Hertz 2011 Annual Report Download - page 35

ITEM 1. BUSINESS (Continued)
At our major airport rental locations, as well as at some smaller airport and off-airport locations,
customers participating in our Hertz #1 Club Gold program are able to rent vehicles in an expedited
manner. In the United States, participants in our Hertz #1 Club Gold program often bypass the rental
counter entirely and proceed directly to their vehicles upon arrival at our facility. For the year ended
December 31, 2011, rentals by Hertz #1 Club Gold members accounted for approximately 36% of our
worldwide rental transactions. We believe the Hertz #1 Club Gold program provides a significant
competitive advantage to us, particularly among frequent travelers, and we have, through travel industry
relationships, targeted such travelers for participation in the program.
Hertz introduced a number of customer service offerings in 2011 in order to further differentiate itself
from the competition. The most significant new offering was Gold Choice. Hertz Gold Choice now offers
our customers an option to choose the car they drive. As always for Gold customers, they will have a
preassigned car ready and waiting for them, but now they have the freedom to select a different car that’s
available at the new Gold Choice area. This service is free of charge to Gold customers who book a
midsize class or above. The Gold Choice program was launched during August 2011 and rolled out to
32 U.S. airport locations by December 2011.
In addition to our airport locations, we operate off-airport locations offering car rental services to a variety
of customers. Our off-airport rental customers include people wishing to rent cars closer to home for
business or leisure purposes, as well as those needing to travel to or from airports. Our off-airport
customers also include people who have been referred by, or whose rental costs are being wholly or
partially reimbursed by, insurance companies following accidents in which their cars were damaged,
those expecting to lease cars that are not yet available from their leasing companies and those needing
cars while their vehicle is being repaired or is temporarily unavailable for other reasons; we call these
customers ‘‘replacement renters.’’ At many of our off-airport locations we will provide pick-up and
delivery services in connection with rentals.
When compared to our airport rental locations, an off-airport rental location typically services the same
variety of customers, uses smaller rental facilities with fewer employees, conducts pick-up and delivery
services and deals with replacement renters using specialized systems and processes. In addition, on
average, off-airport locations generate fewer transactions per period than airport locations. At the same
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 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 Gold
program 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
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