Hertz Business Model: A Comprehensive Review

Editorial Team

Hertz Business Model

Hertz, a renowned player in the car rental industry, has developed a robust business model that has contributed to its success and dominance in the market. With a global presence spanning 160 countries, Hertz has consistently adapted and evolved to meet the ever-changing needs of its customers. In this comprehensive review, we will explore the various aspects of Hertz’s business model, including its revenue streams, fleet management strategies, franchise model, customer experience initiatives, technological innovations, sustainability practices, competitive strategies, and global expansion efforts.

Key Takeaways:

  • Hertz’s business model is characterized by a diversified revenue stream, including car rentals, leasing, fleet management, and other ancillary services.
  • The company utilizes a franchise model to expand its operations globally, leveraging local expertise and market knowledge.
  • Hertz prioritizes customer experience by offering innovative services, such as contactless rentals, loyalty programs, and a seamless online booking system.
  • Technological advancements play a crucial role in Hertz’s business model, enabling efficient fleet management, data analytics, and personalized customer interactions.
  • Sustainability initiatives, including environmentally friendly vehicles and energy-efficient practices, are an integral part of Hertz’s corporate strategy.
  • Hertz’s competitive strategies include price differentiation, strategic partnerships, and continuous market analysis to stay ahead in a highly competitive industry.
  • The company has achieved significant global expansion, reaching a market share of 36% in the United States and operating in 160 countries worldwide.

Introduction to Hertz

Hertz, a global car rental company, has established itself as a leader in the industry with its wide range of rental car locations and strong presence worldwide. Since its founding in 1918 by Walter L. Jacobs with just a dozen Ford Model Ts, Hertz has evolved into a renowned brand that operates in 160 countries.

Over the years, Hertz has introduced several innovative initiatives and programs to enhance the customer experience. In 1923, John D. Hertz purchased Rent-a-Car Inc. and rebranded it as the “Hertz Drive-Ur-Self System,” laying the foundation for the company’s growth. In the 1970s, Hertz launched the Hertz #1 Club Gold loyalty program, offering exclusive benefits to its members. In 1995, Hertz revolutionized the industry by introducing the “NeverLost” GPS system, providing customers with enhanced navigation capabilities.

Despite facing challenges such as the Chapter 11 bankruptcy protection filing in 2020 due to the COVID-19 pandemic, Hertz emerged from bankruptcy in 2021 with a renewed focus on growth and sustainability. With a diverse fleet that includes economy cars, luxury vehicles, SUVs, trucks, and electric and hybrid options, Hertz caters to the varied needs and preferences of its customers.

Revenue Operating Income Net Income Total Assets Total Equity Number of Employees
US$9.37 billion in 2023 US$766 million in 2023 US$616 million in 2023 US$24.6 billion in 2023 US$3.09 billion in 2023 c. 27,000 in 2023

With a 36% market share in the car rental industry in the United States and a robust global presence, Hertz offers rental locations at major airports and off-airport sites, making it convenient for customers to access their services. The company provides flexible rental options, including short-term, long-term, and one-way rentals, accommodating diverse travel needs.

Hertz’s commitment to customer satisfaction is evident through its Gold Plus Rewards loyalty program, offering perks such as expedited check-in, vehicle upgrades, and points for future rentals. Both corporate-owned and franchise locations contribute to Hertz’s global reach while providing franchisees with access to the company’s support network, reputation, and marketing resources.

Franchisees can also take advantage of Hertz’s comprehensive training programs, ensuring they are equipped with the necessary skills and knowledge to succeed in the rental industry. The brand recognition associated with Hertz, combined with its diverse fleet of rental vehicles, presents growth opportunities for franchisees.

Overall, Hertz’s enduring history, commitment to innovation, and global scale make it a trusted choice for customers seeking reliable and convenient car rental services.

Hertz’s Strategic Acquisitions

To drive growth and expand its market share, Hertz has adopted a strategic approach by making key acquisitions in the industry. These strategic acquisitions have allowed Hertz to strengthen its position and broaden its customer base.

Advantage Rent a Car

In 2009, Hertz acquired Advantage Rent a Car, a move that proved instrumental in enhancing Hertz’s growth trajectory. This acquisition enabled Hertz to expand its customer reach and tap into new markets. By integrating Advantage Rent a Car’s operations, Hertz gained access to cutting-edge technologies and operational capabilities, further bolstering its position in the industry.

Dollar Thrifty

In 2012, Hertz made another strategic acquisition by purchasing Dollar Thrifty, a leading car rental brand. This acquisition significantly contributed to Hertz’s market share expansion and its ability to cater to different customer segments. By offering a range of brands, including Dollar and Thrifty, Hertz successfully addressed the needs of cost-conscious and upscale leisure travelers, further driving its growth in the market.

Navigation Solutions

In addition to the Advantage Rent a Car and Dollar Thrifty acquisitions, Hertz acquired the remaining 35% stake in Navigation Solutions. Navigation Solutions operates the NeverLost customized in-car GPS system, which has become a valuable tool for Hertz customers. By integrating Navigation Solutions into its fleet, Hertz enhances the customer experience by providing every car with a comprehensive GPS system, improving navigation and convenience for its customers.

The strategic acquisitions made by Hertz have allowed the company to tap into diverse customer segments and maximize its market share. By expanding its fleet, integrating new technologies, and appealing to environmentally conscious customers with electric and hybrid vehicles, Hertz continues to demonstrate its commitment to growth and innovation in the car rental industry.

Hertz’s Business Strategy

Hertz, a renowned player in the car rental industry, employs a comprehensive business strategy to maintain its market position and meet the diverse needs of its customers. This section will explore several key elements of Hertz’s business strategy, including market segmentation and branding, innovations and technologies, as well as expansion and global presence.

Market Segmentation and Branding

Recognizing the importance of catering to different consumer segments, Hertz strategically divides its target market into distinct groups. By tailoring its offerings to meet the specific preferences and requirements of each segment, Hertz ensures a personalized customer experience. With a wide range of vehicle options, including luxury cars, SUVs, and electric vehicles, Hertz effectively caters to the preferences of both leisure and business travelers.

Furthermore, Hertz has successfully built a strong brand identity over the years. Through consistent messaging and visual representation, Hertz has established itself as a trusted and reliable car rental provider. The company’s commitment to delivering quality service and exceeding customer expectations has earned it numerous accolades and awards, cementing its reputation as a leader in the industry.

Innovations and Technologies

Hertz recognizes the importance of staying at the forefront of technological advancements to enhance its customers’ experience and streamline its operations. The company has implemented various innovations to improve the reservation process, enhance vehicle maintenance, and introduce new services. For example, Hertz’s mobile app allows customers to easily book, modify, or cancel a reservation, providing convenience and flexibility.

Additionally, Hertz has been actively exploring new technologies to promote sustainability and reduce its carbon footprint. The company’s commitment to environmental responsibility is evident in its efforts to incorporate electric vehicles into its fleet. Hertz’s initiatives in the realm of electric mobility align with its commitment to providing sustainable transportation solutions to its customers.

Expansion and Global Presence

Hertz’s expansion strategy encompasses both geographic reach and strategic partnerships. With its presence in 145 cities globally, Hertz has established a vast network of rental locations, ensuring accessibility and convenience for customers worldwide. Furthermore, the company serves more than 150 countries across continents, making it one of the most widespread car rental providers globally.

Hertz’s global presence is further strengthened through strategic alliances and partnerships with other companies. By collaborating with airlines, hotels, and travel agencies, Hertz leverages these alliances to extend its reach and increase customer engagement. These partnerships not only contribute to Hertz’s revenue growth but also provide enhanced benefits and experiences to its customers.

Through its well-defined business strategy centered around market segmentation, branding, innovations and technologies, as well as expansion and global presence, Hertz continues to thrive in the highly competitive car rental industry. With a strong focus on meeting customer needs and embracing technological advancements, Hertz remains a leader in the market, consistently delivering excellent service and setting new standards for the industry.

Financial Performance of Hertz

In order to evaluate the success of Hertz’s business strategy, it is important to analyze the company’s financial performance. Let’s examine the key financial figures that highlight Hertz’s revenue, growth, profitability, and cost management.

Revenue and Growth

In the fourth quarter of 2023, Hertz achieved a revenue of $2.2 billion, indicating a notable 7% increase compared to the same period in 2022. Furthermore, for the fiscal year 2023, Hertz recorded a remarkable revenue of $9.4 billion, showcasing a substantial 7.9% growth compared to the previous year.

Profitability and Cost Management

While Hertz experienced positive revenue growth, it reported a GAAP net loss of $348 million for the fourth quarter of 2023, representing a negative 16% margin. Adjusted net loss for the same period was $418 million. However, Hertz’s focus on cost management is evident through its adjusted Corporate EBITDA of negative $382 million, which includes $245 million related to the sale of electric vehicles (EV). This showcases Hertz’s commitment to aligning its business with the growing EV market.

Financial Highlights

Q4 2023 FY 2023
Revenue $2.2 billion $9.4 billion
GAAP Net Income/Loss Negative $348 million $616 million
Adjusted Net Income/Loss Negative $418 million $172 million
Adjusted Corporate EBITDA Negative $382 million $561 million

Hertz’s financial performance demonstrates both growth potential and challenges. It is important for the company to leverage its revenue growth and continue cost management efforts to improve profitability. Hertz’s strategic investments in EVs, as seen through the sale and addition of electric vehicles to its fleet, further indicate a commitment to capturing future opportunities in the evolving automotive industry.

Note: The image above visually summarizes Hertz’s financial performance and trends.

Challenges and Industry Disruption

As a prominent player in the car rental industry, Hertz faces various challenges and industry disruptions that require strategic responses to maintain its competitive edge. Two significant challenges that Hertz must address are the competition from ride-hailing services and the need to manage debt and financial issues.

Competition from Ride-Hailing Services

The rise of ride-hailing services, such as Uber and Lyft, has disrupted the traditional car rental market. These services offer flexible and cost-effective alternatives to traditional car rentals, appealing to consumers who favor convenience and on-demand transportation. Hertz must adapt to this changing landscape by leveraging its strong brand presence and customer loyalty while also exploring potential partnerships with ride-hailing platforms.

Debt and Financial Issues

Hertz has faced significant financial challenges, including debt and financial restructuring. These issues have been exacerbated by the ongoing pandemic and its impact on the rental industry. The shortage of computer chips worldwide, caused by supply chain disruptions, has resulted in a reduction in the number of rental vehicles available. Additionally, the steep increase in crude oil prices has led to rising fuel costs, further straining the car rental industry.

Managing Industry Disruptions

The pandemic has had a profound negative impact on the rental industry, with reduced travel demand and supply chain disruptions depleting car fleets. Rental car prices have soared due to inventory shortages, particularly affecting popular tourist areas and major cities. Hertz, like many other rental car companies, had to sell off significant portions of their fleets, leading to asset sales and restructuring.

Adapting to Changing Consumer Habits and Preferences

Changing consumer habits and preferences, such as a growing demand for eco-friendly options, have driven shifts in the rental market and increased competition. Hertz must stay ahead of these trends by considering the inclusion of electric vehicles in its fleet and offering more flexible services, like one-way rentals and long-term leases. By integrating with ride-hailing and car-sharing providers, Hertz can provide seamless transportation solutions to its customers.

The car rental industry is also witnessing a technological revolution. Smartphone applications have made renting a car more accessible, enabling online reservations and payments. Moreover, autonomous vehicles and connected cars are reshaping the industry by reducing the need for human interaction and transforming the customer experience. To remain competitive, Hertz must leverage these technologies and invest in automated vehicle inspections for efficient and accurate damage detection.

Customer Experience and Reviews

Customer experience is a top priority for Hertz, and the company has received recognition for its efforts. With an overall rating of 9.2 out of 10.0, Hertz has earned the best customer experience award. Trustpilot reviews further validate Hertz’s commitment to customer satisfaction, with a score of 4.4 out of 5.0 based on over 7,000 reviews. Additionally, Hertz has achieved an A+ rating from the Better Business Bureau.

Hertz understands that a positive customer experience involves more than just great service, which is why they offer a wide range of rental car services and a diverse fleet of vehicles. From economy cars to luxury vehicles, SUVs, and even electric cars, Hertz caters to various customer preferences and budgets. This extensive car selection ensures that customers can find the perfect vehicle for their needs.

But what truly sets Hertz apart is its commitment to delivering excellent customer service. According to the reviews, 72% of customers rate Hertz with 5 stars, indicating a high level of customer satisfaction. This positive sentiment is reinforced by the 14,225 reviews classified as “Excellent,” showcasing a substantial number of highly satisfied customers. With an average rating of 4.3 stars, it’s clear that Hertz has developed a strong reputation for providing clean, well-maintained vehicles and efficient service.

Hertz’s focus on customer satisfaction goes beyond just the rental experience. The company offers a rewarding loyalty program called Hertz Gold Plus Rewards, which allows customers to earn free rental days. The program includes tiers like Gold, Five Star®, and President’s Circle®, offering exclusive benefits to valued customers.

Strategic partnerships with airlines, hotels, and travel agencies also contribute to Hertz’s ability to provide exceptional customer experiences. These partnerships help Hertz tap into diverse customer segments and expand its reach in the market.

With over 10,400 corporate and franchisee locations in over 150 countries and territories, Hertz ensures convenience and accessibility for customers worldwide. While nearly 80% of car rentals are initiated at airport locations, highlighting the significance of Hertz’s airport presence, the company also offers neighborhood rental facilities to provide options that suit different customer needs.

To enhance the customer experience, Hertz has introduced electric and hybrid vehicles into its fleet as part of its sustainability efforts. The Hertz mobile app further contributes to a seamless rental experience by allowing customers to make reservations, manage bookings, and access customer support at their fingertips.

In summary, Hertz’s customer experience is characterized by exceptional service, a diverse vehicle selection, and a rewarding loyalty program. The reviews and ratings from satisfied customers attest to Hertz’s commitment to delivering an outstanding rental experience.

Pricing and Membership Programs

Hertz offers a variety of pricing options and membership programs to ensure customers receive the best value for their car rental needs. Whether you’re a frequent traveler or occasional renter, Hertz has options that cater to your individual requirements.

Membership Benefits and Elite Status Levels

Hertz Gold Plus Rewards program provides members with exclusive benefits and rewards based on their elite status. The program offers three elite status levels:

  1. Gold: As a Gold member, you earn 1 point per dollar spent on rentals. Additionally, after completing seven qualifying rentals, you can achieve Five Star elite status.
  2. Five Star: Five Star members earn 1.25 points for every dollar spent. To reach this status, you can either spend $2,000 or complete 10 rentals.
  3. President’s Circle: President’s Circle members earn 1.5 points for every dollar spent. To reach this prestigious level, you need to complete 15 qualifying rentals or spend $3,000 with the program.

Having elite status with Hertz Gold Plus Rewards comes with numerous advantages. For example, the Capital One Venture X Rewards Credit Card provides complimentary President’s Circle elite status for both the cardholder and authorized users. Moreover, elite status with Hertz can lead to status matches with other rental car companies like National, providing additional perks and benefits.

Partner Programs and Rewards

Hertz has established partnerships with major airlines and hotels, offering members the opportunity to earn miles, points, and rewards through these programs. With Hertz’s vast array of airline partners, you can earn miles or points with each rental, based on the agreements with specific partners. Similarly, limited hotel partners like Accor Live Limitless offer rewards points for every euro spent with Hertz.

Hertz Gold Plus Rewards points can be redeemed for rental reservations, and the redemption rates vary based on factors such as rental length, country, car type, and whether it’s a one-way rental. Standard reward rentals start at 750 points for a one-day rental within the U.S., while AnyDay rewards start at 1,500 points for a single day. If you’re planning a longer trip, weekly rentals with standard rewards redemption cost 3,750 points for a full seven-day rental. However, it’s important to note that Hertz Gold Plus Rewards points expire after 12 months of no rental activity.

Maximizing Discounts and Deals

While booking directly with Hertz is a convenient option, it’s worth exploring online travel agencies like Priceline or Costco as well. These platforms often offer competitive rental car rates, taking advantage of the frequent pricing fluctuations in the industry. Considering the dynamic nature of pricing, it’s recommended to compare rates and discounts across multiple platforms to secure the best deal for your rental needs.

Overall, Hertz’s pricing structure, membership programs, and partnerships provide customers with flexibility, rewards, and attractive deals. By joining the Hertz Gold Plus Rewards program, you can enjoy the benefits of elite status, earn points for future rentals, and take advantage of exclusive partnerships to enhance your travel experiences.

Conclusion

In conclusion, Hertz has successfully navigated the challenges of the car rental industry by implementing a dynamic business model and adopting strategic strategies. With over 12,000 locations worldwide, Hertz has showcased its extensive reach, establishing itself as a dominant player in the market.

Despite facing financial struggles, Hertz’s significant market share, demonstrated by nearly $7 billion in U.S. consumer spending in 2019, solidifies its competitive edge. The heavy reliance on airport transactions, accounting for 76% of its business, further highlights its effectiveness in catering to customer needs.

Although the company endured ownership changes and the burden of a massive debt load of $17 billion, Hertz has managed to maintain its position as a major industry player. By focusing on diversifying revenue streams and effectively managing costs, Hertz has demonstrated its commitment to improving financial stability.

Looking ahead, Hertz’s ambitious plans to incorporate electric vehicles into its fleet signify its readiness to embrace the future of transportation. While challenges such as higher damage costs persist, Hertz remains determined to enhance EV economics and profitability while preserving its first-mover advantage. By selectively expanding its offerings and optimizing its business model, Hertz is poised to lead the way in the evolving car rental industry.

FAQ

What is Hertz’s business model?

Hertz operates as a car rental company on a global scale, offering a wide range of vehicles to cater to the needs of business and leisure travelers.

How many rental car locations does Hertz have worldwide?

Hertz has over 11,555 rental car locations worldwide, establishing a strong presence in the industry.

Has Hertz made any strategic acquisitions?

Yes, Hertz has pursued strategic acquisitions to drive growth and expand its market share. These acquisitions include Advantage Rent a Car, Dollar Thrifty, and Navigation Solutions.

What is Hertz’s business strategy?

Hertz’s business strategy focuses on market segmentation, branding, innovations, technologies, and global expansion.

How is Hertz’s financial performance?

Hertz’s financial performance encompasses revenue, growth, profitability, and cost management.

What challenges does Hertz face in the industry?

Hertz faces challenges such as competition from ride-hailing services and the need to manage debt and financial issues.

How does Hertz prioritize customer experience?

Hertz values customer experience and strives to provide excellent service to ensure customer satisfaction and loyalty.

What pricing options and membership programs does Hertz offer?

Hertz offers various pricing options, discounts, and membership programs to cater to the diverse needs of its customers.