Rent-a-car companies expanding into rivals' turf

Monday, October 4, 2004

ST. LOUIS -- It's part of an intensifying car-rental rumble: As Enterprise Rent-A-Car beefs up its visibility around airports, longtime airport leader Hertz increasingly is muscling into America's neighborhoods, the closely guarded turf of Enterprise.

During the past three years alone, Hertz has christened more than 800 away-from-airport sites to push its total to 1,100, with hopes of adding another 200 before the end of this year.

Enterprise -- the nation's largest rental car company -- is responding in kind, seeking out counter space at more airports in the never-ending drive for growth.

Nationwide, new car rental sites are sprouting like weeds as Hertz and other Enterprise rivals eye off-airport sites to pare their dependance on an air-travel industry that has struggled since the September 2001 terrorist attacks. Such woes contributed to the bankruptcies of Alamo, National and Budget, all of which since have regained their footing.

"I wouldn't use the term 'turf war'; that suggests its a down-and-out battle for the flag, and it really isn't," said Neil Abrams, whose New York-based consulting group has a market-research unit that, among other things, monitors the rental-car industry.

"It's open season. It's capitalism. There's plenty of business out there."

According to Abrams Travel Data Services, car rental companies will generate $18 billion in revenue nationwide this year. About 40 percent of that business will be away from airports, perhaps explaining the focus on car rentals in the neighborhoods and suburbs.

Enterprise's response to the mounting challenge: Bring it on.

"Why is everyone running to the non-airport market that we cultivated? What other choice do they have?" said Christy Conrad, spokeswoman for St. Louis-based Enterprise, which became the nation's biggest rental car company mostly on the strength of its neighborhood rental shops that often provide temporary replacements while cars are in the shop.

"This isn't the first time we've seen the competition in our market. It happens in cycles; competition comes and goes," she said. "We really do a better job when the competition is there. It keeps us on our toes."

Enterprise, which boasts it has sites within 15 miles of 90 percent of the U.S. population, has been the 800-pound gorilla in the local and replacement market, thanks to its deals with major insurers, large auto dealers and automotive service companies.

Such neighborhood dominance, observers say, has given Enterprise relative stability and made it more recession-proof than other rental companies more reliant on air travelers.

The reason: In good times and bad, car wrecks happen, and folks need rentals to get them by.

When it comes to Enterprise -- 16th on the Forbes list of the nation's 500 largest private companies -- "there aren't too many industries you can think about where there's such a major domination in one marketplace," Abrams said.

Hertz hopes to chip away at that, seeking growth beyond its comfort zone of airports, where it enjoys a 30 percent market share. Hertz claims the most U.S. airport locations but has declined to release figures.

By stepping into suburbia, Hertz sees the lucrative insurance-replacement market as a "very promising niche," spokeswoman Paula Stifter said.

"In (that) arena, body shops and insurance companies are welcoming the choice," she said. Away from the airports, "our services have been very well received."

All the while, the Cendant Car Rental Group -- which bought Budget out of bankruptcy in 2002 and also operates Avis -- also has taken to the neighborhoods. In August statements trumpeting its opening of 15 new car-rental sites in the West and Midwest, Avis cast the expansion "as part of its commitment to expand into local markets nationwide."

This year through early August, New Jersey-based Avis has opened 25 off-airport sites nationwide.

Messages left with Cendant and its car-rental operations were not returned.

Enterprise, with five times the non-airport locations as Hertz, has pushed into the airport market, opening 27 airport outlets in the past year or so. That upped its total in recent years to 170 for about a 7 percent share of that market, Conrad said.

Now, Conrad said, Enterprise has operations at every major U.S. airport.

Enterprise has more than 6,000 locations worldwide -- 5,400 of them in the United States -- and on average has been opening a new branch every business day.

Enterprise said it had a record 600,000 rental vehicles in its fleet at the end of July, 41,000 more than the previous year.

In hopes of grabbing headlines, privately held Enterprise did something it doesn't necessarily have to do -- make some of its finances public.

The company said it had $7.4 billion in worldwide revenue in the latest fiscal year, up from $6.9 billion the year before and nearly quadruple its $1.9 billion in revenues of 1994. The latest figures don't include sales of more than 65,000 used vehicles through its 150-plus retail outlets.

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