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Despite stalled growth in China, Brazil and Russia, a wave of newly middle-class travelers from the BRICs and beyond will start visiting international destinations in the coming decades — dwarfing the numbers we’ve seen thus far.
Airline and car rental mergers may be good for the largest companies in their respective industries, but they usually mean price increases for travelers, as AvisBudget attests to.
There’s been so much self-satisfied talk among airline executives of late about how mergers have righted the industry to a proper size, but hold on — at least one car rental official believes his industry is “right-fleeted,” as well.
After all, Avis Budget acquired Avis Europe in 2011, Hertz completed its $2.3 billion acquisition of Dollar Thrifty in 2012, and Avis Budget is poised to buy little Zipcar, with Zipcar shareholders approving the deal March 7.
Speaking at the JP Morgan Aviation Transportation and Defense conference yesterday, Avis Budget CFO David Wyshner said car rental pricing, particularly for leisure travelers has been rising, and one factor driving it is that the number of cars available for rental industrywide is at an optimum level.
“I think we have an industry that is generally right-fleeted,” Wyshner said. “And then on top of that, I think we’re seeing our competitors move for profitability, rather than share or other potential objectives, and that has a positive impact on all of us. The pricing has clearly been stronger on the leisure side and is being driven on the leisure side, that’s where the increases have been coming.”
There are other parallels between the airline industry and car rentals, as well, including the push and pull in trying to wrangle price increases, although perhaps the car rental industry is a little more successful in that regard.
“We’ve been very aggressive in initiating price increases over the last four months or so, and I think that’s had a positive impact,” Wysnher said. “What we watch for is the extent to which our competitors react to that with increases.
“And we’ve seen a fairly good matching of increases by both Hertz and the Enterprise. Slowed down a little bit lately, but I think the number of increases we’ve had puts us in a reasonably good position.”
As the travel industry follows the progress of Brand USA in trying to market the U.S. as an inbound destination, Wyshner explained that international inbound tourists are a particularly attractive target market for AvisBudget because they rent cars for longer periods, on average, and they are more apt to rent and GPS unit and buy insurance.
Says Wyshner: “And as a result, the international inbound becomes attractive to us. And we’re targeting it through our sales efforts, through our marketing efforts, how we position our brands around the world.”