Hertz 2007 Annual Report Download - page 31

time, though, our airport and off-airport rental locations employ common car fleets, are supervised by
common country, regional and local area management, use many common systems and rely on
common maintenance and administrative centers. Moreover, airport and off-airport locations, excluding
replacement rentals, benefit from many common marketing activities and have many of the same
customers. As a consequence, we regard both types of locations as aspects of a single, unitary, car
rental business.
We believe that the off-airport portion of the car rental market offers opportunities for us on several levels.
First, presence in the off-airport market can provide customers a more convenient and geographically
extensive network of rental locations, thereby creating revenue opportunities from replacement renters,
non-airline travel renters and airline travelers with local rental needs. Second, it can give us a more
balanced revenue mix by reducing our reliance on airport travel and therefore limiting our risk exposure
to external events that may disrupt airline travel trends. Third, it can produce higher fleet utilization as a
result of the longer average rental periods associated with off-airport business, compared to those of
airport rentals. Fourth, replacement rental volume is far less seasonal than that of other business and
leisure rentals, which permits efficiencies in both fleet and labor planning. Finally, cross-selling
opportunities exist for us to promote off-airport rentals among frequent airport Hertz #1 Club renters
and, conversely, to promote airport rentals to off-airport renters. In view of those benefits, along with our
belief that our market share for off-airport rentals is generally smaller than our market share for airport
rentals, we intend to seek profitable growth in the off-airport rental market, both in the United States and
internationally.
In the three years ended December 31, 2007, we increased the number of our off-airport rental locations
in the United States by approximately 27% to approximately 1,580 locations. In 2008 and subsequent
years, our strategy may include selected openings of new off-airport locations, the disciplined evaluation
of existing locations and pursuit of same-store sales growth. We anticipate that same-store sales growth
would be driven by our traditional leisure and business traveler customers and by increasing penetration
of the insurance replacement market, of which we currently have a low market share. In the United States
during the year ended December 31, 2007, approximately one-third of our rental revenues at off-airport
locations were related to replacement rentals. We believe that if we successfully pursue our strategy of
profitable off-airport growth, the proportion of replacement rental revenues will increase. As we move
forward, our determination of whether to continue to expand our U.S. off-airport network will be based
upon a combination of factors, including the concentration of target insurance company policy holders,
car dealerships, auto body shops and other clusters of retail, commercial activity and potential
profitability. We also intend to increase the number of our staffed off-airport rental locations
internationally on the basis of similar criteria.
In addition to renting cars, in Germany we also rent trucks of eight tons and over, including truck tractors.
This truck rental fleet consists of approximately 3,700 vehicles, which have either been acquired under
repurchase programs similar to those under which we purchase program cars, or are under operating
leases. We believe we are a market leader in heavy truck rental in Germany. Also, we are engaged in the
car leasing business in Brazil and Australia. Our truck rental activities in Germany and our car leasing
activities in Brazil and Australia are treated as part of our international car rental business in our
consolidated financial statements.
Our worldwide car rental segment generated $6,920.6 million in revenues and $468.6 million in income
before income taxes and minority interest during the year ended December 31, 2007.
We may also, from time to time, pursue profitable growth within our car rental business by pursuing
opportunistic acquisitions, which may be significant, that would expand our global car rental business.
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