A rise in air travel due to growth in income and corporate budgets will drive demand
Los Angeles, CA (PRWEB) July 08, 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 in recent years. In response, operators cut expenses and searched for revenue 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,” according to IBISWorld industry analyst Nima Samadi. “As such, revenue is forecast to grow from 2012 to 2017.”
Revenue is expected to fall from its peak of $31.0 billion in 2007 to $30.5 billion in 2012, reflecting a 0.3% annualized decline. Most of this decline happened in 2009, when the number of air travelers, per capita disposable income and corporate profitability all decreased. “Car rental companies adapted to the difficult economic environment by aggressively cutting expenses and searching for new markets,” adds 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 as the leisure market, which is viewed by Car Rental industry insiders as the segment with the most growth potential. For example, Hertz purchased Advantage Rent-A-Car to gain better access to the price-oriented leisure travel market. The largest companies, including major players Enterprise Rent-A-Car and Avis Budget Group, enjoy large marketing budgets and market power that grant national brand recognition, relationships with airlines and hotels and other advantages smaller companies cannot match. Successful smaller companies carve out a market or geographic niche. Unsuccessful smaller companies cease operations or get acquired. Concentration is expected to continue during the next five years, especially as smaller players operating within the same regions merge.
Demand and revenue are expected to increase as air travel rates continue to grow in 2012, with Car Rental industry revenue growing an estimated 5.5% in 2012. In addition to the rise in air travel, growth will be underpinned by rising personal income and more generous corporate travel budgets. However, volatile fuel prices and increases in airfares threaten that forecast. For more information, visit IBISWorld’s Car Rental in the US industry report 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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