Hertz deal won t hinder Enterprise s path to growth, analysts say, Business
Business
Jaclyn Waggoner (left) and Jason Gillespie (center) work the counter at the Enterprise Rent-A-Car office in the two thousand two hundred block of Washington Avenue in St. Louis on Thursday, August 30, 2012. Photo By David Carson, [email protected]
- David Carson
Enterprise employee Jason Gillespie (left) goes over the rental contract with customer Curtis Smith, from St. Louis, at the Enterprise Rent-A-Car office in the two thousand two hundred block of Washington Avenue in St. Louis on Friday, August 31, 2012. Photo By David Carson, [email protected]
- David Carson
Enterprise employees Mike Slyman (left), Harry Bassett (center) and branch manager John Campbell talk in the Enterprise Rent-A-Car office in the two thousand two hundred block of Washington Avenue in St. Louis on Thursday, August 30, 2012. Photo By David Carson, [email protected]
- David Carson
Hertz deal won’t hinder Enterprise’s path to growth, analysts say
- BY LISA BROWN • [email protected] > 314-340-8127
Lisa Brown
Jaclyn Waggoner (left) and Jason Gillespie (center) work the counter at the Enterprise Rent-A-Car office in the two thousand two hundred block of Washington Avenue in St. Louis on Thursday, August 30, 2012. Photo By David Carson, [email protected]
- David Carson
Enterprise employee Jason Gillespie (left) goes over the rental contract with customer Curtis Smith, from St. Louis, at the Enterprise Rent-A-Car office in the two thousand two hundred block of Washington Avenue in St. Louis on Friday, August 31, 2012. Photo By David Carson, [email protected]
- David Carson
Enterprise employees Mike Slyman (left), Harry Bassett (center) and branch manager John Campbell talk in the Enterprise Rent-A-Car office in the two thousand two hundred block of Washington Avenue in St. Louis on Thursday, August 30, 2012. Photo By David Carson, [email protected]
- David Carson
When rival Hertz announced its plans to acquire the Dollar and Thrifty car rental brands last week, the news caused hardly a ripple at the Clayton headquarters of Enterprise Holdings, the world’s largest car rental company.
On Sunday night, Hertz Global Holdings announced a $Two.Trio billion dollar deal to buy the Dollar Thrifty Automotive Group. The purchase, subject to antitrust approval, will boost Fresh Jersey-based company’s fleet of cars and trucks by about seventeen percent, to 720,000, and solidify its place as the world’s 2nd largest rental car company. Enterprise has a fleet surpassing 1.Two million vehicles.
Hertz had long sought the car-rental company, even after a failed bid to buy Dollar Thrifty in 2010. And analysts don’t expect the deal to hinder Enterprise’s capability to grow its three major car rental brands: Enterprise Rent-A-Car, National Car Rental and Alamo Rent A Car.
“(Enterprise) has always done a good job differentiating themselves from the competition,” said Nima Samadi, an analyst with Santa Monica, Calif.-based business research hard IBISWorld. “Enterprise’s advantage is leveraging their existing strength – their number of locations. This won’t create a sea shift, other than it puts Hertz clearly ahead of (No.Trio) Avis Budget.”
While Hertz picks up two long-sought-after brands, Enterprise executives say they don’t plan on deviating from a long established strategy of focusing on key fundamentals – customer service and providing employees training and advancement opportunities – that has led the privately-held company to instruction a superior position in the industry over five decades.
“We don’t indeed concentrate on competitors,” said Greg Stubblefield, an executive vice president at Enterprise who oversees strategy, global sales and marketing.
In his 30-year career at Enterprise, the company has succeeded best when it made its own path rather than go after industry trends, he said. Even in the face of economic headwinds, Enterprise reported record revenue in its two thousand eleven fiscal year, $14.1 billion, a twelve percent increase from 2010.
“The differentiation of our service levels will always be there,” he said. “We don’t look at what the industry does.”
Hertz’ acquisition of Dollar Thrifty would boost Hertz’s U.S. market share from nineteen percent to twenty four percent, narrowing the gap inbetween it and Enterprise, which holds 39.Three percent of the market, according to IBISWorld. The rigid doesn’t track global market share information.
The acquisition also would decrease the number of major players in the car rental business from four to three, with Avis Budget Group rounding out the third spot with an Legitimate.Five percent market share.
Samadi said he doesn’t expect the Hertz deal to lead to higher prices for customers as the number of brands would remain the same.
“It won’t have a profound affect on pricing,” he said. “What will, is growing request, as business and leisure travel increases.”
Hertz and Enterprise have competed for customers’ business for decades. Hertz’s history renting cars dates back to 1918. With the addition of Dollar Thrifty, its combined sales would total $Ten.Two billion.
Enterprise got its begin in one thousand nine hundred fifty seven at a St. Louis car dealership with seven cars available for lease. Led by its founder, Jack Taylor, the company began renting cars five years later to people whose cars were being repaired at dealerships. In its 55-year history, the company has had just two CEOs, its founder, and his son, the current chairman and CEO, Andy Taylor.
Enterprise set itself apart from competitors in its early years by building rental car branches in downtowns and neighborhoods — markets other rental car companies overlooked — and away from airports, where rivals fought aggressively for the lucrative business traveler.
That strategy paid off, and by the mid-1990s, Enterprise surpassed Hertz as the largest rental car company, based on fleet size.
“We opened locations that were very convenient to where people worked and lived,” Stubblefield said. “We made it effortless to access a rental car, and we made it affordable on a consistent basis.”
Enterprise opened a branch servicing Denver International Airport passengers in 1995, marking its very first airport location. The company added more locations near airports in the following decade, and enhanced its presence at airports significantly with its two thousand seven acquisition of the National and Alamo brands from Cerberus Capital Management.
The acquisition of National and Alamo strengthened Enterprise’s capability to suggest diverse services and pricing for different customers. National concentrates on business travelers and Alamo is geared toward vacationers who are looking for value deals.
But Hertz has been making gains in adding off-airport locations, and the addition of Dollar Thrifty — which caters to value-conscious leisure renters — to its portfolio could put pressure on Enterprise.
“Hertz has the capability to attempt to budge the millions of Dollar and Thrifty customers through their off-airport distribution channel,” said Neil Abrams, president of Abrams Consulting Group, consulting and research stiff based in Purchase, N.Y. “Enterprise is clearly the leader in the off-airport space, but Hertz has grown its number of off-airport locations.”
Enterprise is focusing on several areas to drive growth, including growing its car share business, which permits customers to rent cars for hours at a time, and expanding internationally.
This year, Enterprise acquired a fifteen percent stake in eHi AutoServices in the growing Chinese market, its very first foray in China, and entered the Brazilian market with a 15-year franchise deal with its Alamo and National brands.
“We’re not even close to developing National and Alamo into what they can be,” Patrick Farrell, Enterprise’s chief marketing and communications officer, said about growing the brands domestically and internationally.
Enterprise is also investing strongly in adding alternative fuel vehicles to its fleet. The company is expanding its ‘Driving Futures Network’ at more than thirty markets, where customers can test drive a hybrid or electrical car.
Other developments in the pipeline include fresh technology to ease the rental process, such as smartphone apps and mobile payments.
“The sea switch that is going to happen in the industry is going to be technology driven,” Farrell said. “There’s not a purveyor of technology that’s not talking to us.”