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State of the U.S. Car Rental Market

State of the U.S. Car Rental Market. Presentation to: International Forum ABLA 2019. 1998 8 majors 23 non-major brands. 2008 6 majors 8 non-major brands. 2018 3 majors 6 non-major brands. Brand Differentiation (ownership). Brand Differentiation (segments). Premium / Corporate. Budget.

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State of the U.S. Car Rental Market

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  1. State of the U.S. Car Rental Market Presentation to: International Forum ABLA 2019

  2. 19988 majors23 non-major brands

  3. 20086 majors8 non-major brands

  4. 20183 majors6 non-major brands

  5. Brand Differentiation (ownership)

  6. Brand Differentiation (segments) Premium / Corporate Budget Deep Value Deep Value (off-airport)

  7. U.S. Brand Differentiation (franchise) Corp/Franchise Corporate Franchise Only Affiliate Network

  8. Market Segmentation 50% off-airport

  9. The U.S. Franchise Landscape • Franchises helped car rental grow in U.S. • Franchisee base has shrunk over 20 years (represents <5-8% total revenue today ). • Franchises allow brands to have a presence in locations corporate stores choose not to run, such as seasonal locations like ski areas and national parks. • Franchise opportunities still exist with smaller brands such as Green Motion, U-Save, Rent-A-Wreck. • Sixt, franchising again?

  10. Independent Car Rental – Keys to Success • Exploit a market niche • Know the niche’s market better than majors • Customer service: “Surprise and delight” • Don’t compete on price • Understand fleet management • Use affiliate networks and brokers to augment reservations opportunistically

  11. A Changing Carsharing Market • Total carsharing fleet size static for five years. • Zipcar (owned by Avis Budget Group), Enterprise Carshare, and U-Haul represent about 50% of market. • Services owned by auto manufacturers are struggling. • Peer-to-peer (P2P) carsharing is biggest growth story. Turo and Getaround lead the market. • Many mini fleet owners are supplying their platforms with cars to make money. • Ride hailing affects car rental for one-day rentals in urban areas. • Ride hailing has had a greater effect on carsharing.

  12. How Rental Fleets Are Financed • Asset-backed securities (majors) • Bank lending (franchisees and independents) • Leasing (new rental companies, smaller independents)

  13. How rental cars become used cars • Fleet sales agreed six months in advance. • Majors buy direct from OEM: risk and repurchase. • No more dumping cars into rental fleets to increase sales. • Fleet higher trim levels: “No more roll-up windows!” • March is largest fleet month, de-fleet late August. • Trend to avoid physical auctions with digital upstream sales (shrink time to sale). • Smaller RACs buy used fleet. • Buy and ship around the country.

  14. Pricing • RACs use internal pricing teams, 3rd-party services (Rate Highway, RateGain). • Airport rates can change 50x in 24 hours! • OTAs (Expedia, Priceline) take 25% of total booking. • Brokers (Rentalcars.com, CarTrawler) take 10% - 15%. • Rates generally trending up YoY as supply is rightsized. • Artificial intelligence (AI) is new pricing tool. • Average revenue per unit, per month (RPU) $1,131 in 2018.

  15. U.S. Car Rental Industry – Positive Forces • Overall fleet is rightsized. • Demand strong with a healthy economy. • Rational actions by manufacturers, rental companies. • Technology is driving efficiencies. • Connected car will produce new revenue streams. • Profitability renting to TNC’s.

  16. U.S. Car Rental Industry – Disruptive Forces • Ride-hailing impacts – more erosion? • Peer-to-peer market – taxation, legislative challenges. • Automakers as service providers (GM/Maven, Daimler/car2go) • Perception of car rental process as clunky, inefficient, opaque.

  17. Ensuring Car Rental Survival • Transition from rental counter to app. • Decentralize the fleet. • Migrate OTA bookings to proprietary brand channels. • Update antiquated ancillary sales methods. • Use and monetize connected car data. • Expand business model to commuting, subscriptions, carsharing. • Partner with players in autonomous market.

  18. Brave, New World • When driverless cars arrive, who wins? (Uber, Turo, Avis) • Who will manage the fleet of the future? (Fleet Management as a Service)

  19. Own the Fleet, Own the Future! Chris.brown@bobit.com 001-310-533-2499 Twitter: @fleetchrisbrown March 22-24, 2020 Caesars Palace Las Vegas

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