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Avis Budget Group : company profile

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Avis and sister brand Budget are respectively the #2 and #3 vehicle rental services worldwide behind Hertz. Avis is positioned in the premium segment, targeting an audience of corporate and "upscale leisure travellers", and has the larger system, comprising around 5,500 locations worldwide. Budget offers a more value-oriented service geared towards cost-conscious renters, and operates a global network of around 3,900 locations. Regional ownership of the brands was split for more than 25 years between two separate companies: Avis Budget Group, mainly in North America; and Avis Europe primarily in EMEA. The two entities agreed to merge once again in 2011. At the beginning of 2013, the enlarged group agreed to acquire car-share service Zipcar; further bolt-on acquisitions have followed in international markets.

Advertising

Who handles advertising? Click here for agency account assignments from Adbrands.net. Avis Budget Group declared advertising expense of $123m in 2015.

Competitors

The global car rental market is dominated by three major companies. Perhaps unexpectedly, the single biggest is Enterprise Holdings, which owns the Enterprise, National and Alamo rental brands. Still privately owned and run by its founding family, it had combined revenues of around $19.4bn in 2015. Its network covers 9,000 locations - less than Avis Budget - but it has a considerably larger fleet of 1.7m vehicles. Hertz Global Holdings is the largest by network with 9,980 locations. It owns the Hertz rental brand and acquired the Dollar and Thrifty brands in 2012. Fleet size was around 703,000 vehicles in 2015, and combined revenues that year were $10.5bn. According to researcher IBISWorld, Enterprise had around combined 39% share of the US rental market in 2012, Hertz 24% and Avis Budget 19%. Additional competitors in Europe include Europcar, the regional market leader with revenues of €2.1bn and a fleet of around 205,000 vehicles, and Sixt, with revenues of €1.8bn and 156,000 vehicles. Competitors in the truck segment include U-Haul and Penske.

Brands & Activities

Avis and Budget are two of the three largest worldwide vehicle rental services. The current business was created in 2011 from the merger of what were previously two separate companies, Avis Budget Group in North and South America and Australasia, and Avis Europe, which held both franchises for the EMEA region. Since that merger, the group has continued to selectively acquire others among its remaining international licensees.

Avis Budget Group is all that remains of what was previously the diversified conglomerate Cendant. That group broke itself up in 2006, spinning off several other units and adopting the new name of Avis Budget Group. Avis and Budget operate as separate brands, but share the same back-office administration structure. In 2010, the group attempted to break up an agreed merger between Hertz and Dollar Thrifty by offering a significantly higher purchase price of $1.3bn for the smaller company. The bid was declined, and instead, Avis Budget turned its attention to its European licensee. Until 2011, Avis Europe had been an entirely separate company which operated Avis and Budget brands in the EMEA region ( and also Avis in Asia). Both brands were used under a royalty-free license from Avis Budget Group. Although separately quoted as a public company, its controlling shareholder was D'Ieteren Group of Belgium with around 60% of equity. (D'Ieteren is also the exclusive distributor of all Volkswagen Group and Porsche cars in Belgium, and controls the world's leading vehicle glass company, Belron, which operates under various brands including Carglass in most of Europe and Autoglass in the UK and US). In June 2011, D'Ieteren agreed to accept an offer by Avis Budget to reacquire all the outstanding shares in Avis Europe for a total of around $1.0bn. The deal completed in October 2011.

Since then, the group has continued to buy out selected licensees to take greater control of its brands globally. In 2014, it acquired its licensee in Southern California and Las Vegas; the following year, it acquired the licensees in Brazil, Scandiniavia and Poland.

Its brand portfolio has also expanded. In 2013, the group acquired hourly rental car-share service Zipcar for $491m in cash. Originally founded in 2000, that service continues to operate as a standalone brand, with more than 1m members in North America and Europe. It operates around 13,000 vehicles. Other acquisitions included the "deep value" rental services Payless in the US and Apex in Australia and New Zealand. In 2015, it added the Italian rental service Maggiore.

Avis Budget now operates or franchises around 5,500 Avis locations and 3,900 Budget offices in 180 countries. Of the two, Avis has the broader international footprint, with more than 70% of its rental locations situated outside North America, compared to 59% of Budget's. Just under half of all outlets are company operated, with the remainder run by licensees. Approximately 70% of all the group's rentals are generated from offices situated at airports; and the same percentage from operations in the Americas. Traditionally Avis was aligned primarily with General Motors during the 1980s and 1990s as its main vehicle supplier, but that relationship has been loosened considerably since the 2000s. Both brands now buy cars from a wide range of suppliers, although the big three US manufacturers supplied 45% of all vehicles acquired for rental in 2015. That year, the fleet comprised an average of 580,000 cars worldwide; the number rises and falls depending on seasonal demand, from 494,000 in January to 690,000 in July. Total transaction volumes were in excess of 38m rentals.

Avis Budget has a number of marketing partnerships with companies including American Express and Sears, as well as hotel companies and airlines. It is the official rental partner for Universal Parks & Resorts and of the PGA Tour. The Avis brand is still widely associated with the celebrated "We Try Harder" tagline first introduced in 1962 by Doyle Dane Bernbach. That slogan was quietly retired in 2012 after 50 years of service in favour of "It's Your Space".

The group is a regular winner of the award for Best Car Rental Company in the World Travel Awards, most recently in 2014. It has been top-rated car rental company in the Brand Keys Consumer Loyalty Engagement Index every year since 2000.

Financials

Revenues for 2015 were more or less flat at $8.50bn. The Avis brand accounted $5.0bn; Budget for $2.4bn; and Zipcar for most of the remaining $1.1bn. Net income rose 28% to $313m, a best-ever result. The group has been weighed down for years by depreciation costs and interest payable on the significant debt accumulated during the Cendant demerger and the acquisition of Avis Europe. EBITDA excluding these costs was also at a ten-year high of $903m. Total debt, including the cost of acquiring vehicles, was almost $8.9bn.

Background

Warren Avis established what is thought to be America's first airport car rental office in 1946 at Detroit's Willow Run airport. He opened offices at a number of other US airports over the following years, and began franchising the brand in the early 1950s, establishing outposts in Europe, Canada and Mexico. However Avis struggled to match the success of #1 service Hertz, and its founder sold the business in 1954. It went through a string of different owners over the next 20 years.

During the 1960s, the brand was greatly strengthened by an iconic advertising campaign devised by New York's Doyle Dane Bernbach, which turned its #2 position into a badge of honour, claiming "We Try Harder". Largely as a result of this campaign, Avis became the leading car rental service in Europe in the 1970s. Following an alliance between Hertz and Ford during the 1960s, Avis signed a worldwide alliance with General Motors in 1979 under which it agreed to feature GM cars. In 1986, Avis Europe was established as a separate company based in London, with D'Ieteren Group of Belgium (also the local distributor for Volkswagen Group), GM and Avis of the US as its controlling shareholders. (GM and Avis subsequently sold their shares).

In 1996, Avis in the US was acquired by HFS, a forerunner of Cendant, and was part-floated the following year. In 2001 it was reacquired by what had by then become Cendant. In 2002, the group also acquired Budget Rent A Car, originally founded in 1958 by entrepreneur Morris Mirkin. It too had spread rapidly during the 1960s through franchisee arrangements, and like Avis went through several different owners before being acquired in 1997 by its biggest franchisee, publicly owned Team Rental Group, which adopted the Budget corporate name. Following its purchase by Cendant, the Budget business was split and its offices in Europe were sold to Avis Europe.

Last full revision 24th May 2016

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