A lot can happen in 94 years. In 1918 Hertz opened its doors in Chicago with a dozen of Henry’s finest Model T Fords, and since then the black and yellow logo has grown from a one-site rental outfit into one of the industry’s most recognisable global brands. But not without going through a few changes along the way.

‘I started off in the South of France and I’ve now been a Hertz man for 33 years. But in the last five or six years, the company has changed almost beyond recognition,’ reckons Michel Taride, executive vice president and president, Hertz International.

Most long-established industry players will have changed in the last few years – the relentlessly tough conditions ushered in by 2008’s economic crisis have seen to that. But despite the headwinds, Hertz has the bit between its corporate teeth. The long, drawn-out acquisition of Dollar Thrifty Group, which took five years to come to fruition and saw the company divest itself of the Advantage rental brand to squeeze the deal past antitrust regulators, is testament to the determination at the top. ‘Hertz is on a transformation journey,’ enthuses Mr Taride.

History

Starting with that first Chicago outlet, Hertz consolidated its position in the rental market a decade and a half later, opening a rental location at Chicago’s Midway airport in 1932. A move across the pond beckoned in 1950, which saw a European assault kick off with a 50-vehicle outlet in Paris. 63 years later the Hertz, Dollar and Thrifty brands span over 10,700 locations across North America, Europe, Latin America, Asia, Australia, Africa, the Middle East and New Zealand. But France remains the company’s largest market outside its USA home market. 

Fleet size

The combined Hertz and Dollar Thrifty fleet numbers 752,200 vehicles – 638,400 of these under the Hertz banner, and 113,800 under the Dollar and Thrifty brands. This excludes a fleet of around 165,000 vehicles operated by Donlen – a once family-owned fleet management and leasing business, which Hertz acquired in 2011.

Headquartered in the US, Donlen operates across Canada, Mexico and Europe providing Hertz with a very profitable avenue back into corporate fleet management services, as well as access to a range of proprietary technology. That includes the Donlen Fleet MasterCard, linked to Donlen’s “PUSH” (Prevent Unnecessary Spending and Hazards) technology, which can send alerts if a vehicle’s MPG performance is below expectations, a daily spending limit is breached or if the driver enters non-sequential odometer readings.

Market position

That transformation Mr Taride speaks of is across several fronts, one of which is market share – the Dollar Thrifty acquisition puts the combined Hertz operation ahead of the recently enlarged Avis Budget Group, with a 23.9% share of the €22.5bn ($30.5bn US) rental market, according to figures from industry researcher IBISWorld. Both groups are humbled by the leviathan Enterprise stable of brands, which enjoy a 38% slice of the US market and significant global presence.

But crucially, swallowing up the Dollar and Thrifty brands has provided Hertz with an established path into the mid and lower-tier sectors of the rental market. ‘Now we are no longer trying to be all things to all people – we can tap into the more price-sensitive end of the market without diluting the Hertz brand,’ explains Mr Taride. Not to mention the fact that having a lower-tier brand in the portfolio provides a good excuse to re-position the Hertz brand onto a more premium footing, he admits.

A value offering will help Hertz find more customers in the embattled southern European and Mediterranean markets. ‘Europe is challenging at the moment and Hertz has always been a more premium brand. Dollar Thrifty helps us in places like Spain and Portugal where prices have to be highly competitive,’ reckons Mr Taride.

Synergies from combining the two businesses are reckoned to be in the order of €118m ($160m US) of annual cost savings through shared assets and economies of scale. To put it mildly, the company has also been on something of an efficiency drive since 2007, somehow shaving an estimated €1.55bn ($2.1bn US) off its costs in the last five years.

“Asset light”

As Mr Taride explains, moving towards an “asset light” business model, partly as a result of adopting the franchising route has been key to leaving more in the company coffers.

‘Car rental is an asset-intensive business, so in many markets we’ll try to partner with established operators to accelerate our growth – more than 35% of our revenues come from the franchised route.’

Hertz’s not-insubstantial revenues comprise €7.45bn ($10.1bn US) from corporate (centrally owned) outlets and a further €3.54bn ($4.8bn US) from franchisee-owned locations – which number 4,500 worldwide.

Car sharing

This is an age where paring things back is on-trend, so being asset light is also a real draw for the customer. That’s why the car-sharing phenomenon is now firmly on the radar of many fleet managers who are under pressure to reduce costs.

The Hertz car-sharing brand “Hertz On Demand” provides 230,000 members in 800 locations with immediate keyless access to rental cars by the hour or by the day, accessed for an hourly rate that includes fuel, insurance and 24-hour back-up from a member’s contact centre. It’s gaining traction in the corporate sector with high-profile names such as Heathrow Airport, PwC and Marriott International amongst the customers who have generated significant savings and reduced their fleet size as a result of using the service.

Hertz On Demand also operates the most energy-efficient models possible, including electric vehicles – of which Hertz has been early adopters in the rental market. ‘It’s still a niche market, but we really believe this is the start of a new era,’ explains Mr Taride.

Hertz has an EV programme spanning more than 10 cities in three continents, offering an eclectic electric selection – from the Nissan LEAF and Opel Ampera through to the ultra-niche Tesla. And easy rental access to EVs is one of the keys to demystifying the electric car, reckons Mr Taride. The sustainability angle that companies love to plug in corporate responsibility reports is another attraction – but Mr Taride acknowledges it won’t happen overnight.

‘Lots of corporations are interested in getting EVs on board as part of a sustainability strategy. There’s good progress on charging standardisation, but it takes time – and renting an EV is one of the best trials people can have.’

Remarketing

There’s no getting away from the fact that EVs are costly in terms of a total ownership proposition, but Hertz is balancing that out by increasing the returns from its remarketing activities, something Mr Taride has had responsibility for since 2010. The Hertz “Rent2Buy” program, which started three years ago in the US, has been a success, says Mr Taride: ‘You test-drive the car for three days in the US – or 10 days in the UK – and if you like it, you buy it afterwards, with the rental costs refunded.’

‘Rent2Buy has worked very well in the US so we’ve started it in France, the UK, Italy and Spain, with more countries to follow.’ There’s also an online platform for dealers and the motor trade, but auctions make up less than 5% of total sales. Outside of these channels, buy-back schemes are in place on around 20% of the fleet in the US and 65% of the European fleet.

As with most operators, there are favoured brands on the fleet, with Hertz’s biggest supplier being General Motors. 47% of the US fleet and 21% internationally wear a GM Group badge. Toyota, Ford and Nissan bring up the rear, with strong representation on the Hertz rental fleet in the US and overseas.

The future

Hertz is setting out its stall for emerging market growth: it’s banking on international travel doubling over the next decade, led by the expanding middle-class market.

‘We are focusing a lot on growth in emerging markets – moving into Brazil, India and China,’ admits Mr Taride.

‘We’ll also focus on higher-return investments like car-sharing to bring growth,’ he continues.