Madrid Hotels Articles

July 24, 2010

Internet Rivals Still Affecting Avis

Struggling car hire giant Avis still faces an uphill battle to stem its continuing losses, despite achieving some of the best market gains in the last three years. Latest figures show half-year losses cut by 40% but the group, which accounts for 16.8% of the European market is still struggling to gain a competitive edge over their cheaper internet rivals and control an increasingly expensive fleet car operation.

Large markets in Europe’s major cities, especially airports, have been the scene of intense competition making car rental in London, Paris, Madrid and other capital cities cheaper now than one year ago.

To try and win back market share against their cyberspace rivals Avis have dropped their average daily hire charge, which now stands at 1.6% lower than this time last year, but chief executive Murray Hennessey retains his optimism. Talking to the Times Online Hennessey said: “When I joined the group in 2004 I said that we couldn’t turn this round overnight, but that it would be a multi-year turnaround. However, it is taking even longer than I thought but that’s down to the market. Prices are going down and costs are going up. That makes for a tough environment. “

Group half-year pre-tax losses to June 30 fell from 13.2 million euros to 7.9 million euros, a marked improvement that included a five per cent increase in revenues to total 604 million Euros. Indeed, the results could have been better had not the group been fined 3.4 million Euros for malpractice in its Portuguese operation and also not booked a 7.1 million Euro charge from the sale of its business in Greece.

Business has been tough for most of the established car hire operators in Europe and the rest of the world since the advent of cheaper car rentals sourced from the internet. Because of the success of the online operators the prices of car hire in London and other large European markets, have been forced down – significantly reducing Avis’ income. The competition has effectively squeezed revenues by aggressively cutting average rental prices, and it is against that backdrop that Avis has had to respond.

It is belatedly ploughing millions into its internet operation in an attempt to not only compete with the new, leaner entrants to the market, but in order to steal a march on its traditional rivals, and it appears that, at last, that strategy may be starting to pay dividends.

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