Could Rental Rates Rise With Hertz-Dollar-Thrifty Combination?

April 26, 2010
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Today's news, that Hertz is planning to purchase Dollar Thrifty, might not raise rates right away, but it could make deals for some travelers a bit harder to find in the not-too-distant future.

Rental prices have already been on an upswing, with short-notice deals harder to find than they had been. After the industry was caught flat-footed in 2008, hit doubly by the stay-at-home affects of the recession and the drop in business-related rentals and air travel, fleets were trimmed down, and aging cars were kept in the fleet with tens of thousands of miles on them.

To help compensate, rental-car companies raised prices for leisure travelers. According to Avis Budget, the average price of a rental jumped by around three dollars a day in 2009.

In recent months, the rental-car industry has been in recovery mode, with the companies reducing their losses and stock prices bouncing back.

For now, analysts anticipate that customers won't see any rate changes. That's because the two companies largely cater to different types of travelers. While Hertz caters to the special needs of corporate and business travelers, Dollar Thrifty has focused toward leisure travelers, and the two companies run at different pricing tiers.

But the concern is that the acquisition will leave just three car-rental giants in the U.S.: Enterprise (Alamo/National), Avis (Budget), and Hertz (Dollar/Thrifty).

Even when merged with Hertz, Dollar Thrifty operations would almost certainly continue operation in some form. However, Hertz has said that it plans to cut about $180 in overlapping costs, primarily in fleet, IT systems, and procurement—meaning that in addition to merging operations, the brands could be sharing vehicles.

Based on previous rental mergers, the first locations to see a rise in prices could be small-to-medium-size airport locations, as smaller-volume, redundant locations are consolidated.

Hertz was wholly owned by Ford Motor Company (NYSE:F) from 1994 to 2005, while Thrifty was at one time owned by Chrysler. Accordingly, Hertz was long-dependent on Ford vehicles like the Lincoln Town Car, Ford Explorer, and Ford Taurus, and Dollar-Thrifty had a fleet heavy on Chrysler products such as the Chrysler Sebring and Dodge Grand Caravan. In recent years, both companies have diversified their fleets to include more small cars, and more import-brand vehicles.

At present, Hertz has about 8,200 locations over 146 countries, and Dollar Thrifty has 1,550 locations.

[CNN; USA Today]

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