Abrams Travel Data Issues Year 2000 Forecast for U.S. Car Rentals
16 February 2000
Abrams Travel Data Issues Year 2000 Market Forecast for U.S. Car Rental Industry
LONG BEACH, Calif.--Feb. 16, 2000--Prospects for the U.S. car rental industry look positive for 2000, according to Abrams Travel Data Services (ATD), a Long Beach, CA-based research firm specializing in analytical market data on the auto rental, travel service, and fleet industries.Jon LeSage, vice president and director of research for ATD says the following trends should add up to a healthy business climate for car rental:
Market Growth: The U.S. travel industry is anticipating another year of full airplanes, a steady inflow of international visitors, and American consumers willing to spend extra income on vacations. The car rental industry, an integral spoke in the travel wheel, should benefit from continued U.S. economic growth and a healthy travel outlook. Corporations have been working hard to trim travel costs in the face of costly airfares; car rental has not been adversely affected by this trend, as business travelers depend on rental cars in cities where other ground transportation modes aren't as cost effective or convenient.
Pricing: The industry should expect to see price increases in the 3-5% range on the retail/leisure side, and 2-3% in corporate accounts. Strong customer demand, for both airport and local market locations, along with solid controls on the volume of fleet vehicles for the major car rental companies, should create a business environment where price increases can be maintained throughout the year.
Performance: Fleet costs, which account for nearly half of the car rental industry's overhead, appear to be stable this year, as manufacturer programs have reached price equilibrium, along with the cost of capital for funding fleets. The industry is only increasing its fleet volume about 2% over 1999, to accommodate growth in customer demand. Companies are containing other cost categories through technology, streamlining corporate overhead structures, and integrating overlapping administrative functions.
Internet: Car rental companies are working hard to get consumers to book more transactions through their own websites, or the websites of strategic internet partners to lower reservation and distribution costs. A primary focus this year will be direct connection links between key customers such as large corporations and car rental companies. Car rental companies, like most other businesses, are also looking for ways to expand their e-commerce presence and tap into the enormous potential for transaction and revenue growth through the internet.
Corporate Strategies: As car rental companies are vulnerable to downturns in travel, most are diversifying into ancillary businesses to offset the negative impact of this business cycle. The major companies have been making investments in recent years to broaden their bases, such as Hertz's growth in construction equipment rental, fleet leasing, and truck rental, Avis' acquisition of fleet management giant PHH Vehicle Management, and Budget's integration of Ryder TRS. AutoNation USA, the nation's largest auto retailer, is spinning off ANC Rental Corp., a new publicly traded company consisting of the Alamo, National, and CarTemps brands. Major companies should continue to make acquisitions, integrate their holdings into expanded product offerings, and migrate into other car rental segments such as insurance replacement and local rentals.
Globalization: Global growth will continue for major car rental companies, as the global economy stabilizes, key ancillary industries such as auto manufacturing and airlines move further into globalization, and the mandate by car rental investors for long-term growth motivates the majors to continue expansion through location openings, securing overseas franchise networks, and creating strategic alliances with other travel service suppliers. Europe will play a key role in the plans of U.S. companies, as Europe continues to experience car rental industry consolidation, international alliances, and growth spurred by the euro and business regulation harmonization.
ATD is a business unit of Purchase, NY-based Abrams Consulting Group, Inc., the leading specialized consultancy serving the auto rental, fleet, and allied industries worldwide since 1982. ATD utilizes its proprietary resources and in-depth understanding of the complexities of the auto rental industry to produce customized research reports and targeted consumer and business-to-business surveys which assist clients in making strategic business decisions.