News Column

Hertz Deal Shouldn't Raise Rental Rates

Aug 29, 2012

By Gary Stoller

Hertz confirmed Monday that it is buying rival Dollar Thrifty for $2.3 billion -- a move that further consolidates the auto rental industry but isn't expected to increase rates for consumers.

The deal, which must be approved by the Federal Trade Commission, is expected to boost Hertz from No. 3 to No. 1 in market share at U.S. airports.

The move will give Hertz -- popular with corporate and high-end renters -- a larger presence in the discount and leisure travel market.

Veteran industry analyst Neil Abrams says the deal, which would reduce the number of big U.S. rental companies from four to three, will be "unnoticeable from a consumer standpoint."

Rental car prices should not be affected, Abrams says, because there is still plenty of competition from other brands.

Betsy Snyder, a director at Standard & Poor's, says fewer competitors typically indicate higher pricing, but there "will still be a substantial presence by the value car renters that could keep a lid on pricing."

The number of competing companies shrank when Budget Rent A Car's assets were sold to Avis' parent company in 2002, and Enterprise Rent-A-Car bought Vanguard Car Rental Group, the parent of National Car Rental and Alamo Rent A Car, in 2007.

Hertz's acquisition of Dollar Thrifty was applauded by consumer safety advocate Rosemary Shahan, president of Consumers for Auto Reliability and Safety.

According to Sen. Barbara Boxer, D-Calif., Hertz -- but not Dollar Thrifty -- agreed earlier this year to make "a permanent commitment" to not rent or sell any vehicles under safety recall until the defect has been fixed. Boxer has since introduced legislation to force other companies to follow suit.

Hertz controls about 25% of the U.S. airport market, behind Avis Budget Group, which has 26% of the market, and Enterprise Holdings, which has 34%, according to Abrams' 2011 statistics at 50 major airports.

Dollar and Thrifty control about 12% of the airport market, so the acquisition -- which Hertz pursued for several years -- could vault the company ahead of Enterprise Holdings' Enterprise, National and Alamo brands.

Enterprise Holdings has a larger presence away from airports and would remain the largest auto renter overall. Enterprise has 6,187 U.S. locations -- about 3,700 more than Hertz, trade magazine Auto Rental News estimates.



Source: Copyright USA TODAY 2012


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