Hertz 2013 Annual Report Download - page 11

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The terms of our concessions typically do not forbid us from seeking, and in a few instances actually require us to seek, reimbursement from
customers of concession fees we pay; however, in certain jurisdictions the law limits or forbids our doing so. Where we are required or
permitted to seek such reimbursement, it is our general practice to do so. Certain of our concession agreements require the consent of the
airport's operator in connection with material changes in our ownership. A growing number of larger airports are building consolidated airport
rental car facilities to alleviate congestion at the airport. These consolidated rental facilities may eliminate certain competitive advantages
among the brands as competitors operate out of one centralized facility for both customer rental and return operations, share consolidated
busing operations and maintain image standards mandated by the airports. See “Item 1A—Risk Factors” in this Annual Report.
Off-Airport Locations
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.”
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 air 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 Gold Plus Rewards 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 69% to approximately 2,785
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. 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 franchisee
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
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Source: HERTZ CORP, 10-K, March 31, 2014 Powered by Morningstar® Document Research℠
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