A rise in air travel, due to growth in income and corporate budgets, will drive demand
Los Angeles, CA (PRWEB) February 18, 2012
The global recession put the brakes on the Car Rental industry, but rental agencies have slowly gotten back into gear as travel demand increased. Air travelers, the industry's primary revenue source, were staying put amid the economic uncertainty, poor income growth, rising unemployment and tighter corporate travel budgets of recent years. “In response,” says IBISWorld industry analyst Nima Samadi, “operators cut expenses and searched for revenue growth separate from airports.” Air travel only began to recover in 2010, and the industry's future looks brighter than its immediate past, though rising gas prices may slow the industry's recovery.
Revenue is expected to fall from its peak of $31.0 billion in 2007 at a rate of 0.3% over the five years to 2012. Most of this decline happened in 2009, when the industry's key external drivers (the number of air travelers, per capita disposable income and corporate profitability) all weakened. Reflecting the Car Rental industry’s struggles, operator concentration has increased over the past five years. This increase is attributable to merger and acquisition activity by the industry's major companies. For example, Enterprise Rent-A-Car acquired Vanguard Car Rental (which operated National and Alamo) in mid-2007, and Hertz acquired Advantage Rent a Car in April 2009. Other major companies in the industry include Avis Budget Group and Dollar Thrifty Automotive Group.
These large companies enjoy significant marketing budgets and market power that grant national brand recognition, relationships with airlines and hotels and other advantages smaller companies cannot match. However, even these major players were forced to change in the face of the recession. “Car rental companies adapted to the difficult economic environment by aggressively cutting expenses and searching for new markets,” says Samadi. Operators reduced head counts, closed unprofitable locations, decreased the size of their rental fleets and purchased fewer new cars in 2009. Some companies expanded into off-airport markets, including insurance replacement and car sharing, while others turned to acquisitions to penetrate market segments such the leisure market, which is viewed by industry insiders as the segment with the most growth potential.
Demand and revenue are expected to increase as air travel rates continue to grow in 2012. This growth is attributable to a rise in air travel, underpinned by rising personal income and more generous corporate travel budgets. However, rising fuel prices and the corresponding increase in airfares threaten this forecast. For more information, visit IBISWorld’s Car Rental report in the US industry page.
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IBISWorld industry Report Key Topics
Companies in this industry rent or lease passenger cars to customers. Car rentals typically last a short time (30 days or fewer) while leasing agreements are for longer (12 months or more). The industry excludes the rental or leasing of cars with drivers.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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