Consolidation in the Car Rental Market Is Not So Bad

Consolidation in the Car Rental Market Is Not So Bad

The Federal Trade Commission granted the Hertz Corporation approval to takeover Dollar Thrifty Automotive Group earlier this year. The only condition that the company had to meet was selling its Advantage Rent-A-Car brand. The aim of this stipulation was to create a feasible competitor within the car rental market, but this didn’t work as planned. On November 5, Advantage filed for bankruptcy because it failed to secure a deal to buy 24,000 vehicles from Hertz due to a dispute about how much the fleet was worth. Now, Advantage will probably disappear, leaving the market with one less competitor. However, is it really a bad thing that there are fewer brands of rentals from which to choose?

Based on 2012 revenues, three main car rental giants control 95 percent of the market. Enterprise Holdings controls 48.7 percent with Enterprise Rent A Car, National Car Rental, Alamo Rent A Car and Enterprise Car Share. Avis Budget Group controls 20 percent with Avis Car Rental, Budget Car Rental and Zipcar. Hertz Corporation controls 26.3 percent with Hertz Rent-a-Car, Thrifty Car Rental, Dollar Rent A Car and Hertz On Demand.

These numbers show a huge imbalance in the car rental market due to mergers, but between these three organizations are 11 brands with varying prices for which consumers can rent a car. Many of the customers who rent the more than 50 million vehicles at airports every year find the variety overwhelming. The prices are not the same across the board, because each giant operates in different sectors, offering budget to premium services. Keeping the distinct character of each brand, the companies continue to compete in every sector, which gives consumers a variety of cost choices. The companies also compete for corporate and government contracts.

Meanwhile, the companies merge brand operations to make each run efficiently, such as centralizing back office functions and moving managers between brands. This saves the overall organization money, which helps lower prices for customers. Consolidated companies are also able to negotiate better with vehicle manufactures on the purchase of new cars for rental fleets, lowering vehicle costs. Additionally, they make deals with airlines and hotels to offer travel packages that bring down prices for customers. These are all good reasons why consolidation in the rental market is not so bad.

The loss of another small car rental agency like Advantage Rent A Car may not make a difference big enough for the market to notice. It is also likely that consolidation has come to an end in the market because regulators will be more careful about allowing only two competitors to rule the market.

Posted by George Daniels on Sunday November 10 2013, 4:08 AM EST. All trademarks acknowledged. Filed under Featured News, Travel. Comments and Trackbacks closed. Follow responses: RSS 2.0