Operating environment
Market size and growth
There is little external data available regarding the car rental market on a European-wide basis, the latest being the Euromonitor IMIS Travel Database 2007. Euromonitor estimated the car rental revenue generated in the 10 main countries where we operate on a corporate basis (see below) was €8.81 billion during 2007. The largest countries by revenue were Germany (22%), the United Kingdom (18%), France (17%), Spain (16%) and Italy (12%). During this period, Euromonitor estimated that 44 million rentals were made and that a combined fleet of approximately 1.2 million vehicles was employed by the car rental industry.
Whilst there is no market data currently available for the car rental industry in 2008, growth has historically been closely tied to general economic activity levels and, in the case of rentals from airports, to airline passenger volume growth. The global economic environment deteriorated during 2008, particularly in the second half of the year, with The Economist Intelligence Unit reporting growth of 1.1% in Euro-area GDP for 2008, compared with growth of 2.6% in 2007. The International Air Transport Association (IATA) reported full year growth of 1.8% in Intra- European passenger numbers, although there was significant variation between the first and second halves of the year. The growth rates in the car rental market in 2008 are likely to have been similar.
In 2009, the overall demand outlook in the Group’s main markets is expected to be challenging and uncertain. As at January 2009, The Economist Intelligence Unit was forecasting a 1.2% decline in Euro-area GDP in 2009 with growth of 0.5% in 2010, with UK GDP forecast to decline by 2.5% in 2009 and by 0.9% in 2010.
Growth expectations for the airline sector tend to be higher than GDP growth, driven in part by structural trends, in particular by the continued growth of low cost airlines. IATA forecasts growth in passenger arrivals for flights within Europe of 4.4% per annum for 2008 to 2011, marginally down from their previous forecast of 4.8%.
Air passenger growth estimates 2008-2012 (average annual rate)
| Intra-European |
4.4% |
| Europe- Asia Pacific |
6.5% |
| Europe - North America |
3.5% |
Source: IATA
Market composition
The car rental market is generally categorised either by the type of customer, (Leisure, Corporate, Insurance/Replacement) or by the location of rental (airport, non-airport). In 2007, Euromonitor estimated just under 54% of the market to be leisure, with approximately 40% being corporate and 6% being replacement business. During 2007, 42% of the industry’s revenue came from airport rentals, with 58% attributable to non-airport locations.
Customer groups
Reflecting the above, we recognise three key customer types, each with differing needs and expectations: Individuals, Corporate and Insurance/Replacement.
Individual:
These customers are individual travellers booking directly or indirectly through travel companies, tour operators, partnership arrangements and brokers.
The individual customer category is more seasonal than the corporate customer category, with demand peaking over the key holiday periods. Individual customers are principally attracted to Avis by its widespread network, quality of service, reliability, car choice, brand, website and competitive prices.
Corporate:
Corporate customers book via negotiated arrangements with their employers and through vehicle replacement companies. The corporate customer category displays a relatively even pattern of demand throughout the year. The key requirements of corporate customers are competitive prices, speed and quality of service, reliability, car choice, availability of management information and geographical coverage.
Insurance/Replacement:
These customers come through insurance and leasing companies, vehicle dealerships and repair shops with which Avis has a direct contractual relationship.
This category also displays a relatively even pattern of demand throughout the year and customers’ requirements are similar to those in the corporate segment.
Partnerships
To support business from both individual and corporate customers we have an extensive portfolio of over 70 international partnerships with the world’s airlines, railway networks and other leading travel companies.
Stations/locations
Rental locations throughout the network are selected for their convenience to customers, with particular importance attached to representation at airports, rail locations and other major travel points. Whilst Euromonitor estimates that across the market as a whole, 42% of revenue comes from airport rentals, Avis benefits from a broadly even distribution of revenue from airport and nonairport locations due to its significant international network.
Competition
The European car rental market is dominated by three large multinational companies that comprise around 60% of the overall market. The Euromonitor research referred to earlier shows that the Avis and Budget brands had the second highest aggregate market revenue share in our 10 largest corporate countries in 2007 at 17.7%.
The merger between Europcar and Vanguard (primarily National and Alamo brands) in November 2007 gave Europcar a leading position in the European market place with a reported share of 25.6%. Hertz is the third largest with a reported market share of 15.3% in 2007.
In specific markets we face competition from other car rental operators. For example, Sixt are a major competitor in Germany and Enterprise in the United Kingdom. There are a large number of smaller-scale operators with strength in particular markets (frequently the Mediterranean), examples being Maggiore in Italy and ADA in France.
It is noteworthy that the Group operates two of the four established global brands, Avis, Budget, Hertz and Europcar (Vanguard).
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