Industry Strength Maintained Among Troubling Trend

2. Industry Strength Maintained Among Troubling Trend • Despite many challenges, especially from ride-hailing services, such as Uber and Lyft, the US car rental industry continues its growth in total revenues since the recession, reaching $27.11 billion for 2015, a 4.0% increase over 2014’s $26.01 billion. • Cars in service also increased during 2015, by 5%, to 2.18 million vehicles. Although providing more choices for consumers, this increase resulted in a minimal decline of revenue per unit per month to $1,035. • Enterprise Holdings (Enterprise, Alamo and National) retained its top position among US car rental companies, with $13.9 billion in revenues and 6,250 locations, compared to $6.4 billion and 5,410 locations for #2 Hertz (Dollar-Thrifty, Firefly).

3. Buoyed by Business Growth • According to Auto Rental News’ Business Outlook Survey 2016, 54.8% of car rental companies responding to the survey said their 2015 revenues increased and 66% expected their 2016 revenues to increase. • Companies were also optimistic about their net profit, as 54.7% expected it to increase for 2016, with just 15.1% forecasting a decrease. More than half, 53.8%, thought their total expenses per unit would increase during 2016. • More good news for car rental companies was that September 2016’s airport rates increased the most during the past two years, or $5.48, for a 50-city weighted average. They increased the most in the Midwest, at +$7.69, and the least in the Southeast, +$3.18.

4. Tracking Traveler Trends • According to Certify’s 2015 Year in Review report, global companies spent 5% of their travel and entertainment budgets on car rentals, which was third in a list of the top 10 average cost per expense, or $186.42, with airlines, $274.00, and lodging, $223.45. • A January 2016 Phocuswright white paper identified three types of digital travel services users: Smartphone Bookers, 19% are leisure travelers; Managed Travelers, 44% book on smartphones; and Frequent Business Travelers, 48% book on smartphones. • The Phocuswright white paper also found that simple, intuitive research/booking options, at 44%, was the car rental company service that travelers found the most valuable during October 2015; followed by multiple rental-time options at 38%.

5. Customer Satisfaction Strongest Ever • In its 2015 North America Rental Car Satisfaction Study, J.D. Power reported that customer satisfaction had the highest score, 798, on a 1,000-point scale, since 2006; however, customers experiencing a problem increased 1% to 14%, compared to 2014. • The categories with the largest increases in satisfaction were shuttle bus/van, +37 points; cost & fees, +29 points; and pick-up process, +26 points. • Enterprise had the highest score, at 831; followed by National, 818, and Alamo, 807. Budget, 785; Dollar, 768; and Thrifty, 733, had the lowest scores.

6. Difficulty Competing with Ride-Hailing Services • Although ride-hailing services have not yet had a major impact on vehicle ownership, they have already disrupted the ground transportation industry, as ride-hailing services accounted for more than 50% of the market for the first time during Q3 2016. • During the quarter, Uber and Lyft’s combined share of the ground transportation market increased 3 percentage points to 52% from Q2 2016’s 49%, with Uber accounting for 48% and Lyft 4%. Car rentals’ share was 36% and taxis’, 12%, both decreasing. • Certify’s Q3 2016 SpendSmart Report revealed that Lyft’s 4.57 rating and Uber’s 4.45 rating with business travelers exceeded taxis’ rating of 3.79. Second, Lyft and Uber’s average ride cost was less than $23, compared to taxis’ $35+.

7. More Disruptive Competitions • Another competitive disrupter is car2go, which now has 800,000 members in North America and experienced 43% growth from 2015 to 2016. Members access a car near their location and then drive it to their destination and leave it there for the next user. • An April 2016 Google Consumer Survey found that twice as many American men than women use Uber and, more disturbing for the rental car industry, is that approximately 40% of people with $150K+ incomes are using Uber more as a substitute for a rental. • Rental car companies may have an opportunity to partner with companies, such as HyreCar, that allows individuals who want to be Uber or Lyft drivers, but do not own a car, to rent them to qualify for jobs with the ride-sharing companies.

8. Advertising Strategies • News, finance, weather and sports are clearly the TV programming where car rental companies, especially local independents, must advertise to reach car rental business customers, but ads on your station’s Website will also help to reach Millennials. • Although travelers cite comfort as a major reason they use a ride-sharing service, car rental companies can use the visual power of TV to contrast the “comfort” of riding in someone’s old car (Uber or Lyft) to the enhanced comforts of a late-model, low-mileage rental car. • A possible promotion for rental car companies is “Ride with Us, Fly More Comfortably,” by offering a free neck cushion, movie download gift card or similar incentive that will enhance travelers’ air flight.

9. New Media Strategies • To distinguish the quality of their service especially among Millennials, independent car rental companies should offer an incentive to encourage customers to share their experience on Instagram in videos, and explain why they chose an independent. • Local, independent car rental companies have a unique opportunity to cultivate corporate/business accounts. An active blog on LinkedIn that highlights vehicle choices for specific, local business needs is an excellent supplement to face-to-face sales efforts. • Independent, local car rental companies can use customer problems with a rental vehicle as an opportunity to tell a positive story of how the company resolved the problem to the satisfaction of the customer, including a video testimonial from the customer.