Renting a Chevy Cobalt or a similar small car at Cincinnati airport next week would cost as much as $86.49 a day at Hertz and $54.60 at Avis but as little as $37.99 at Thrifty and $37.62 at Enterprise.
The wide discrepancy, typical of car hire locations across the US, goes some way towards explaining why Hertz and Avis are gearing up for a battle to acquire Thrifty’s parent, Dollar Thrifty.
With a 13 per cent share of US airport car hire business, Dollar Thrifty’s main business is the so-called “leisure” or value sector, focused on holidaymakers whose priority is price rather than the latest model or a quick getaway from the airport rental counter.
By contrast, Hertz and Avis are geared towards business and other high-end travellers and both companies see the acquisition of Dollar Thrifty as a way of bulking up their own offerings in the leisure segment.
Hertz fired the opening shot in the battle in late April with an agreed $1.2bn cash-and-shares bid. But Dollar Thrifty was forced to open its books to Avis after the would-be rival bidder disclosed that it had made numerous approaches to the company.
Avis has yet to announce the terms of its bid, and Scott Thompson, Dollar Thrifty’s chief executive, told employees earlier this week that “in the meantime. . . . we will work to close the proposed Hertz transaction”.
Hertz has up to now sought to boost its presence in the value segment by expanding its Advantage brand, which it bought last year through a bankruptcy court in competition against Enterprise.
Dollar Thrifty “is a way to immediately and significantly grow our presence in that middle tier”, said Hertz. The New Jersey-based car hire business is also looking at launching Thrifty in Europe.
Hertz says the deal would produce cost savings of $180m, for instance, by sharing fleets. Hertz vehicles are most heavily used during the week, while Dollar Thrifty hires out more cars over weekends.
John Healy, analyst at Northcoast Research, says the appeal to Hertz of Dollar Thrifty is that “it doesn’t erode the premium pricing of the Hertz brand. If you want to get into the leisure market, you have to have the lower price points.”
Either tie-up is likely to face antitrust scrutiny. But antitrust experts suggest that cut-throat competition in the sector should aid the passage of either deal.
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