Whether you're a business traveler on an expense account or a family on vacation counting every penny, Avis Budget Group has a car rental brand for you. The company's Avis Rent A Car unit, which targets corporate and leisure travelers at the high end of the market, has 5,200 locations in the Americas, Europe, and the Asia/Pacific region. Budget Rent A Car, marketed to those who watch costs closely, rents cars from some 3,050 locations in more than 120 countries and trucks from 2,600 dealers in the US. Avis Budget Group in 2011 acquired its formerly independent licensee, Avis Europe, boosting its worldwide presence to some 10,000 rental locations in more than 175 countries.
The purchase of Avis Europe, which closed in October 2011, followed Avis Budget Group's withdrawal from its battle with rival Hertz to acquire Dollar Thrifty Automotive Group (DTG). (The purchase of DTG would have strengthened Avis Budget's presence in the low-budget leisure rental market.) Instead, the company turned to Europe for growth by reuniting with Avis Europe, which was legally separated from Avis in 1986. Avis Europe operates the Avis brand via a network of more than 3,100 locations in more than 110 countries through its subsidiaries and licensing agreements. It also operates the Budget brand at some 950 locations in about 60 countries. The deal created what Avis Budget says is the largest publicly traded rental car business in the world.
Avis Budget Group (ABG) operates in three regions: North America; Europe, Middle East and Africa (EMEA); and Latin America/Asia Pacific. The US is ABG's largest market, accounting for 60% of total 2011 sales.
ABG's 2011 revenues increased 14% vs. 2010 to $5.9 billion. The purchase of Avis Europe contributed about half of the $715 million increase in annual sales. However, the European acquisition was expensive and helped drive up expenses for the year, resulting in a net loss of $29 million. The international business saw revenues jump 85% due to the Avis Europe acquisition, while car rental sales in the US increased 6%. Truck rentals were up 2% over the same period. US sales benefitted from an increase in rental days, partially offset by a decrease in time and miles revenue per day, and a 10% jump in ancillary revenue, such as GPS rentals and insurance products sales. Demand for the company's airport rentals (nearly three-quarters of US sales in 2011) is largely dependent on airline passenger traffic. As a result, ABG is vulnerable to declines in airline travel due fluctuations in the economy and volatile jet fuel prices. With the US economy apparently on the mend, the outlook for the business in 2012 is cautiously optimistic, if still a bit cloudy.
Delving into car sharing in 2013, ABG announced it will acquire Zipcar for $12.25 per share in cash, or nearly $500 million. The addition of Zipcar will give ABG access to younger, more tech-savvy customers and new technology that will vastly expand its car rental options in the US and abroad. The deal is expected to close in the spring. Zipcar will become a subsidiary of ABG. Car sharing has increased in popularity,while the traditional car rental industry continues to struggle in the slow-growth economic environment.
With archrival Hertz the winner of the Dollar Thrifty prize, ABG faces an even stronger rival both at home and abroad. Indeed, Hertz's market share will increase to nearly 25%, vs. more than 50% for Enterprise and about 20% for Avis Budget Group. Continuing to bulk up following its purchase of Avis Europe, ABG acquired New Zealand's largest independently-owned car rental company, Apex Car Rentals, in October 2012. The purchase adds more than 4,000 rental cars and strengthen Avis's position in New Zealand and Australia. Although Avis and Budget maintain separate brand identities, the companies share a global fleet of about 450,000 vehicles and an administrative infrastructure. Like several of their rivals, Avis and Budget are working to open more facilities outside airports to compete in the insurance replacement and general use markets, where Enterprise has gained a leadership position. – less