Passenger Car Rental

Industry Snapshot

According to statistics gathered by Dun & Bradstreet in 2009, the auto rental industry consisted of 13,416 establishments and employed 106,711. The largest 24 firms accounted for more than 54 percent of industry sales. Industry revenues in 2008 totaled $21.68 billion, according to Auto Rental News. During the second half of the 2000s, the car rental industry faced some unique challenges. Beginning in 2008 and through 2009, the industry was affected by a recessive economy that led to less consumer travel. During the first five months of 2009, year-on-year billable bookings showed a nearly 20 percent decline. In addition, a banking crisis, due to the collapse of the subprime lending market, resulted in a loss of creditors and easy access to credit necessary to resupply fleets. Finally, two of the industry's major suppliers--Chrysler and General Motors--declared bankruptcy. In all, during the late 2000s, rental firms were cutting fleets to eliminate costs and shoring up other operations to weather the uncertain times.

Background and Development

The car rental industry, known in its early years as the "Drive-Ur-Self" business, had its beginnings not long after the Ford Motor Company introduced the Model T automobile in 1908. An entrepreneur named Joe Saunders began renting a secondhand Model T in Omaha, Nebraska, in 1916. He affixed a mileage meter to the left front wheel and rented the car for 10 cents a mile. His first customer was a traveling salesman who had a date with a local girl. By 1925, Saunders had car rental operations in 21 states. The Chrysler Company ran full-page ads boasting that Saunders had purchased $1 million worth of Chrysler automobiles. Saunders went bankrupt, though, during the Great Depression of the early 1930s.

In the early days of the industry, most Drive-Ur-Self cars were rented by local residents. The industry gained a shady reputation because rental cars were often used by bootleggers, bank robbers, and prostitutes. In 1952, The Saturday Evening Post estimated that as many as 90 percent of the cars rented during Prohibition were used for illegal purposes. The industry began to gain more respectability in 1933 after the repeal of the Eighteenth Amendment that outlawed alcohol.

In 1940, the loss of passengers to private automobiles prompted a group of railroads to form Railway Extension Inc., which franchised car rental dealerships in cities stretching from Chicago to New Orleans. The railroads provided space for car rental booths in stations and free telegraph service so passengers could wire ahead and reserve cars, which would be waiting for them when they arrived. The railroads also paid for the advertising. The American Drive-Ur-Self Association, controlled by Hertz, negotiated a less favorable relationship with railroads east of Chicago. Under the Hertz plan, car rental dealerships paid for their own advertising and telegraph service, and cars were not available on-site at the train stations.

During World War II, the U.S. Office of Defense Transportation (ODT) limited rental cars to 1,500 miles per month to conserve gasoline. The limit was cut to 650 miles per month in the Miami area when the ODT discovered that local residents were using rental cars to circumvent gas rationing in the use of private automobiles. Rental car dealers also were not allowed to buy new or replacement cars for their fleets during the war and were required to maintain a record of each rental, including the person's name, address, occupation, and purpose of trip. Rates were frozen at 1942 levels, which averaged between 14 and 18 cents per mile for the first 50 miles. Government agencies and industries with war material contracts often monopolized available cars.

Airline Service
After the war, the car rental industry grew rapidly, carried along by the expanding economy. The railroads revived their car rental plans in 1947, establishing dealers in some 300 cities. However, the real growth coincided with a boom in airline passenger service. In 1947, the Hertz Drive-Ur-Self System, which then had about 2,300 rental cars nationwide, opened operations at airports in Atlanta and Milwaukee. The same year, Warren Avis, then president of Frost-Avis Inc., a Ford dealership in Detroit, formed the Avis Airline Rent-A-Car System.

Avis was a former Army Air Corps flyer who recognized that airplanes would soon replace passenger trains as America's favorite form of travel. He started with car rental booths at airports in Detroit and Miami and by 1949 had licensed use of the Avis name to rental agencies in New York; Chicago; Dallas; Washington, D.C.; Los Angeles; and Houston. More aggressive than Hertz, Avis also arranged for American Airlines and Eastern Airlines to include information about Avis in passengers' ticket envelopes. In 1949, Business Week reported that "this kind of business is operated on an exclusive franchise basis; the first firm in has a big advantage. At present, Avis seems to have a substantial lead."

Hertz, however, was not long in responding. By 1952, Hertz and its franchised dealers were operating at more than 120 airports. In 1953, General Motors Corp. sold the business back to John Hertz, then chairman of the Omnibus Corporation, which had divested itself of bus operations to concentrate on car and truck rentals. The price was $10.8 million. The following year Hertz opened operations in 50 additional airports and 20 more railroad stations. The company also began buying franchised dealers. By 1955, the Hertz Rent-A-Car System encompassed nearly 1,000 company-owned or licensed dealers with total revenues of $90 million. Avis had 850 dealers and $35 million in revenues.

In 1956, Hertz and National Rent-A-Car, then the third largest rental car operation in the country, cracked the exclusive franchise that Avis had held with the Miami International Airport for eight years. This opened up the lucrative Florida vacation business.

Price Wars
By the early 1960s, Hertz, Avis, and National were entrenched as the industry leaders. However, there were hundreds of independent companies, many with only a few cars, eager to cash in on the growing market. In 1965, there were more than 135,000 rental cars available in the United States. The industry at that juncture was a $450-million-a-year business, an increase in value of 80 percent from only three years previously.

The average Hertz or Avis rental in a resort city such as Miami or Las Vegas was $10 a day, but the frugal renter could find rates as low as $1. The discount companies often purchased used cars or replaced new cars less often. They also saved by locating their businesses near targeted airports, thus avoiding fees the leaders paid for on-site locations. Budget-conscious vacationers did not seem to mind the inconvenience. Many discount companies, however, were fly-by-night operators and managed to give the car rental industry a bad name before dropping by the wayside. Nevertheless, the success of reputable companies such as Budget Rent-A-Car eventually forced the industry leaders to cut their rates. Avis began offering compact, British-made Ford Cortinas for $3.95 a day and nine cents a mile. Hertz and National also began offering lower rates on smaller cars. The price wars lasted until 1985, when car rental companies suffered through one of the worst financial years in industry history. After a few years of uneasy truce, the price wars were revived in the early 1990s.

Energy Crisis
The industry was detoured by the energy crisis in the early 1970s. In 1973, federal regulations limited the amount of gasoline available to car rental companies to 1972 levels. This forced rental companies to replace full-size cars with more fuel-efficient vehicles. Even then, many rental cars were sent out with half-empty gasoline tanks. Hertz survived by buying a fleet of 10 tanker trucks to shift supplies of gasoline from city to city to deal with local shortages.

The industry also moved into the used-car business in the early 1970s. When it came time to update their fleets, rental companies had traditionally sold their cars to wholesalers, who auctioned them to used-car dealers. However, the rising cost of new cars and a decision by automakers to curtail fleet discounts made it more attractive for rental car companies to sell their cars directly to the public. In 1975, Kenneth Krabbe, then vice-president of Dollar-Rent-A-Car, told Business Week, "You've got to run a rent-a-car business on what you can sell. If you don't make money there, you're through."

Hertz was the first rental car company to move into retailing in a serious way. Hertz opened its first small showroom in southern California in 1971, and by 1974 the company had more than 100 used car outlets across the country. By 1980 Hertz had become the largest used car dealer in the United States, selling 70,000 cars at 139 locations. Frank Olson, then chairman of Hertz, told Forbes that the automakers "did us a favor. They put us out of a lazy man's business." Avis, which unlike Hertz had previously leased most of its cars to reduce financial risk, began buying its cars outright in 1978 so they could then be sold in the used car market. By 1987, Avis was selling about 50,000 used cars annually. In 1992, rental car companies sold more than 1.5 million used cars.

Unfair Practices
In 1975, the Federal Trade Commission (FTC) accused Hertz, Avis, and National of conspiring to monopolize the airport car rental market. The FTC said the companies, then armed with 96 percent of the airport business, pressured airport authorities into establishing requirements for on-site operations that smaller companies could not meet, such as offering a nationwide reservations system. Off-airport car rental companies were not allowed to advertise in some airports. An executive at the Philadelphia International Airport told Business Week, "If you're getting 10 percent from one company and 0 percent from another, you don't want to hurt those giving you the money." The FTC also accused the major car rental companies of illegal price fixing.

The case was settled out of court in 1976, without any of the companies admitting guilt. However, they agreed not to engage in any predatory practices in the future. As a result, smaller car rental companies found it easier to negotiate on-site locations at major airports. Budget was especially aggressive, more than doubling its share of the airport car rental business from about 7 percent in 1976 to 17 percent in 1982. In 1983, Olson told Fortune, "Short-term we have to worry about Avis. Long-term it's Budget."

The increased competition also led rental car companies into a battle of give-away programs. The leaders--Hertz, Avis, National, and Budget--offered everything from athletic equipment and luggage to televisions and airline tickets for repeat customers who piled up points. In 1983, Fortune reported, "Unintentionally but predictably, the industry has imprisoned itself in a campaign that is horrendously expensive, poisonous to profits, and difficult to stop." By 1985, the companies were financially battered and bruised, but market share had stayed about the same. The companies called an unofficial truce.

Restructuring
The 1980s saw a major restructuring of the car rental industry, as automobile makers purchased controlling interests in the leading companies. In 1987, an investment group headed by Ford Motor Co. paid $1.3 billion to buy Hertz from the Allegis Corporation, which also owned United Airlines. Ford later sold a 20 percent share to Volvo North America Corporation, retaining a 60 percent interest. Ford purchased Budget in 1988. Avis was sold five times between 1983 and 1987, finally ending up in the hands of an employee stock ownership plan (ESOP). In 1989, General Motors Corp. purchased a 25 percent share of Avis. General Motors also purchased a 45 percent share of National in 1988, later increasing its share in that company to 80 percent. The Chrysler Corporation owned Pentastar Transportation Group, which operated General Rent-A-Car, Dollar Rent-A-Car, Thrifty Rent-A-Car, and Snappy Car Rentals.

The manufacturers' interest in the rental car industry stemmed from the fact that rental companies were their biggest single customers and purchasing the company locked in sales. Each of the four major rental companies agreed to purchase 70 percent or more of their fleets from their auto company owners. In 1988, Ford sold more than 100,000 cars to Hertz; GM sold about 85,000 cars to Avis and National; and Chrysler sold about 75,000 cars to its car rental firms. When Mitsubishi Motor Sales of America purchased Value Rent-A-Car in 1991, it replaced the fleet of 25,000 mostly Ford automobiles with its own. Car rental companies accounted for about 10 percent of all domestic auto sales in the early 1990s.

Rental cars also provided manufacturers with an effective marketing tool. Millions of potential buyers were exposed to the carmakers' newest models every year. Renters also helped eliminate glitches in new cars by providing feedback to the manufacturers. Carmakers generally offered to buy their cars back from the rental companies after four to six months and often shared the cost of advertising if the ads mentioned the manufacturer. In the early 1990s, car makers began to request that rental cars be kept in service longer, from six to nine months, because the "almost new" fleet cars were cutting into sales of new automobiles.

Issues in the 1990s
The booming economy of the mid-1990s erased any lingering effects of the previous recession, which had limited air travel and, thus, airport car rentals. Industry-wide revenues jumped from $13 billion in 1995 to nearly $15 billion in 1996. The industry closely watched the economic indicators for any signs of a new recession, but several more immediate issues dominated the headlines in 1996 and 1997.

In March 1997, New York state's highest court ruled that rental car companies could not refuse to rent cars to young drivers solely because of age. As the Wall Street Journal reported, most of the major car companies, including Hertz, Avis, and National, routinely refused to rent to drivers under 25 years old, citing higher accident rates. The decision by the New York Court of Appeals was the first major ruling on what had been an industry-wide practice for decades, legal experts said. The rental car companies criticized the decision, saying it made them too vulnerable to a dangerous group of drivers. Consumer advocates, however, praised the decision. By the 2000s, it was standard practice for rental companies to rent to "under-age drivers," but to compensate their risk by charging a higher rate.

Avis also faced a barrage of bad publicity over a race discrimination case involving one of its franchise owners in the South. The franchisee, who owned several Avis outlets, had allegedly instructed his workers to refuse rentals to African Americans. When the practice was exposed, it received widespread publicity on the television program 60 Minutes and elsewhere. Avis vowed to end the practice immediately, although bad feelings lingered because the practices had reportedly been continuing for several years before Avis moved to halt them.

In early 1997, another controversy arose, this time over bank debit cards. Hertz, Avis, and other companies decided not to accept debit cards as payment, despite their similar appearance to credit cards. As The New York Times reported, for years the rental companies used possession of a credit card as a crude way to weed out potentially risky renters. However, this test was not valid with debit cards because no loan was involved in a debit card transaction and banks gave them to nearly everyone with a bank account. Hertz spokesperson Lisa LoManto told the Times that Hertz was entitled to a certain level of confidence because in car rental, unlike almost any other business, the customer was given total control of a vehicle worth $20,000 or more. Still, it was certain that with more than 60 million bank debit cards in circulation, the decision not to accept them would lead to some confusion and frustration at rental agency counters.

Meanwhile, automakers were expected to continue playing a major role in the development of the industry. Automakers influenced what makes and models of rental cars were available, how long they stayed in service before being replaced, and the direction of car rental advertising. During 1996, automakers sold almost 1.5 million vehicles to the rental companies, a volume equivalent to about 10 percent of total production by "the Big Three." In 1991, Vincent A. Wasik, then chairman of National, told Automotive News, "With the substantial ownership positions in the major rental car companies (GM, Ford and Chrysler) the game is really being played at a different level. Customer satisfaction through superior service is now the 'product' that makes the difference."

The mid- to late 1990s saw another wave of ownership changes and consolidation. In 1996, HFS, Inc., a New Jersey-based company with significant holdings in lodging and real estate, took over ownership of Avis, Inc. Republic Industries announced its intention to purchase Alamo Rent-A-Car for $625 million. In 1994, Ford Motor Co. went from 49 percent to 100 percent ownership in Hertz. That same year, Chrysler sold Snappy Car Rentals to company management and the Jacobson Partners. As Jon LeSage, executive editor of the trade journal Auto Rental News, wrote in his 1997 Fact Book, "Car rental is a mature industry...dominated by a small number of major companies. While it is not the most profitable industry in the world these days, there are several advantages in controlling part of the market for the companies and investors who are buying car rental companies."

Overall, the industry remained very competitive, with many of the leading companies becoming more aggressive in the leisure market. Unlimited mileage offers became a common promotional weapon. There also were increasingly fewer distinctions between on-airport and off-airport car rental companies. Major airports had become so congested and rental fleets had become so large that on-site rental companies were forced to shuttle customers to distant car lots. Off-airport companies were able to offer similar service by running shuttle buses between airport terminals and their own locations. Conversely, off-airport rental companies began to lose their financial advantage, as airports introduced access fees for airport shuttle buses.

Along with the travel industry, the passenger car rental business was negatively impacted after the September 11, 2001, terrorist attacks on the United States. The conflict in the Middle East, the SARS virus outbreak, and political unrest in the early 2000s also contributed to a drop in travel in the United States. In 2000, the car rental industry took in $19.4 billion, which dropped to $18.2 billion in 2001. By 2002, revenue had dropped to $16.1 billion, the lowest in several years. Car rental companies were forced to cut down their fleets, while at least one company filed for bankruptcy protection The 1.82 million cars in service in 2000 dropped to 1.74 million in 2001 and 1.64 million in 2002.

By 2003, the non-airport market had become an important segment of this industry. The non-airport market helped offset the loss from fewer people traveling by plane. Travelers who used non-airport car rental agencies marked the trend in travelers using rental cars for short-haul trips. The average price of a rental car in 2002 was $58.52 per day. A midsize rental car averaged $55.88, and a full-size car, $61.16. Baltimore was the city that ranked as the most expensive city to rent a car, averaging $86.24 in 2002, whereas Rochester, Minnesota, was the least expensive in the top 100 cities ranked, averaging $39.32 for a rental car.

Booking rental cars online was another important industry trend in car rental and travel in general. Of the $12.9 billion made in online travel bookings in 2000, 9 percent came from car rentals. National Car Rental introduced its "QuickRent" program in 2003, which allowed customers who booked online to avoid stopping at the counter and go straight to the lot where they could choose a car from the class reserved.

In an effort to cut costs and raise revenue, mergers and partnerships flourished in the early 2000s. Alamo and National brands merged at many counters in the United States, whereas the Dollar Thrifty Automotive Group announced it would combine its two rental car units. Thrifty also partnered with Walmart.com in 2002, allowing customers to book their cars online and pay with Wal-Mart credit cards. In 2002, Alamo teamed with Walt Disney Co. and became the official rental car company of Walt Disney World and Disneyland resorts. Alamo replaced National, which had been the official rental car of Disney for 22 years. Avis teamed with Sears in 2002, with Sears converting all its Sears Car Rental locations into Avis Rent-A-Car operations that would accept Sears credit cards.

By the mid-2000s, the passenger car rental business experienced a recovery with significantly increased revenues each year, $42.19 billion in 2006, and a combined fleet of 1.7 billion cars. Due to the improved economy and increasing travel, the rental car companies were optimistic going into the late 2000s. Of the 13,100 establishments in this industry in 2006, the top four companies were Enterprise, Hertz, Avis, and Vanguard, a line-up that had been in place for some time. As in other sectors, consolidation was a major trend, with several of the major car rental players merging to lower costs. Companies also raised car rental prices in order to increase revenue. With fewer traditional rental cars from the likes of Ford and GM made available, companies in this industry were turning to more expensive, higher-end options.

The average price of a rental car in 2004 was $36.60, compared to $37.35 in 2003. A midsize rental car averaged $40.60 in 2004, compared to $40.10 in 2003. According to Business Travel News, some of the most expensive cities to rent a car were Boston ($128.25); Houston ($121.75); New York ($116.60); Jackson, Mississippi ($113.43); Philadelphia ($111.60); Dallas ($110.81); Chicago ($109.88); Albuquerque ($108.71); New Orleans ($107.73); and Austin ($106.80).

Due to market conditions and car availability, companies began to raise car rental prices in order to increase revenue. In the mid-2000s, fewer stock rental cars, such as the Chevy Malibu and Ford Taurus, were available to rental companies from the manufacturers, which resulted in an increase in purchases of higher end models. In 2006 alone companies in this industry saw costs increase 20 percent, and these costs were passed on to the consumer. On the other hand, SUV rentals fell drastically in the fuel-efficiency aware mid- and late 2000s.

While the business climate was picking up, car rental companies were hesitant in expanding their fleet size, resulting in a shortage of rental cars. Companies were continuing the trend toward consolidating and merging. However, business was very strong overall in the mid-2000s for both airport and non-airport rental locations. By 2006, the passenger car rental business was valued at $42.2 billion.

In 2005, in an effort to maintain a competitive edge, car rental companies were offering "perks" to their customers. For example, once only offered to its elite customer base, Alamo allowed its customers to check in online, avoiding the rental counter altogether. Budget offered a $2 off its daily rate to companies renting a minimum of five times per year, while Hertz offered a free tank of gas, as well as double the miles on traditional frequent-flier miles. Some rental companies, such as Avis, equipped their cars with satellite radio and navigation systems, while Enterprise Rent-A-Car ran an online sweepstakes.

Current Conditions

After dipping slightly in the two years following the 9/11 attacks, car rental businesses experienced incremental increases in income between 2004 and 2008, rising steadily from $17.64 billion to $21.68 billion. Although overall bookings were down in 2009, average revenues per booking rose 4.4 percent from $146.19 to $152.68 over the same period.

According to statistics gathered by Auto Rental News, in 2008 the number of cars in service dropped for the first time in five years to 1.81 million, down from 1.86 million in 2007, although the annual income per vehicle increased.

The auto rental industry was adjusting how it did business from beginning to end of its operations. First, with the short supply of credit and new cars (due to the bankruptcy of Chrysler and General Motors), the industry was narrowing its fleets and holding cars longer. Traditionally, rental cars were phased out of the fleet once they reached 25,000 miles. In 2007 and 2008, rentals were sold in the used car market with an average of 24,500 to 27,000 miles. By the first half of 2009, the average miles on a rental when it was phased out was up to 34,000, and there was murmuring in the industry that that number may eventually edge up toward 45,000 miles.

Second, the auto rental industry is a mature industry with traditionally low margins. Therefore, firms looked for ways to increase profits in the rental process. To bump up per rental revenues, many firms heavily promoted various value-added services, such as GPS, gas refill packages, and satellite radio. Up to 20 percent of the rental price is often generated from add-on services.

Finally, the industry players had to gauge the used auto market as they turned their fleets over--removing cars when miles accumulated and adding new vehicles. With the bankruptcy of two U.S. auto giants and the weakened condition of the others, rental firms began adding more foreign-made models, such as Kia, Honda, and Toyota. Although American-made autos continued to be found in rental fleets, rental firms expressed concern about the resale value of some U.S. models. "Today, you have to buy your cars with the idea of selling your cars," Monty Merrill, owner of a Dollar and Thrifty rental business in Killen, Texas, told Auto Rental News. "Purchasing Chrysler may not be the way to go, even if you'd like to be the good American. I have to make money on the back end of these cars. Most of us are buying foreign product."

There was also growing demand from consumers for eco-friendly cars. According to a 2009 Priceline.com survey, nearly three-quarters of consumers want more environmentally friendly cars. In addition, the Wall Street Journal cited a Hertz spokeswoman who reported a 40 percent increase in requests for hybrids and similar fuel-efficient vehicles in 2009. However, as of 2009, few hybrids were in the rental market--making up just a fraction of the big dealers' inventory and available in limited locations. In addition, hybrids were often rented at premium prices, which offset any fuel savings to the consumers.

A new hybrid industry was emerging from the rental industry in the late 2000s as car sharing was becoming increasing popular. Pioneered by innovator, Zipcar, car sharing allows consumers to rent a car for short periods of time. For example, Zipcar provides a membership card equipped with a smart chip; the consumer can reserve a car online, locate the closest available vehicle (parked at various locations), and use the membership card to open the vehicles (keys are left in the glove box), which is then returned by the consumer to its designated parking location. The consumer end targets consumers who do not want the expense of owning a car, but occasionally need to get around when neither a taxi nor public transportation is convenient. On the business end, car sharing targets corporations who no longer want to manage their own fleets. A car sharing program can provide a dedicated fleet or allow employees of smaller firms to take advantage of consumer-based services. Both Enterprise and U Haul have entered the car sharing market with its programs WeCar and U Car Share, respectively.

Industry Leaders

In the late 2000s, the four leading companies in the car rental industry were Enterprise Rent-A-Car with a 2008 fleet of 627,314 cars; Hertz with a 2008 fleet of 411,000 cars; National Car Rental/Alamo Rent A Car (part of the Enterprise family) with a 2008 fleet of 226,717 cars; and Avis with a 2008 fleet of 220,000 cars.

Enterprise Rent-A-Car, Inc.
Enterprise is the largest car rental company in the United States. Its successful strategy was to leave the highly competitive airport rental market to the other companies and concentrate on the non-airport market, although by the mid-2000s, Enterprise was opening airport locations as well. It operated 7,000 outlets, and was the only company to target primarily local rentals. The company has been rapidly adding to its fleet since it started its renting business in 1963 with 7 cars. By 1970, Enterprise had 500 vehicles; by 1980, 6,000 vehicles; by 1990, 90,000 vehicles; and by 2000, 493,000. The company's fleet consisted of 714,000 vehicles in 2008. In 2007, Enterprise purchased rival Vanguard Car Rental. Enterprise boasted that it had locations within 15 miles of over 90 percent of the U.S. population. Revenues in 2008 exceeded $10.1 billion.

Hertz Global Holdings
In 2008, Hertz operated more than 8,000 company-owned or licensed car rental locations in 145 countries and in 2008 reported sales of $8.5 billion. Of those locations, 2,920 were in the United States. The majority of Hertz's sales came from the airport rental market, both business and leisure. Eighty percent of revenues come from car rentals; the remaining income is generated by other rentals such as heavy equipment.

Hertz had its beginnings in 1908, when Walter L. Jacobs founded the Rent-A-Ford Co. in Chicago. By 1923, Rent-A-Ford had a fleet of 200 cars and $1 million in revenue. That same year, Jacobs sold the business to John Hertz, then president and owner of the Yellow Cab and Yellow Truck and Coach Manufacturing Co. Hertz renamed the business the Hertz Drive-Ur-Self System. Hertz converted the rental fleet to the oversized sedans used by Yellow Cab, but customers balked at renting the bulky automobiles, and the fleet was switched back to regular passenger cars. General Motors Corp. purchased Hertz in 1926 and sold it to the Omnibus Corporation, then headed by John Hertz, in 1953. Omnibus changed its name to the Hertz Corporation in 1954. The RCA Corporation purchased Hertz in 1967.

In 1985, Hertz was purchased by UAL, Inc., the owner of United Airlines, which planned to expand into other travel-related services. UAL, however, which changed its name to the Allegis Corporation, abandoned the strategy within months. Allegis sold Hertz in 1987 for $1.3 billion, which was more than twice what it paid in 1985, to the Park Ridge Corporation, a holding company created by Ford and Hertz management. As of 2008, 55 percent of the company was jointly owned by three investment firms.

National Car Rental/Alamo Rent A Car
With rentals waning in a post-9/11 environment, ANC Rental Corporation, the former parent of Alamo and National, filed for bankruptcy protection in 2001. To cut costs, ANC combined the operations of Alamo and National brands at the end of 2002, and Vanguard purchased the combined company in 2003. The two sister companies became part of the Enterprise family when Enterprise purchased Vanguard in 2007. Together, they had an average of 226,717 vehicles in operation in 2008 combined revenues of $2.9 billion.

Avis Budget Group
With the rise of Enterprise, Avis Group Holdings, Inc. slipped from its long-time position as second largest car rental company in the United States to third. Its Avis Rent A Car division targets higher end consumers, while the Budget Rent A Car division caters to the cost-conscious consumer. The company reported 2008 revenues of $6 billion.

Originally known as Avis Airlines Rent-A-Car System, the Avis company was founded in 1946 by Warren Avis, who owned an automobile dealership in Detroit. Avis started with rental operations at Detroit's Willow Run Airport and Miami International Airport. He then licensed the Avis name to independent car rental companies to serve airports in New York; Chicago; Dallas; Washington, D.C.; Los Angeles; and other cities. In 1948, Avis began to open offices near hotels and business districts and dropped "Airlines" from the company name.

Avis sold Avis Rent-A-Car System in 1954 to Richard S. Robie, operator of a car rental business in New England, for $8 million. At the time, there were 185 Avis locations in the United States and Canada, and working agreements were established with local companies throughout Europe. Under Robie, the company developed the first nationwide plan for one-way rentals and introduced its own credit card. Robie sold the business in 1956 to the Amoskeag Company, which created the holding company called Avis, Inc.

Avis grew rapidly in the late 1950s and early 1960s, expanding its fleet from 1,200 to 7,500 vehicles, but the changes in ownership that came to characterize Avis continued. Amoskeag sold the business in 1962 to Lazard Freres & Co., a New York investment banking firm. In 1965, Avis was purchased by the International Telephone & Telegraph Corporation (ITT). Under ITT's leadership, Avis strengthened its presence in Europe, where it became the leading car rental company. Avis also created the first online car rental reservation system in 1972 with the introduction of the Wizard System. ITT was ordered to divest Avis in 1972 as part of federal antitrust proceedings. When ITT was unable to find a buyer, Avis became a public company in 1974, with 52 percent of the stock held by a court-appointed trustee.

In 1977, Norton Simon, Inc., purchased control of Avis for $174 million. Revenues had grown to more than $673 million, with Avis accounting for about 25 percent of the car rental market. Under Norton Simon, Avis was riddled by dissension from its licensed dealers. The dissension became public in 1982 when Avis launched an advertising campaign with Norton Simon Chairman David Mahoney as spokesperson. The franchise group took its $5 million advertising budget to a different agency and created its own ads promoting low rates. In the confusion, Hertz widened its lead over Avis. National and Budget also gained market share. Avis posted a $50 million loss in 1982.

Changes in ownership continued in the 1980s. In rapid succession, Esmark, Inc., purchased Norton Simon in 1983, and Beatrice Company acquired Esmark in 1984. In 1985, Kohlberg Kravis Roberts & Company acquired Beatrice in a leveraged buyout. A year later, a management group and the Wesray Corporation purchased Avis for $265 million and the assumption of $1.34 billion in debt. In 1986, Wesray disposed of about half of Avis' European rental operations and its leasing operations in America. In 1987, Wesray sold the rest of Avis to an employee stock ownership plan for $750 million and the assumption of $1 billion in debt. General Motors purchased its 25 percent share of Avis in 1989. These changes continued with the HFS deal in 1996.

Budget Rent-A-Car was founded in Los Angeles in 1958 by Morris Mirkin, who started with a fleet of 10 cars. Initially, the company focused on the discount leisure market with its off-airport locations, but its image also appealed to economy-minded small business travelers. Budget began pursuing corporate accounts aggressively in 1989. Budget promoted its cars with the advertising tagline "The Smart Money Is On Budget."