Avis Budget's Carey Investment Presages Synergy

Avis Budget Group furthered its move into the chauffeured transportation realm with a $60 million investment in Carey International. The investment, announced last month, gives Avis 45 percent of Carey's common stock and the option to increase the stake to about 80 percent within one year.

"The overall intent is to offer all of our corporate customers a complete ground transportation product across the board," said Scott Deaver, Avis' executive vice president of strategy. "The Carey investment is really intended to give us more reasons to talk to corporate customers."

Avis had heard from customers a desire for chauffeured transportation offerings, Deaver said. With the Carey buy-in, Avis already is discussing the services with some corporate customers in negotiations for 2008 rental agreements, he said. "At this point, there's a lot of handing off with the sales team, but this is beginning to happen," he said.

Neil Abrams, president of the Purchase, N.Y.-based Abrams Consulting Group, said the additional ground transportation services should strengthen Avis Budget's position in the corporate market. With the major car rental brands now consolidated under only four companies—the most recent move being Enterprise Rent-A-Car's summer acquisition of the parent company of the National and Alamo car rental brands—the shift to broader transportation services is a natural progression, he said.

"This gives Avis Budget significant leverage in the corporate sector," Abrams said. "Now, they can offer a multitude of services. If car rental doesn't work for a client in an area, they have alternate transportation capability. They can customize a corporate travel program, so you have the Avis, Budget and Carey brands."

Carey, meanwhile, will retain its executive team, including president and CEO Gary Kessler.

This is Avis' second significant foray into chauffeured car services this year. In June, it launched a chauffeured drive service to loyalty program members in 10 U.S. business destinations, supplying drivers at hourly rates for rented cars.

Since the launch, the program has added six new markets: Atlanta, Philadelphia, Las Vegas, San Diego and, just this month, Seattle and Miami, said Dennis Carlson, president and CEO of Avis chauffeured drive service partner WeDriveU. Plans are for continued expansion next year with growth into the top 100 markets in the next three to five years, Carlson said. Michael Caron, vice president of project and program development for Avis Budget Group, said the company is in discussions with several multinational companies to use the service for their executives.

"We've had month-over-month growth," Caron said, "and we're very pleased with how this product is positioned."