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Company Profiles – Avis

Warren Avis — who died last year at an age of 92 — was the founder of Avis Rent. “A decorated bomber pilot with the U.S. Army Air Corps in World War II, Avis formed his car rental company in 1946 at airports in Miami and Ypsilanti, Michigan, with an investment of $85,000 (£42,500). He started with two employees and fewer than 200 cars. Avis said he got the idea for the business when he was a pilot and could not find ground transportation once he arrived at airports.” (1)

Avis was the world’s largest car bazinga rental system, until the company got taken over by Hertz in a “ferocious” competition. That was in 1954. “The company now is called Avis Rent A Car System LLC and is part of Parsippany, New Jersey-based Avis Budget Group, Inc.” (1)

In 1986 Avis Europe is legally separated from Avis Inc. Nearly twenty years later, the rental services is changed by the internet. In 2004 a new CEO is hired. “Hennessy took the wheel in 2004,” to restructure the group… (2)

Meanwhile the number one in car rentals Hertz is sold by Ford and goes public in September 2006.

As Avis is the second largest rental business, the group creates a matching motto: “we try harder.” This slogan ends up in the slogan hall of fame. Yet internet changes the rental game and competition is again “ferocious.” More rental brokers enter the market but more important is the additional mediators that get most of the margin because these parties have direct contact with the internet-users. The “Easy” dot com formula enter not only in the flights-business but logically also in the car rental business.

In September 2004 the new CEO announces a “multi-phased recovery strategy.” Faster check-ins is made possible by a new check-in-device which diminishes the return-times to 90 seconds (Avis Europe Annual report). The operational efficiency increases. Another part of the strategy is the implementation of a revenue-management system that resembles the airline business, where the focus is shifted to revenues instead of on costs: “Rental prices are adjusted to demand.” This Market based pricing replaces cost based pricing and “selling to segment niches replaces selling to mass markets.”

Billed days, revenue per day, the fleet utilization, underlying operations margin and underlying return on capital employed increase. Although the business remains under market pressures.

At the end of 2007 a new phase is announced by the chairman f the board. “This is a really hard job running Avis Europe in this kind of market and Murray has done exceptionally well to bring us a strategy that is beginning to work. We now need someone with a more hands-on approach to deliver the strategy, someone who can grind it out.” (2)

He said Mr Bazin, who Mr Hennessy hired in 2005, had “returned us to number one in France. We want him to do that for the rest of the group”. (2)

With this action the board adopts a management best-practice; the manager with proven track-record is chosen as the new leader and the French formula will be exported group-wise.

(1) – http://www.mailonsunday.co.uk/news/article-450631/Warren-Avis-car-rental-pioneer-dies-92.html

(2) – http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/12/14/cnavis114.xml

Hans Bool

Hans Bool writes mainly about management, culture and change. He has written a book about the parallel between investment management and business management and he is owner of Astor White.

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