Rental Car Companies Move More and More into the Suburbs for Growth

"Enterprise Rent-A-Car, the largest suburban provider, has approximately 5,000 non-airport locations nationwide, and claim to be "within 10 minutes of 90% of the population of Chicago and northwestern Indiana," according to one company spokesperson. Hertz Corporation, long the leader in airport rental locations, plans to create about 1,300 non-airport locations nationwide. Other brands, such as Avis and Budget Rentals, are expanding into the suburbs, but much more slowly than either Enterprise or Hertz.

Part of the problem with tying rental car agencies to airport locations is that it forces car rentals to be based on airline travel. And in a post-9/11 world, with airline travel faltering, car rentals at airport locations are faltering as well. In fact, Alamo Rentals, Budget, and National Car Rentals have all recently come out of bankruptcy proceedings. Further, some airports require a guaranteed volume for counter space, and rental companies must also pay for shuttle service to their parking lots and rent for the counter space.

Costs are much lower in suburban areas, requiring (in some instances) only a computer terminal and one or two employees. Further, the growth observed in these suburban rental offices is growth that the companies themselves can control, as compared to airport offices, the growth of which derives largely from economic changes. Much of the business in these suburban areas is generated from insurance replacements: When individuals are in accidents and need loaner cars while theirs are being repaired, insurance companies typically look to the rental companies for assistance. Car rental companies have developed relationships with auto insurance carriers to guarantee rentals" (The Chicago Tribune, 2004).

"The ability to reserve a car at the onset of reporting a claim eliminates the period most customers must wait for a claim adjuster to examine the customer's file. During this time, policyholders usually need to find an alternate means of transportation. Individuals who require an immediate solution often end up paying standard prices instead of the discounted rates their insurance carriers may have pre-negotiated with a car rental provider like Hertz" (Business Wire, 2003).

While 9/11 may have changed our life, leaving forever a footprint that were not welcomed nor expected, it had a very short term affect on travel choices we faced: Airplane or car? The change needed, to move us from gasoline guzzling ownership to environmentally conscious living, is taking years and too much money spent to support our love with all things automobile; yet change is occurring nonetheless. In such cities as NY, London or Berlin, owning a personal car is akin to renting or owning two apartments. Not very cost effective for the people looking from the outside into the world of the Trumps.

In addition to being budget conscious in a haphazard world, the global community also fell in love with the color green. It is hip to be green today. Eco friendly living is on the rise all over the world, leading people down the path of renting by the hour rather than purchasing a vehicle outright. "Cars can have serious deleterious societal impacts, particularly in large urban areas. These impacts include pollution, traffic congestion, and large public expenditures on highway construction and maintenance, often to the exclusion of investment in public transportation. Cars also are expensive to own and operate, especially for people with moderate incomes. Car sharing reduces the individual and the societal costs of driving." (I-Go)

The methodology utilized to assess suburban car rentals, and its overall viability based on supply and demand and green impact, is a bit clouded. One would assume that most brand name car rental agencies are joining the fray to increase the bottom line, green research being of little concern, with one minor exception. I-GO, a 'by the hour car rental agency' conducted "its own research from its four years of operation and has found profound results:

1. Each I-GO car replaces 15 cars on the road
2. 25% increasing their walking.
3. 14.5% increased their biking.
4. 17.6% increased their public transit usage.
5. 45.9% gave up or postponed purchase of a vehicle or considered selling a vehicle because of joining I-GO.
6. Members report driving only 9.6 miles per week, or 500 miles per year, whereas the typical car owner in Chicago drives 10,000 miles per year.
7. Of those who did not own a car at the time of orientation, 56% postponed buying a car because of I-GO or gave up a car prior to joining I-GO" (I-GO).

The trend towards greener living and learning to live post 9/11 propelled many companies in the rental car industry down the path of evaluating their place within this niche. If a demand seemed to be on the horizon, supply needed to follow since "rental firms suffered along with the rest of the travel business. Industry revenues slid from $19.4 billion in 2000 to $17.9 billion in 2003, reports Auto Rental News. In response, car rental companies cut fleet sizes by up to 20% during 2003, according to Abrams Consulting Group. Meanwhile, franchisees ratcheted up the pressure on employees to push profitable extras - such as fuel-purchase options, insurance and upgrades" (Elliott, C.) until the market became viable for hourly rentals.

"In the fall of 1999, the two founders of Zipcar were sitting in a café, excited about a concept they had seen in Berlin while on vacation. Cars were parked around the city for members to drive by the hour instead of owning their own vehicles. They had a Eureka! moment (or maybe it was more like, "Duh! What an obvious idea.") They put an American spin on it - outfitting the cars with wireless technology, creating a hassle-free reservation system and strategically placing the cars around key cities and neighborhoods. In June of 2000 the first Zipcars were on the road. The masses could now drive cars by the hour or day - on their terms" (Zipcar).

While the big companies are tentatively entering the suburban 'rental car' market, there have been unique forerunners to this concept for some time. HourCar for Minneapolis and St. Paul; ZipCar for multiple US locations and London, City Wheels in Cleveland, Flexcar in Seattle, Autoshare in Toronto, Flexicar in Australia, and the list goes on. "Flexcar is the oldest of the lot, being able to trace its origin back to 1998" (Wikipedia).

If green living and budget are not a concern, one of the more delightful aspects in relation to off-Airport renting is the ability to spoil yourself without long term obligations, may it be with a Hummers in Las Vegas or a Lexus in NYC. As an example, renting and driving a Lexus in NYC feels "fantastically similar to relaxing on a royal throne". I can enjoy a "commanding view with a heightened leather seat while delighting in technological and transmission power" at my fingertips. I am also assured that I make "heads turn" as I cruise around in my temporary "posh vehicle" (in part by Car Rental Express NYC). Why obligate myself for years to pay off loans when I can rent luxury and get my fix filled in just few hours?

Conversely, "it's a rare but increasingly common option for business travelers: renting cars by the hour rather than by the day. Rental giant Hertz now will offer hourly rentals in three locations in New York City. Eight of Enterprise Rent-A-Car's Manhattan stores offer hourly rentals. In all, Enterprise offers hourly rentals in seven other cities - Washington, Seattle, Chicago, Boston, San Francisco, Philadelphia and Portland, Ore. Enterprise has been renting by the hour since late 2005 when it started in Chicago. About 200 Chicago-area stores now offer the service. Neither company rents by the hour from airport locations. Hourly rates vary by day and location, but start at about $11 for the smallest cars before taxes and fees. Daily rentals for compact cars in Manhattan start about $80 on weekdays before taxes and fees" (USA Today, 2007).

Community Car Rentals can help individuals and employers save money and time while improving the region's quality of life, or as in my case, allow you to live in the lap of luxury one hour at a time.

References:

Elliott, Christopher, 2003. "Car rentals on the skids". Retrieved from the Elliott.org website at
http://www.elliott.org/archives/2003/04/car_rentals_on.php

Business Wire, 2003. "Hertz and First Notice Systems Team Up to Facilitate Insurance Replacement Car Rentals". Retrieved from the Find Articles website at
http://findarticles.com/p/articles/mi_m0EIN/is_2003_March_24/ai_99109062

Gale Group, 2003. Hertz and First Notice Systems Team Up to Facilitate Insurance Replacement Car Rentals. Retrieved from the Find Articles website at
http://findarticles.com/p/articles/mi_m0EIN/is_2003_March_24/ai_99109062

Car Rental Express NYC Information, 2007. Retrieved from the Car Rental Express NYC website at
http://www.nycexoticcarrentals.com

ZipCar Information. Retrieved from the ZipCar website at
http://www.zipcar.com

USA Today, 2007. "More companies rent cars by the hour". Retrieved from the USA Today website at
http://www.usatoday.com/travel/news/2007-04-23-hourly-rental-usat_N.htm

NY Times, 1995. "Rent a Car, By the Hour". Retrieved from the NY Times at
http://query.nytimes.com/gst/fullpage.html?res=990CE1D61F3EF93BA3575AC0A963958260

Wikipedia, 2007. "Eco Friendly Hourly Car Rentals". Retrieved from the Wikipedia website at
http://en.wikipedia.org/wiki/Flexcar
and verified via the Flexcar website at
http://www.flexcar.com/ and I-GO http://www.igocars.org/

Project Topic via the "Economics in the News" Article by Kathy Bergen, 2004. "Rent-a-car firms take fight for sales far from airports." The Chicago Tribune, August 2004, http://www.chicagotribune.com.
Retrieved from the SW Learning website at http://www.swlearning.com/economics/econ_news/rental_cars_0904.html

Tucker, Irvin B, 2007. Microeconomic For Today. Fifth Edition. Kaplan Course eBook for Microeconomics SS224-02, 2007