Hertz 2008 Annual Report Download - page 27

ITEM 1. BUSINESS (Continued)
the total. Within Europe, the largest markets are Germany, France, Spain and the United Kingdom. We
believe total rental revenues for the car rental industry in Europe in 2008 were approximately $10 billion
in nine countries—France, Germany, Italy, the United Kingdom, Spain, the Netherlands, Switzerland,
Belgium and Luxembourg—where we have company-operated rental locations and approximately
$2.4 billion in eight other countries—Greece, Ireland, Portugal, Sweden, Norway, Denmark, Austria and
Finland—where our brand is present through our licensees.
We estimate that rentals by airline travelers at or near airports, or ‘‘airport rentals,’’ accounted for
approximately one-half of the total market in the United States in 2008. This portion of the market is
significantly influenced by developments in the travel industry and particularly in airline passenger traffic,
or ‘‘enplanements.’’ We believe domestic enplanements decreased in 2008 by approximately 5.1% and
are expected to decrease by 8.0% in 2009. The International Air Transport Association, or ‘‘IATA,’’
projected in December 2008 that annual international enplanements would decrease 3.0% in 2009.
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.
Worldwide 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 2008, 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 9.6% compound annual growth rate between
1991 and 2008. Other market data indicates that the equipment rental industries in France and Spain
generate roughly $4 billion and less than $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. We believe U.S. non-residential construction spending grew at an
annual rate of 4% in 2008 but is projected to decrease at an annual rate of 10% in 2009. We also believe
that rental equipment accounted for approximately 40% of all equipment sold into the U.S. construction
industry in 2007, 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 by 2012.
Our Business Segments
Our business consists of two reportable segments, car rental and equipment rental. 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 are included as ‘‘other reconciling items.’’
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, 2008, 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.
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