Hertz Global Holdings Inc (HTZ)

A. Company Overview

Hertz Global Holdings Inc., incorporated in Delaware in 2015, operates as a prominent vehicle rental and leasing company through its subsidiary, Hertz Corporation, which has been in the car rental business since its founding in 1918. The company's roots trace back to multiple earlier corporations involved in vehicle rental services, with Hertz Corporation itself established in Delaware in 1967. Hertz Global's primary business includes vehicle rentals primarily under the well-known Hertz, Dollar, and Thrifty brands.

As of December 31, 2023, Hertz operates globally with approximately 11,400 rental locations, both company-operated and franchised, spanning 160 countries and territories. This extensive network includes significant presences in the United States, Europe, Africa, Asia, Australia, Canada, the Caribbean, Latin America, the Middle East, and New Zealand. Hertz is recognized as one of the largest vehicle rental companies worldwide, with its brand notably among the most distinguished globally and a robust operational base consisting of both airport and off-airport rental locations.

B. Business Strategy

Hertz is strategically focused on the execution of its rental operations, aiming for operational excellence and unique product offerings across its brand spectrum. The company is positioned at the intersection of modern mobility evolution with a committed emphasis on ride-sharing services and direct-to-consumer vehicle sales.

The strategic direction incorporates investments in technology, the transition to electric vehicles (EVs), shared mobility solutions, and enhancing digital customer experiences. The management asserts that its fleet management capabilities provide an advantageous means of diversifying and fostering profitable growth across various facets of mobility.

C. Business Segments

Hertz operates primarily through two main segments aligned with its vehicle rental operations:

Americas RAC

The Americas RAC segment encompasses rentals of vehicles, vehicle sales, and complimentary services in the U.S., Canada, Latin America, and the Caribbean. Hertz maintains a significant network of company-operated locations and collaborates with franchise partners to extend its service reach.

International RAC

The International RAC segment includes vehicle rental operations outside the Americas, with a primary concentration in European countries. This segment similarly features a network of company-operated locations supplemented by franchise collaborations. As of December 31, 2023, a substantial majority of the franchise locations—72%—are situated within International RAC markets.

These segments are evaluated based on financial performance, and resource allocation reflects the dynamics of these operational divisions.

D. Rental Brands

Hertz's rental services are predominantly delivered through three main brands:

• Hertz: As the flagship and premium brand, Hertz is known for superior customer service and has garnered numerous accolades for its service quality. It has a diversified offering, including Hertz Gold Plus Rewards, electric vehicle rentals, and exclusive programs such as Hertz Ultimate Choice.
• Dollar: Positioned as a value-oriented brand, Dollar focuses on serving budget-conscious travelers. Its mission is encapsulated in its tagline reflecting customer-centered pricing and value, primarily targeting family, leisure, and small business customers.
• Thrifty: This brand caters to value-seeking customers looking for affordability without sacrificing quality. Thrifty's focus is predominantly on leisure travelers, promoting itself as the best value for money.

These brands maintain operational autonomy in terms of customer engagement and promotions while benefiting from shared fleet management and operational synergies.

E. Operations

Hertz operates both airport and off-airport rental locations and offers a unified operational structure across these two types of venues. The airport locations are critical to the company's business model and account for a substantial amount of rental revenue, while off-airport locations cater to local customers needing rentals near home or place of work.

Airport Locations

As of December 31, 2023, Hertz boasts approximately 1,900 airport rental locations in the U.S. and about 1,500 internationally. These locations play a vital role in supporting cost control, consistency in service delivery, and competitive pricing strategies. The operational success at airports is partly fueled by concessions obtained from airport operators that allow Hertz to conduct its rental business.

Off-Airport Locations

The off-airport network includes roughly 3,300 locations in the Americas RAC segment and approximately 4,700 in the International RAC segment. These locations cater to customers preferring rentals outside airports, helping diversify revenue streams during off-peak travel seasons and reducing reliance on air travel patterns.

F. Customers and Business Mix

Hertz's customer base is segmented into business and leisure segments, with efforts to cultivate relationships with businesses, government agencies, and travel partners. A significant portion of business is derived from negotiated corporate rates which allows for differentiated offerings compared to general public rentals.

Leisure rentals are characterized by longer duration bookings and typically generate higher average transaction values. The company utilizes comprehensive sales and marketing strategies to attract individual renters and leverage partnerships with insurance and travel entities.

G. Customer Service Offerings

Hertz provides several initiatives to enhance customer engagement and streamline rental experiences. The Hertz Gold Plus Rewards program allows members expedited rental processes and benefits, which enhance customer loyalty—making up approximately 33% of all rental transactions worldwide by the end of 2023. Beyond this program, Hertz offers electronic rental agreements, mobile alerts for vehicle readiness, and advanced return options to improve service efficiency.

H. Fleet Management

Hertz operates a diverse fleet of vehicles, catering to various market demands through a finely tuned vehicle management ecosystem. As of December 31, 2023, the company managed approximately 467,000 vehicles in the Americas and an additional 124,600 in international markets.

The company strategically utilizes both program vehicles purchased under guaranteed depreciation agreements and non-program vehicles to optimize its fleet mix. A focus on fleet efficiency is maintained via in-house vehicle maintenance centers, further enhancing the company's operational capabilities.

I. Competition and Market

The vehicle rental market is intensely competitive with several major players including Avis Budget Group and Enterprise Holdings. Factors such as vehicle availability, pricing, customer service, and the growing threat from online travel agents contribute to this competitive landscape. Hertz's established brand, extensive operational footprint, and ongoing commitment to technology and EV initiatives are viewed as critical differentiators.

J. Geographic Markets

Hertz is active in various global markets, with the U.S. being the largest segment, representing approximately $38.4 billion in estimated annual industry revenue. Other notable regions include Europe, Asia-Pacific, the Middle East, Africa, and Latin America, reflecting varied approaches and competitive dynamics influenced by local economic conditions and travel behaviors.