Hertz 2012 Annual Report Download - page 33

ITEM 1. BUSINESS (Continued)
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
market share for airport rentals, we intend to seek profitable growth in the off-airport rental market, both
in the United States and internationally.
Since January 1, 2009, we increased the number of our off-airport rental locations in the United States by
53% to approximately 2,520 locations. Our strategy includes selected openings of new off-airport
locations, the disciplined evaluation of existing locations and the pursuit of same-store sales growth. We
anticipate that same-store sales growth will be driven by our traditional leisure and business traveler
customers and by increasing our market share in the insurance replacement market, in which we
currently have a relatively low market share. In the United States during the year ended December 31,
2012, 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, commercial activity and potential profitability as well as the concentration of target insurance
company policyholders, car dealerships and auto body shops. We also intend to increase the number of
our staffed off-airport rental locations internationally based on similar criteria.
Rates
We rent a wide variety of makes and models of cars. We rent cars on an hourly (in select markets), daily,
weekend, weekly, monthly or multi-month basis, with rental charges computed on a limited or unlimited
mileage rate, or on a time rate plus a mileage charge. Our rates vary at different locations depending on
local market conditions and other competitive and cost factors. While cars are usually returned to the
locations from which they are rented, we also allow one-way rentals from and to certain locations. In
addition to car rentals and licensee fees, we generate revenues from reimbursements by customers of
airport concession fees and vehicle licensing costs, fueling charges, and charges for ancillary customer
products and services such as supplemental equipment (child seats and ski racks), loss or collision
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