Hertz 2007 Annual Report Download - page 27

The off-airport portion of the industry has rental volume primarily driven by local business use, leisure
travel and the replacement of cars being repaired. Because Europe has generally demonstrated a lower
historical reliance on air travel, the European off-airport car rental market is significantly more developed
than it is in the United States. However, we believe that in recent years, industry revenues from off-airport
car rentals in the United States have grown faster than revenues from airport rentals.
Equipment Rental
We estimate the size of the U.S. equipment rental industry, which is highly fragmented with few national
competitors and many regional and local operators, to be approximately $38 billion in annual revenues
for 2007, but the part of the rental industry dealing with equipment of the type HERC rents is somewhat
smaller than that. We believe that the industry grew at a 10.2% compound annual growth rate between
1991 and 2007. Other market data indicates that the equipment rental industries in France and Spain
generate roughly $5 billion and $2 billion in annual revenues, respectively, although the portions of those
markets in which HERC competes are smaller.
The equipment rental industry serves a broad range of customers from small local contractors to large
industrial national accounts and encompasses a wide range of rental equipment from small tools to
heavy earthmoving equipment. The industry has undergone a strong recovery following the industrial
recession and downturn in non-residential construction spending between 2001 and 2003. We believe
U.S. non-residential construction spending grew at an annual rate of 3% in 2007 but is projected to
decrease at an annual rate of 2% in 2008. We also believe, based on an article in Rental Equipment
Register published on February 1, 2006, that rental equipment accounted for approximately 30% to 40%
of all equipment sold into the U.S. construction industry in 2005, up from approximately 5% to 10% in
1991. In addition, we believe that the trend toward rental instead of ownership of equipment in the U.S.
construction industry will continue and that as much as 50% of the equipment used in the industry could
be rental equipment within the next ten years.
Our Business Segments
Our business consists of two segments, car rental and equipment rental. In addition, ‘‘corporate and
other’’ includes general corporate expenses, certain interest expense (including net interest on
corporate debt), as well as other business activities, such as third-party claim management services.
Car Rental: Our ‘‘company-operated’’ rental locations are those through which we, or an agent of ours,
rent cars that we own or lease. We maintain a substantial network of company-operated car rental
locations both in the United States and internationally, and what we believe to be the largest number of
company-operated airport car rental locations in the world, enabling us to provide consistent quality and
service worldwide. For the year ended December 31, 2007, we derived approximately 69% of our
worldwide car rental revenues from airport locations. Our licensees and associates also operate rental
locations in over 140 countries and jurisdictions, including most of the countries in which we have
company-operated rental locations.
Equipment Rental: On the basis of total revenues, we believe HERC is the one of the largest equipment
rental companies in the United States and Canada combined and in France and Spain. HERC rents a
broad range of earthmoving equipment, material handling equipment, aerial and electrical equipment,
air compressors, generators, pumps, small tools, compaction equipment and construction-related
trucks. HERC also derives revenues from the sale of new equipment and consumables.
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