HIRE PURPOSE (From the Economist of Sept 13th 2014) Hertz’s departing boss may have foreseen the future of car rentals BOOTLEGGERS and bank-robbers were among the first to use car-hire firms when they got going in the 1920s. Nowadays their customers are more likely to be tired and irritable travellers, picking up the keys at an airport hire desk, lacking the energy to quibble with all those optional extras being loaded on to the bill. It is a big business—worldwide turnover last year was about $37 billion. But a wave of consolidation in recent years has left just three firms—Hertz, Avis Budget and Enterprise—with 95% of the market in America and a sizeable share elsewhere. So it ought to be a cosy oligopoly, with the dominant firms feeling no need to compete vigorously. There are two reasons why it may make sense for Hertz to sacrifice short-term profits for market share. Smartphone apps for car rentals are killing the hire counter, even at airports, so Hertz (and Avis Budget) will need to replace the easy profits those counters generate. And becoming even bigger may be the best defence against a rising wave of competition from car-sharing schemes of various types, some backed by carmakers. This week Renault said it would join a new electric-car-sharing venture, for which it will make the vehicles. Daimler’s Car2Go service operates in about 30 cities in Europe and America. Avis Budget, recognising the emerging threat, spent $500m last year buying Zipcar, the world’s largest example of a “car club”, a form of sharing in which vehicles are parked on the streets and users can rent them, using a swipe-card, by the hour. In theory, the giant hire firms are well-placed to operate the car-club model: conventional rentals peak during the week, whereas club-car use peaks at weekends, so they can achieve high utilisation rates by shifting cars between the two services. economist/news/business/21617004-hertzs-departing-boss-may-have-foreseen-future-car-rentals-hire-purpose
Posted on: Fri, 12 Sep 2014 10:01:44 +0000
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