Avis 2010 Annual Report Download - page 12

Table of Contents
partnership agreement with American Airlines and we also entered into new partnership agreements with Jet Blue’s and Frontier Airlines’
frequent flyer programs. Avis and Budget are also affiliated with the frequency programs of major hotel companies, including Hilton Hotels
Corporation, Hyatt Corporation, Starwood Hotels and Resorts Worldwide, Inc. and Wyndham Worldwide. These arrangements provide
incentives to program participants and cooperative marketing opportunities, including call transfer programs and online links with various
partners’ websites. Avis has an agreement with Wyndham Worldwide’s lodging brands whereby lodging customers making reservations by
telephone may be transferred to Avis if they desire to rent a vehicle.
In 2010, approximately 83% of domestic vehicle rental transactions from our owned and operated Avis locations in the United States were
generated by travelers who rented from Avis under contracts between Avis and the travelers’ employers or through membership in an
organization with whom Avis has a contractual affiliation (such as AARP or Costco). Avis also has marketing relationships with organizations
such as American Express Company, Mastercard International Incorporated and Sears Holding Corp., through which we are able to provide
customers of these entities with incentives to rent from Avis. Avis licensees also generally have the option to participate in these affiliations. For
commercial and leisure travelers who are unaffiliated with any of the employers or organizations that we contract with, Avis solicits business
through media, direct mail, e-mail and Internet advertising. Avis conducts various loyalty programs through direct marketing campaigns,
including Avis Preferred, which allows customers to bypass the rental counter when renting a vehicle, and Avis First, which offers our customers
enhanced benefits for frequent rentals.
Additionally, Budget offers “Unlimited Budget”, a loyalty incentive program for travel agents, which had approximately 18,000 travel agents
actively enrolled as of December 31, 2010 and which was expanded in 2010 to include Avis as a partner. Budget also offers the Budget Small
Business Program, a program for small businesses that offers discounted rates, central billing options and rebates to members. Budget has
contractual arrangements with American Express Company, Mastercard International Incorporated and other organizations, which offer
members of these groups incentives to rent from Budget. In connection with its focus on value-conscious customers, Budget primarily relies on
retail advertising, including Internet advertising, and on value pricing to drive customers to our Budget website, our call centers and other
distribution channels. Budget also offers proprietary marketing programs such as Fastbreak, an expedited rental service for frequent renters. Our
international Avis and Budget operations maintain close relationships with the travel industry through participation in several non-U.S. based
frequent traveler programs with airlines such as Qantas Airways Limited, Air New Zealand and Air Canada. We have been selected as Qantas
Airways’ exclusive car rental partner for its frequent flyer program, and have expanded our marketing agreement with Air Canada. We also
participate in Avis Europe’s programs with British Airways Plc, Deutsche Lufthansa AG and other carriers.
Licensing
Revenue derived from our car rental licensees in 2010 totaled $45 million, including $43 million of royalties. Licensed locations range from
large operations at major airport locations and territories encompassing an entire country to relatively small operations in suburban locations.
Our licensees maintain separate independently owned fleets. Royalties generated from licensing provide us with a source of high margin revenue
because there are relatively limited additional fixed costs associated with fees paid by licensees to us. Although licensed locations represent
approximately 25% of the domestic Avis and Budget car rental locations, domestic locations operated by licensees represent only approximately
9% of total domestic revenue generated by the Avis and Budget Systems, because the average licensed operation is significantly smaller than the
average corporate-operated location. We facilitate one-way car rentals between corporate-owned and licensed locations in the United States,
Canada and Australia that enable us to operate as an integrated network of locations.
We generally enjoy good relationships with our licensees and meet regularly with them at regional, national and international meetings. Our
relationships with licensees are governed by license agreements that grant the licensee the right to operate Avis or Budget car and/or truck rental
businesses exclusively in certain territories. These agreements impose obligations on the licensee regarding its operations and most restrict the
licensee’s
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