Avis Budget Group has been focusing generally on raising prices and specifically on ensuring corporate business is profitable. For the third quarter, the company reported a 2 percent year-over-year increase in commercial pricing, the third consecutive quarter of such growth, which had been generated primarily through higher pricing in the small business segment. "But," according to CEO Ron Nelson, "possibly the most positive sign of success in our strategy to drive higher achieved pricing came in our large commercial segment, where we recorded year-over-year pricing growth for the first time since 2009."
Nelson was speaking during a Thursday conference call with analysts to discuss Avis Budget's third-quarter financial performance, which in North America included "record" quarterly revenue (which grew 8 percent year over year, including 7 percent in the commercial segment) and a 13 percent jump in adjusted earnings before interest, taxes, depreciation and amortization.
Much of that performance is attributable to solid demand—North America rental volume rose 6 percent, including a 5 percent increase in the commercial segment—and strong pricing.
In North America, overall pricing increased 3 percent year over year, with growth across all brands and for both on- and off-airport operations. Nelson said the company will continue to "consistently lead price increases across our entire book of business," and that North American pricing growth has continued into the fourth quarter.
In the Avis Budget small-business segment, revenue increased 8 percent, with pricing that was "more than $10 a day higher than our average large commercial rates," according to Nelson.
On those large-commercial rates, finally higher, Nelson said, "While one quarter does not make a trend, I am encouraged by our efforts to improve returns in our large commercial segment."
The commercial business, Nelson said, "has gone from being our best business to our worst business. The levels that exist now in the large commercial market, going much lower is basically just taking on unprofitable business. It'll always be competitive. We are sort of bouncing around—zero, to up a half [percentage point], to down a half—in the pricing scheme in large commercial, so I don't want to get too carried away with it. But my feeling is, it just can't go any lower unless you want to lose money on a contribution business. We will continue to push for increased pricing and we are not participating in RFPs where there is no service issue. We've renewed something like 70 percent of the contracts this year at flat or better rates. I am mildly optimistic and hopeful that we'll continue the trend."
Avis Budget also reported record revenue for its Zipcar car-sharing operation and increased membership to 900,000 worldwide. The company reported that it "leveraged existing Avis Budget partnerships by signing additional corporate accounts to Zipcar" (augmenting a new contract with the U.S. General Services Administration), enrolled 21 more universities and launched Zipcar operations in several new markets, including Dallas, Paris and Madrid.