Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Avis Budget Group Inc. (CAR) & Hertz Global Holdings, Inc. (HTZ): Car Rental Companies Driven to Consolidate

Building on its acquisition of Zipcar earlier this year, Avis Budget Group Inc. (NASDAQ:CAR) just announced it is buying deep-value rival Payless Car Rental, the sixth-largest car rental company in North America, in a $50 million deal. The deal marks the continued consolidation of the car rental industry, one that is already heavily rolled up into just a few hands.

Following Hertz Global Holdings, Inc. (NYSE:HTZ)‘s acquisition of Dollar Thrifty this year, there are just three car rental companies controlling 95% of the market. While airport car rentals are the biggest drivers for the industry, accounting for 70% of revenues for both Avis Budget Group Inc. (NASDAQ:CAR) and Hertz Global Holdings, Inc. (NYSE:HTZ), the overall industry leader is privately held Enterprise Rent-A-Car, which has a decidedly more neighborhood-oriented approach and owns 70% of that market.

Hertz Global Holdings, Inc. (NYSE:HTZ)

The off-airport market is an $11 billion industry, but it’s dominated by the premium and mid-tier value propositions. Avis Budget Group Inc. (NASDAQ:CAR) is following Hertz Global Holdings, Inc. (NYSE:HTZ)’s lead by going after the deep-value market, which is represented by brands like Payless, Sixt (a Hertz company), and Advantage (which Hertz sold to get the Dollar Thrifty acquisition past regulators).

With its $80 million in annual revenues, Avis Budget Group Inc. (NASDAQ:CAR) is looking for Payless to help cut into Enterprise’s neighborhood reign. It won’t be easy, since the industry giant has more than 5,500 locations across the country, but analysts anticipate that with a stronger economy, the North American car rental market will grow at a compounded annual rate of 5.5% between 2013 and 2017 as Americans take more leisure-related trips.

That’s borne out by the results achieved by online travel agent Inc (NASDAQ:PCLN) , which purchased a car rental business a few years ago and has seen it become a strong part of its online booking business. Last quarter the OTA saw domestic gross bookings grow 9% primarily because of growth in its domestic rental car reservations as rental car days increased sequentially from 37% to 43%.

The Payless deal isn’t a game changer for Avis Budget Group Inc. (NASDAQ:CAR), but does represent management’s holistic view to driving its business. Having acquired the leading name in car-sharing services, it now adds a top player in the underutilized deep-value market that ought to chip away at Enterprise’s dominance, even if it means consolidating the industry further.

The article Car Rental Companies Driven to Consolidate originally appeared on

Fool contributor Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends Inc (NASDAQ:PCLN). The Motley Fool owns shares of Hertz Global Holdings, Inc. (NYSE:HTZ) and Inc (NASDAQ:PCLN).

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!