"Rent-a-car firms take fight for sales far from airports"

Monday, August 9, 2004

TREND: CAR RENTALS
Rent-a-car firms take fight for sales far from airports
Suburban growth tied to insurance replacements
By Kathy Bergen
The Chicago (IL) Tribune


When Enterprise Rent-A-Car Co. opened a rental office in Naperville
recently, it was the company's fourth in that western suburb and its
ninth in that neck of the woods.

And when Hertz Corp. launched a facility in Naperville this summer, it
was its third in that growing suburb and its fifth in the immediate
vicinity.

"We have so many locations that we are within 10 minutes of 90 percent
of the population in Chicago and Northwest Indiana," said Christy
Conrad, a spokesman for fast-growing Enterprise, which operates more
than 5,000 non-airport rental offices in the U.S.

"By the end of the year, we plan to have 1,300 [non-airport] locations
nationwide," crowed Paula Stifter, a spokeswoman for Hertz, which is
pushing hard to grab a bigger piece of the local marketplace.

Although not nearly as ubiquitous as the boxy bank branches, chi-chi
coffee emporiums or quick-fix sandwich shops that dot the metropolitan
landscape, car-rental offices are spreading like dandelions, and the
proliferation promises to continue as car-rental companies try to reduce
their reliance on the struggling air-travel industry.

The slump in air travel post-9/11 contributed to the bankruptcy filings
of Alamo, National and Budget, all of which have since been bought out
of bankruptcy.

"Off airport is where most of the growth is, and it's growth we can
control, whereas in the airport, it's tied to air travel," said Ted
Deutsch, a spokesman for Cendant Car Rental Group, which bought Budget
out of bankruptcy and which also operates Avis. Those brands are
expanding off airport, too, though at a slower pace than Enterprise or
Hertz.

The 800-pound gorilla in the off-airport market is Enterprise, which
built its business in the local market and continues to do so with a
breathtaking speed that has caught the eye of its airport-centric
rivals.

"It is the market leader by far, with an estimated 85 percent of the
local market, and it is the most profitable of the car-rental
companies," said Betsy Snyder, credit analyst with Standard & Poor's,
which rates the company's debt. "So, others see the margins, and they
see where the growth is."

Local-market offices have low start-up costs and limited sensitivity to
economic changes.

"They are usually in suburban business-mall-type things, and it's a
desk, a computer, one or two people and a few cars parked outside," said
Jerry Galant, director of research for Huberman Financial, an investment
brokerage. "It's not like they need a lot of inventory or shuttle
buses."

"And they don't have to pay for counter space at airports, and they
don't have to give the airports guaranteed volume," said Michael Gallo,
a vice president with CL King & Associates, an investment firm.

The local market also "is mostly insurance replacements, and this goes
on all the time," said SherbBrown, publisher of Auto Rental News.
"Whether times are good or bad, people get into accidents."

A privately held company, Enterprise does not disclose earnings
publicly. But other numbers tell the story of its growth in the local
market.

"For more than a decade, we've opened a new office every business day,"
said Conrad. The company added about 300 last year and expects to match
that total this year.

In the past year, it added 13 non-airport rental offices in the Chicago
area, bringing the regional roster to nearly 140.

"We don't see an end in sight right now," said Conrad, whose employer
whizzed past Hertz in 1996 to become the largest rental-car company in
the U.S.

Enterprise "has made itself very tight with the major insurance
companies, large auto dealerships and automotive services companies that
make up the primary referral sources for replacement rentals," Abrams
Travel Data Services stated in a recent industry report.

"However, insurance companies and other referral sources are suggesting
they would like to see more competition and options for their
customers," the report stated. "This indicates room for one or more
major competitors."

That may be, but rivals will find it tough going.

"A lot have tried to establish beachheads in the local market in the
last decade, and everyone winds up giving up," said Brown of Auto Rental
News.

"Enterprise is a ruthless competitor. And when someone tries to take
them on, they do whatever they have to do, including lowering prices."

Enterprise only lowers prices when rivals enter the market at lower
rates, in which case Enterprise will match their rates, said Jeff
Wilder, head of Chicago-area operations.

Still, a number of competitors are forging ahead in the local market,
most notably Hertz, the leader in airport rentals.

"They already have the airports pretty well covered," noted Brown.

In 2000, Hertz had only 600 local-market offices, which has since grown
to more than 1,100. By year-end, it is aiming at 1,300.

In this region it added 10 non-airport offices recently, bringing its
Illinois total to 70.

And though others have failed to make inroads against Enterprise, Hertz
stands a better chance, observers said.

"So far, Hertz has done a good job," said Snyder of Standard & Poor's.
"If anyone can be successful, I think they can, with their brand and
resources."

But as the airport stalwarts are looking outward to the local market,
Enterprise once again is marching to a different drummer and looking
toward the airports, growing from 17 airport offices in 1999 to 168 now.

A bit of tit for tat, perhaps?

Not at all, said Rob Hibbard, vice president for rental development at
Enterprise.

"Our move into the airports was in response to our customers' requests,"
he said. "And we found it was a very good fit."


 Do you have an opinion about this story?
Share it with other readers in our CAA Discussion Forums

http://www.californiaaviation.org/dcfp/dcboard.php


*****************************************