Rising incomes and corporate travel budgets are underpinning demand for car rentals
Los Angeles (PRWEB) March 29, 2013
Rising personal incomes, more generous corporate travel budgets and a rise in the number of foreign tourists visiting Canada have all underpinned the industry’s growth in demand and revenue. For these reasons, industry research firm IBISWorld has added a report on the Car Rental industry to its growing industry report collection.
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 began to recover from 2010 onward, and the industry's future looks brighter than its immediate past, although rising gas prices may slow the industry's recovery, says IBISWorld industry analyst Nima Samadi. As such, revenue is forecast to grow at an annualized rate of 3.5% from 2013 to 2018 to $4.9 billion.
Revenue is expected to grow from $3.5 billion in 2008 to $4.1 billion in 2013, reflecting a 3.0% annualized rise. The industry's largest declines happened in 2008 and early 2009, when the number of air travelers, per capita disposable income and corporate profitability decreased. Car rental companies adapted to the difficult economic environment by aggressively cutting expenses and searching for new markets. 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 industry insiders view as the segment with the most growth potential, says Samadi. For example, Hertz purchased Dollar Thrifty in 2012 to gain better access to the price-oriented leisure travel market. This trend is expected to result in the number of industry operators falling at an annualized rate of 3.2% during the five years to 2013. The Car Rental industry's concentration has increased during the five years to 2013, which 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 (although it later divested the brand) and Dollar Thrifty in 2012. In 2013, the largest companies include Enterprise Rent-A-Car, Hertz Rent-A-Car and Avis Budget Group.
The largest companies 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 typically establish themselves in a niche market or region. 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 during the remainder of 2013 and throughout 2014. In addition to the rise in air travel, rising personal incomes and more generous corporate travel budgets have underpinned growth. The industry has also been boosted by a rise in the number of foreign tourists visiting Canada, with estimated jumps of 3.1% and 2.2% in 2012 and 2013, respectively. For more information, visit IBISWorld’s Car Rental in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry rents and leases passenger cars without drivers, generally for short periods of time. Car rental agencies provide hearses, limousines and passenger cars, including automobiles, minivans and sport-utility vehicles (SUVs). Car rentals typically last a short time (30 days or fewer), while leasing agreements are for longer (12 months or more).
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US and Canadian industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.