Car rental companies don’t often air the details of market reach and regulatory issues, making Enterprise’s comments a broad but interesting overview of an industry that remains unaffected by the growing number of startups trying to disrupt it.
What are car rental companies’ roles in the travel economy? They support the domestic automotive industry, provide transportation for urban locals and travelers, support tens of thousands U.S. jobs, and foster career growth.
This, according to one executive at Enterprise Holdings, the world’s largest car rental company in terms of revenue, fleet, and employees.
Bryan Rothery, Assistant Vice President of Government & Public Affairs for Enterprise Holdings, Inc., which operates the Enterprise, Alamo and National car rental brands, spoke Tuesday before the U.S. House Subcommittee on Commerce, Manufacturing and Trade, detailing the economic benefits of the nearly $24 billion U.S. car rental market.
Enterprise Holdings, the world’s largest car rental company in terms of revenue, fleet, and employees, generated $15.4 billion in revenue and operated 1.3 million vehicles in 2012.
Rothery breaks down the billion dollar industry into two markets:
According to best estimates, the nearly $24 Billion US car rental market can be neatly divided into two equal parts: with approximately half of the revenue (~$12B) being earned at locations servicing deplaning passengers at airports (“airport market”), while the other half (~$12B) of the revenue is earned at neighborhood locations servicing customers for needs unrelated to an air voyage (“neighborhood market”).
Car rental companies often expand beyond consumer and vacation car rentals to include car sharing services, commercial truck rental, corporate fleet management, and retail car sales. Although customers at the airport remain Enterprise’s largest market, its growing presence in cities and neighborhoods is quickly catching up in terms of profit.
Airport leisure segment brings in the highest annual revenue per market and purpose: around $7 billion in revenue. “The airport leisure segment serves deplaning passengers needing a vehicle for all other reasons, most notably, vacation.”
Worth special note is that the extensive Enterprise Rent-A-Car neighborhood network has become an integral part of many cities’ and towns’ local transportation infrastructure, particularly when natural disasters like Hurricane Sandy hit.
Looking for a long-term career in the car rental or travel industry? Enterprise might be a good place to start. Rothery explains Enterprise’s strategy of breeding leaders from the ground up:
In fact, our Chairman and Chief Executive Officer, Vice Chairmen, President and Chief Operating Officer, Executive Vice President, and nearly every member of our senior leadership team all began their career with Enterprise Holdings just as I did 16 years ago as an entry level Management Trainee. Our leadership positions are occupied by employees who learned the car rental business from the ground up. This is one of the reasons why Enterprise Holdings is ranked by BusinessWeek as one of the “50 Best Places to Launch a Career” year-over-year, and are consistently named Top College Recruiter by The Black Collegian magazine.
The car rental industry directly supports domestic car production as major buyers of vehicles from Detroit’s “Big Three,” including Ford, General Motors, and Chrysler:
In 2010, US car rental companies purchased about 1 million vehicles from Detroit’s “Big Three” – about 16 percent of the automakers’ output. Because rental car companies regularly order and purchase so many cars, the rental car industry provides a basic level of certainty and predictability for automakers confronting complex and costly plant scheduling and utilization concerns.
Enterprise also sells cars back to auto dealerships and influences consumers’ preference for certain brands. Rothery cites a study stating consumers are more likely to buy a brand after renting it.
Auto dealerships rely on this steady influx of reasonably priced, well-maintained used rental vehicles that are, on average, one year old with relatively low mileage levels.
Moreover, car rental companies purchase a diverse mix of models, providing excellent exposure for new car introductions. And as consumer studies reveal, consumers are more likely to buy a vehicle after renting it.
He likens the taxation of car rental customers to modern day “taxation without representation.”
To my knowledge, there has never been any evidence set forth by proponents of car rental taxes demonstrating the link between a car rental tax and the purpose of the tax.
The problem of excessive taxation of car rental customers, left unchecked has the potential to significantly harm our industry, and I encourage this Congress to explore ways to address this problem that has become a plague to a vital segment of the broader economy.
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Photo Credit: Jaclyn Waggoner, left, and Jason Gillespie, center, work the counter at a Enterprise Rent-A-Car office in St. Louis, Missouri, on August 30, 2012. David Carson/St. Louis Post-Dispatch/MCT / St. Louis Post-Dispatch