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The car rental industry is strong, but Hertz struggles

Gigi Douban Aug 7, 2015
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Hertz reported lower earnings this week. The company has been struggling, and shares are down more than a third from a year ago. But overall the car rental industry is at a high point. Revenue is at about $38 billion a year. Amid competition from car-sharing services, is Hertz capitalizing on its profit-making potential?

Getting the extra insurance coverage or having the company put gas in the car for you? Not cheap. But this is how car rental companies make money. Just ask Bill Carroll, who taught marketing at Cornell University and worked for Hertz for 17 years.

“Pretty high margin return on that,” he says.

Then there’s the other car rental bread and butter: the business traveler—specifically the flying business traveler.

“About half of car rentals that happen in the U.S. are airport rentals,” Chris Brown, executive editor of the trade publication Auto Rental News, says.

Regulatory issues have kept Uber and Lyft out of airports. And Hertz gets better pricing from airport locations because that’s where corporate expense-account dollars are spent.

“Uber has certainly eaten into taxi service and also limo service,” he says.

But car rentals, he says? Not so much. So it shouldn’t have come as a surprise when earlier this summer, Hertz increased airport car-rental fees by $5 a day.

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