Hertz Global Holdings Inc. (HTZ:US), trying to expand its car-rental business away from airports, wants to outfit its global fleet by 2016 with technology that lets customers rent a car at any hour and for any length of time.
The technology will enable Hertz to better manage its fleet of 575,000 vehicles and give the second-largest rental-car company a way to add locations with kiosks instead of buying or renting property. Hertz last year got 30 percent of its $7.46 billion in global rental-car revenue at non-airport locations, long the stronghold of industry-leader Enterprise Holdings Inc.
Hertz, which has 2,600 neighborhood locations now, sees having as many as 12,000 locations in the next few years, Chief Executive Officer Mark Frissora said in an interview yesterday. Hertz is working with retailers including Lowe’s Cos. (LOW:US), Walgreen Co. (WAG:US) and Tire Kingdom Inc. to help broaden that reach.
“This 24/7 capability allows us to hit the sweet spot of what we think may be consumer demand and accessibility,” he said. “We think this is an opportunity to expand the pie of renters in the U.S.”
U.S. consumers spend about $11 billion a year renting cars at non-airport locations, Park Ridge, New Jersey-based Hertz said in a June investor presentation. Hertz has about 12 percent of that market. Closely held St. Louis-based Enterprise, which had $15.4 billion in revenue last year, has the largest share. Enterprise has about 5,500 U.S. locations, mostly in neighborhoods.
Zipcar, acquired by Avis Budget Group Inc. (CAR:US) in March, created the business of automated car rental in 2000. With the acquisition, Avis is now the leader in the hourly rental segment, with about 770,000 worldwide members and about 10,000 vehicles.
“Technology-enabled hourly, car sharing product offerings will become a key driver of utilization gains for both Hertz and Avis in the coming years,” Fred Lowrance, senior research analyst with Avondale Partners LLC in Nashville, Tennessee, said in an e-mail.
Hertz began directly competing with Zipcar in 2008 after considering buying the startup. Frissora said last year he planned to equip Hertz’s then-375,000-vehicle U.S. fleet for hourly rental within about a year. Hertz now has equipped 35,000 vehicles available in 1,800 neighborhood locations and 800 in the U.S.
‘A Little Slower’
“We’re going a little slower than what I previously outlined, due to fact that we want to be careful that we don’t upset the customer that we’re able to fulfill the demand we generate,” Frissora said yesterday.
Hertz is adding Daimler AG (DAI)’s Mercedes-Benz Sprinter commercial vans and Ford Motor Co. pickups that can be rented from a kiosk at Lowe’s’s 1,740 locations, Frissora said.
The company is also conducting pilots in Chicago and San Antonio with Walgreen, where Frissora is a director (WAG:US), and Kingdom. Hertz plans to add other retailers as well as hotel chains, he said. The company is also working with Standard Parking Corp. (STAN:US), a Chicago-based parking-lot operator.
Hertz maintains the cars with a mobile cleaning crew and pays retailers a cut of the revenue.
“It’s kind of a win-win situation,” Frissora said. “The retailer is able to monetize their parking lot. It’s almost a no-brainer. It’s part of our asset-light strategy, investing in technology and making the car, if you will, the bricks and mortar.”
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