Hertz has plenty to gain by going after the more price-conscious traveler with these two brands, especially as corporate America tightens its belt. But then how does it balance that with its push for more luxury electric vehicles?
Hertz is polishing its affordable car rental brands Dollar and Thrifty to help grow sales from more price-conscious business travelers.
“These two iconic brands are performing shy of their potential,” said Hertz CEO Stephen Scherr on Tuesday.
The vehicle rental company believes that by “revitalizing” them it can pursue profitable mid-market growth.
Scherr made the comments during the company’s fourth-quarter results earnings call, where he revealed his other focuses included growing its electric vehicle platform and expanding its rideshare business.
Dollar and Thrifty are well-known names in the U.S., and have a long history with customers. The problem, the CEO argued, is that they aren’t “adequately capturing the opportunity to reach the important customer population that is more price conscious, travels less frequently and is not necessarily drawn to loyalty programs and other attributes that define more service-driven brands.”
Growth in this sector would be a plus for Hertz, because its existing corporate customers are renewing at a “near 100 percent” renewal rate, with many paying more for those new contracts.
Its average business travel trip duration also grew 20 percent during 2022, to about 1.5 days, due to more travelers taking blended trips. In terms of transaction days, corporate demand was up 28 percent in January compared to January 2022, and international inbound was up 56 percent last month, compared to the same period in 2022.
However, in the fourth quarter for the Americas, corporate business was at 80 percent of 2019 levels. Domestic leisure volumes are heading towards pre-pandemic levels.
“We intend to revitalize these brands to pursue profitable mid-market growth across both leisure and business. The intention here is to utilize these brands on a more managed cost basis and independent of our Hertz brand to access customer segments that we’re not adequately topping today,” Scherr added.
The overhaul comes as other travel companies see a similar opportunity in the affordable sector. Hilton for example has just launched its first-ever hotel brand in the economy slice of the lifestyle market. France’s Accor also unveiled its mid-price focused brand Handwritten Collection last month.
The move towards budget travelers follows years of dealmaking for higher-end electric cars.
In January this year Hertz said it would make 25,000 Tesla and Polestar vehicles available in Europe in a partnership with Uber, while in September last year it placed an order for 175,000 electric vehicles from General Motors. In 2021, it announced it was buying 100,000 Teslas.
“Our objective is that we will have 25 percent of our fleet electric by the end of 2024,” Scherr told Skift in December.
As a result, making sure charging points are available is a priority. Hertz is now working with BP Pulse to build more of them across its airport and off-airport locations. It’s also focusing on a new public-private partnership project called Hertz Electrifies, starting in Denver and then rolling that out to other cities across the U.S.
Hertz reported $2 billion in revenues for the three months to Dec. 31, 2022, up 4 percent on the fourth quarter of 2021. Its adjusted corporate earnings before interest, taxes, depreciation, and amortization (or EBITDA) was $309 million. Net income was $116 million.
Revenue for the full year was $8.7 billion, up 18 percent on 2021. Adjusted corporate EBITDA was $2.3 billion, with net income of $2.1 billion.
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Photo credit: Hertz wants to "revitalize" its Thrifty brand, according to CEO Stephen Scherr. Flickr