Car Rental Revenues, But Not Rates, Grow
Hertz corporate customers absorbed a slight increase in their car rental rates during the second quarter of 2007 while the Avis Budget Group reported rates lower than 2006, according to second-quarter earnings reports released last month by the companies.
For contract renewals during the second quarter, Hertz increased its prices by an average of 3 percent, according to the company. The pricing contributed to a 7.5 increase in worldwide car rental revenues during the quarter to a record $1.74 billion.
Rental rate revenue per transaction day actually was slightly down for the quarter compared with 2006. The average number of transaction days, however, was on the rise, largely because of a heavier emphasis on Hertz's growth in the off-airport market, which often deals in longer-term insurance replacement rentals. Hertz also increased its fleet size by 7.9 percent to 473,000 vehicles for the quarter, growth it attributed to increased rental demand.
Avis Budget, meanwhile, reported that its commercial rental pricing was about flat in the second quarter compared with 2006, and leisure pricing was down. Avis Budget Group chairman and CEO Ronald Nelson attributed it to a particularly competitive pricing environment.
Overall revenues for the quarter, however, were up 4 percent to a record $1.5 billion and car rental revenues grew by 7 percent. Ancillary sources, including gas, insurance and the Where2 navigational device, spurred revenue growth, up 18 percent for the quarter.
Avis Budget also is opening 73 new off-airport locations with another 74 in the pipeline.
Even though fleet costs are up industrywide, the company expected second-half 2007 results to be considerably stronger than first-half results.
"This reflects continued growth in volume and rigorous expense controls," Nelson said.
Dollar Thrifty Automotive Group, which has the majority of its business on the leisure side, reported that vehicle rental revenue grew 10.4 percent to $431.1 million for the quarter because of an increase in both daily revenue and volume. Dollar Thrifty also saw increased fleet costs and expected stronger numbers in the second half of the year, but said improvement will not come solely from rate increases.
"While raising rental rates is the key to offset these vehicle-related increases, we are also taking steps to further reduce operating costs throughout the organization in an effort to reinforce our objective to be the low-cost provider in the rental car industry," Dollar Thrifty president and CEO Gary Paxton said in the company's earnings report.
Dollar Thrifty said it is more aggressively targeting corporate customers as a strategy to grow revenues. It also is adding high-end vehicle lines in certain markets, expanding global positioning unit availability, plans to open 50 new stores to open this year and acquire more franchises.