The rental car business has grown in line with commercial airlines at Los Angeles International Airport, nearing $1 billion in revenue since emerging from the recession.
The competitive field for rental cars isn’t as spread out as airlines, though – even if the various brands with counters at LAX give a different impression.
Nearly 90 percent of the airport’s rental car market is controlled by three companies: Enterprise Holdings Inc. of St. Louis, Hertz Corp. of Estero, Fla.; and Avis Budget Group of Troy Hills, N.J.
The Business Journal gleaned this and more information from monthly reports filed by the car rental companies with Los Angeles World Airports, the city agency that runs LAX; the reports are compiled on LAWA’s website. The car rental companies are required to file gross revenue and rental transaction tallies as the basis for fees they pay the airport.
Overall, eight car rental companies operating a total of 15 brands serving LAX reported nearly $860 million in 2016 revenue, up almost 8 percent from a year earlier. The LAX rental car market has grown 27 percent in the past five years, slightly outpacing the 21 percent growth in passenger traffic at the airport over the same period. Last year, a record 80.9 million passengers went through LAX.
The airport’s growth in car rentals also is outpacing the national average around airports, according to Chris Brown, executive editor of Auto Rental News in Torrance.
“We’ve seen modest growth in the rental car industry coming out of the recession,” Brown said. “The growth in the LAX market is greater primarily because the growth in airport passenger traffic there is greater and the airport area rental car industry closely tracks the number of airport passengers.”
One other factor, according to Aaron Medina, western region vice president for Hertz, is that customers renting cars around LAX tend to hold on to the vehicles for a day or two longer on average than their counterparts at other airports. That’s because of the higher proportion of leisure travelers and the spread-out nature of the region’s attractions – think Universal Studios and Disneyland – that require multiple-day stays. Longer rental periods of course mean more revenue per transaction.
Enterprise on top
Enterprise was the largest company by revenue and market share at LAX last year, reporting nearly $284 million in 2016 revenue for a 33 percent share of the airport market. Revenue was up 8 percent from $262 million in 2015, though the market share remained constant. Its three brands are Alamo Rent-a-Car, Enterprise Rent-a-Car and National Car Rental.
Kevin Bass, Enterprise’s group vice president for Southern California, said increased passenger traffic at LAX – especially from overseas – drove the jump in revenue.
“We have continued to expand our operations overseas, which means more visibility for us when international travelers come here to Los Angeles,” Bass said.
Close behind was Hertz, with $267 million in 2016 revenue from LAX-area operations for a 31 percent market share.
Hertz’s revenue fell 4.5 percent from 2015, thanks to LAX-area revenue drops in its namesake brand, Hertz Car Rental and its Dollar Rent-a-Car. Its third LAX-area brand, Thrifty Car Rental, saw an increase in business, but it was not enough to offset the revenue drop from the other two brands.
Hertz’s overall share fell from its market-leading 35 percent in 2015 to the No. 2 slot.
Company spokeswoman Lauren Luster said the drop in revenue at Hertz’s LAX brand locations was part of a companywide slump in revenue – U.S. car rental revenue fell about 3 percent in 2016 from 2015 levels.
“While we experienced some decline in revenue, we have been executing a turnaround plan for each of our brands that is gaining momentum,” Luster said in an emailed statement. “We have a new CEO on board, and are focused on upgrading our fleet mix, making service improvements, investing in marketing, and undergoing a technology transformation – all with the goal of earning customer preference. With these initiatives, we expect to see continued progress across our brands throughout 2017 and 2018.”
The third major car rental operation, Avis Budget Group, reported 2016 LAX-area revenue of $192 million, up 3.8 percent from the previous year. Its major namesake, Avis, had a slight drop in revenue, which was offset by its other namesake, Budget, and two other brands with a very small LAX market presence: Payless and Zipcar. Overall, Avis Budget’s market share last year was 22 percent, down from 23 percent in 2015.
The other five brands are niche players with specialty offerings such as luxury car rentals. They include two L.A.-based companies: Fox Rent-A-Car and MCar (formerly Midway Car Rental). Fox had a 4.4 percent market share, followed by Munich-based Sixt, with 4.3 percent, then Advantage OPCO of Orlando, Fla., with 2.2 percent. MCar, which is part of Midway Auto Group – owned by billionaire Don Hankey (No. 28 on the LABJ Wealthiest Angelenos list) – had only a 1.2 percent share of the LAX car rental market.
Looking ahead
Brown of Auto Rental News said he expects revenue growth in the LAX rental car market to slow this year and next as Uber and Lyft mark their first full years of official operation at the airport. The taxi industry has taken the initial brunt of the impact from Uber and Lyft, according to Brown, but rideshare businesses have slowly been eating into the revenue of traditional rental car companies.
“We’re more looking at a slowing or at worst a flattening of revenue growth, not an actual drop in business at this stage like the taxi industry has experienced,” Brown said.
Many travelers still value the independence that a car rental can bring – and the longer the stay, the less of a price advantage Uber and Lyft can offer, he noted.
Further down the road – roughly seven years out – the entire car rental business around LAX is set to undergo a radical shift as a consolidated car rental facility is expected to open near the 405 freeway, connected to the central terminal area by a people mover. All the car rental facilities now scattered around the airport area are expected to move into this single building, eliminating the ubiquitous car rental shuttles circling the terminal area.
Brown said the biggest impact of consolidated car rental facilities at other airports has been an improvement in the car rental experience, which makes travelers more willing to make repeat visits to a region.
– Howard Fine
