Dollar Thrifty Merges Back Office
As a way to maintain its position as a low-cost provider, Dollar Thrifty Automotive Group is consolidating its back-office systems—including legal, accounting, finance, fleet ordering, human resources and IT—and building one servicing facility for both brands at locations wherever possible. Yet, the only profitable publicly held car rental company in the United States is committed to keeping the two brands separate—even to the point of not sharing the counter at the airport, a strategy employed by competitor ANC Rental Corp. with its brands Alamo Rent-A-Car and National Car Rental.
By sharing the counter, "the brands begin to lose identity, and pricing in the two products becomes problematic," according to Donald Himelfarb, president of Thrifty and executive vice president at DTAG, which earned $46.8 million in net income for 2002.
The restructuring will result in about 100 layoffs and includes a shift in operations at Thrifty, which traditionally was a franchised organization. The parent company is buying up franchised locations—a strategy previously adopted by Dollar, which now is mostly corporate owned. So far, DTAG has acquired Thrifty franchises in Boston, Manchester, N.H., and all on the big island of Hawaii.
The reason for the switch is partly rooted in the trend toward more consolidated facilities at airports. A remote facility makes it difficult for companies to remain off-airport, since customers now must take two shuttles to reach the location. It also creates the opportunity, by offering more space, to go on airport.
In addition, the concession fees that all the car rental firms now are passing onto customers enable the low-cost provider to afford the higher cost of being on airport.
Many franchisees, however, have struggled with the higher volumes of business and increased levels of capitalization resulting from being on airport. "The scale and size of business on the Thrifty side has grown dramatically," Himelfarb said. "It's strained the resources of the franchisees." The corporate parent is better able to deal with the challenges of this new environment, he added.
Across the pond, Avis Europe is purchasing the European, Middle Eastern and African assets of Budget Group Inc., which currently is in bankruptcy court, for $20 million. The assets of Budget in North America were acquired previously by Cendant Corp., which also owns Avis Rent-A-Car.
Budget currently has about 1,000 locations overseas, 16 of which are corporate owned, according to Christopher Wermann, a spokesperson with Avis Europe. Although the company is committed to keeping the two brands separate, "We'll be looking at how we can make the booking systems more efficient," he said.
Mark McVicar, transport analyst at London-based DKW, noted that while Budget had not cut back on the number of locations during the bankruptcy proceedings, the fleet is severely depleted, demand has shrunk and the brand desperately needs rebuilding. With Avis Europe being a more upmarket, sophisticated brand and Budget appealing primarily to the leisure traveler interested in the best deal, the brands should complement each other well, he added.
Avis Europe is a separate company from Avis in the United States, although it pays Cendant a fee for the right to use the Avis brand and jointly markets the brand.