Hertz 2015 Annual Report Download - page 13

Table of Contents
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network of company-operated locations contributes to the consistency of our service, cost control, fleet utilization, yield management, competitive
pricing and our ability to offer one-way rentals.
For our airport company-operated rental locations, we have obtained concessions or similar leasing, licensing or permitting agreements or
arrangements (collectively, “concessions”) granting us the right to conduct a car rental business at the respective airport. Our concessions were
obtained from the airports' operators, which are typically governmental bodies or authorities, following either negotiation or bidding for the right to
operate a car rental business. The terms of an airport concession typically require us to pay the airport's operator concession fees based upon a
specified percentage of the revenues we generate at the airport, subject to a minimum annual guarantee. Under most concessions, we must also
pay fixed rent for terminal counters or other leased properties and facilities. Most concessions are for a fixed length of time, while others create
operating rights and payment obligations that are terminable at any time.
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 car rental facilities to
alleviate congestion at the airport. These consolidated rental facilities provide a more common customer experience and 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
We have approximately 2,800 off airport locations in the U.S. and approximately 4,225 off airport rental locations internationally. Our off airport
rental customers include people who prefer to rent cars closer to their home or place of work 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 (“replacement renters”).
When compared to our airport rental locations, an off airport rental location typically uses smaller rental facilities with fewer employees, conducts
pick-up and delivery services and serves replacement renters using specialized systems and processes. On average, off airport locations
generate fewer transactions per period than airport locations.
Our off airport locations offer us the following benefits:
• 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;
• Provide 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;
• Contribute to higher fleet utilization as a result of the longer average rental periods associated with off airport business, compared to those
of airport rentals;
• Insurance replacement rental volume is less seasonal than that of other business and leisure rentals, which permits efficiencies in both
fleet and labor planning; and
• 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, we intend to seek profitable growth in the off airport
rental market, both in the U.S. and internationally.
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