the sale since they possess the ability to play one supplier against another to lower the sales price. Another factor that reduces supplier power is the absence of switching cost. That is, buyers are not affected from purchasing from one supplier over another and most importantly, changing to different supplier’s products is barely noticeable and does not affect consumer’s rental choices.
The Bargaining Power of Buyers
While the leisure sector has little or no power, the business segment possesses a significant amount of influence in the car rental industry. An interesting trend that is currently underway throughout the industry is forcing car rental companies to adapt to the needs of corporate travelers. This trend significantly reduces supplier power or the rental firms’ power and increases corporate buyer power since the business segment is excruciatingly price sensitive, well informed about the industry’s price structure, purchase in larger quantities and they use the internet to force lower prices. Vacation buyers, on the other hand, have less influence over the rental terms. Because vacationers are usually less price sensitive, purchase in lesser amounts or purchase more infrequently, they have weak bargaining power.
Five Forces
Today the car rental industry is facing a completely different environment than it did five years ago. Competitively speaking, the revolution of the five forces around the car rental industry exerts some strong economic pressure that has significantly tarnished the competitive attractiveness of the industry. As a result of the economic downturn in recent years, many companies went under namely Budget and the Vanguard Group because their business infrastructure succumbed to the untenability of the competitive environment. Today, very few firms including Enterprise, Hertz and Avis return a slightly above-average revenue compared to the rest of the industry. Realistically speaking, the car rental sector is not a very attractive industry because of the level of competition, the barriers to entry and the competitive pressure from the substitute firms.
Strategic Group Mapping
As a moderately concentrated sector, there is a clear hierarchy in the car rental industry. From an economic standpoint, disparities exist from a number of dimensions including revenue, fleet size and the market size each firm holds in the market place. For instance, Enterprise dominates the industry with a fleet size of approximately 600,000 vehicles along with its market size and its level of profitability. Hertz comes in second position with its number of market shares and fleet volume. In addition, Avis ranks third on the map. Avis is among one of the companies that is having issues recovering its revenue margins from prior to the economic downturn. For instance, in 2000 Avis returned revenues of approximately $4.23 billion. Over the course of the next several years following 2000, the revenue of Avis has been significantly lower than that of 2000. As a way of reducing uncertainty most companies are gradually lessening the level of dependency on the airline industry and emerging the leisure market. This trend may not be in the best interest of Hertz since its business strategy is intricately linked to the airports.
Key Success Factors
There are many key success factors that drive profitability throughout the car rental industry. Capacity utilization is one of the factors that determines success in the industry. Because rental firms experience loss of revenue when there are either too few or too many cars sitting in their lots, it is of paramount importance to efficiently manage the fleets. This success factor represents a big strength for the industry since it lowers if not completely eliminates the possibly of running short on rental cars. Efficient distribution is another factor that keeps the industry profitable. Despite the positive relationship between fleet sizes and the level of profitability, firms are constantly growing their fleet sizes because of the competitive forces that surround the industry. In addition, convenience is one of the crucial attributes by which consumers select rental firms. That is, car rental consumers are more prone to renting cars from firms that have convenient rental and drop off locations. Another key success factor that is common among competing firms is the integration of technology in their business processes. Through technology, for instance, the car rental companies create ways to meet consumer demand by making renting a car a very agreeable ordeal by adding the convenience of online rental among other alternatives. Furthermore, firms have integrated navigation systems along with roadside assistance to offer customers the piece of mind when renting cars.
Industry Attractiveness
There are many factors that impact the attractiveness of the car rental industry. Because the industry is moderately concentrated, it puts new market entrants at a disadvantage. That is, its low concentration represents a natural barrier to entering the industry as it allows existing firm to anticipate sharp retaliations against new entrants. Because of the risks associated with entering the industry among other factors, it is not a very attractive sector of the marketplace. From a competitive standpoint, the leisure market is 90 percent saturated because of the active efforts of Enterprise to dominate this sector of the market. On the other hand, the airport terminals are heavily guarded by Hertz. Realistically speaking, entry in the industry offers low profitability relative to the costs and risks associated. For most consumers, the main determining factors of choosing one company over another are price and convenience. Because of this reason, rental firms are very circumspect about setting their rates and that generally force even the industry major players in the position of offering more to the consumers for less just to remain competitive. Hertz, for example, offers wireless internet to its customers just to add more convenience to their travel plans. Avis on the other hand, offers free weekend specials if a customer rents a car for five consecutive weekdays. Based on the impact of the five forces, the car rental sector is not a very attractive industry to potential new market entrants.
Conclusion
The rental car industry is in a state of recovery. Although it may seem like the industry is performing well financially, it is nonetheless gradually regaining its footing relative to its actual economic position within the last five years. As a way of insuring profitability, besides seeking market shares and stability, most companies throughout the chain have a common goal that deals with lowering the level of dependency on the airline industry and moving toward the leisure segment. This state of motion has engendered some fierce competition among industry competitors as they attempt to defend their market shares. From a futuristic perspective, the better days of the car rental industry have yet to come. As the level of profitability increases, I believe that most of the industry leaders including Enterprise, Hertz and Avis will be bounded by the economic and competitive barriers of mobility of their strategic groups and new comers will have a better chance of infiltrating and realizing success in the car rental industry.