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Key Issues Facing Travel Agencies for Survivability

A travel agency that wants to survive the demands of the present and future business environment can no longer simply be an outlet for distribution, or a friendly neighborhood business. Agencies that are now looking toward the future with optimism are those that have structured a business rather than a distribution outlet. This article is intended to reach those agency owners and managers who have a fairly sizable volume, have established good business relationships with corporations, and are seriously concerned about their future well-being. I hope to touch on a few areas that are of concern, giving some insight into areas that you may or may not have already targeted as vital to survival. Remember, sometimes it is the obvious that escapes us, so don’t believe that the simplicity of some of these areas is unintentional. The key to survival is overall profitability, but there are some subtle areas that affect whether or not you are profitable.

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The Car Rental Industry

Market Overview

The car rental industry is a multi-billion dollar sector of the US economy. The US segment of the industry averages about $18.5 billion in revenue a year. Today, there are approximately 1.9 million rental vehicles that service the US segment of the market. In addition, there are many rental agencies besides the industry leaders that subdivide the total revenue, namely Dollar Thrifty, Budget and Vanguard. Unlike other mature service industries, the rental car industry is highly consolidated which naturally puts potential new comers at a cost-disadvantage since they face high input costs with reduced possibility of economies of scale. Moreover, most of the profit is generated by a few firms including Enterprise, Hertz and Avis. For the fiscal year of 2004, Enterprise generated $7.4 billion in total revenue. Hertz came in second position with about $5.2 billion and Avis with $2.97 in revenue.

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Cheap Rental Cars Just Got Cheaper

Rental cars are available in all cities of the world. The vast majority of companies dealing in this industry are dependent upon travelers that are making a trip to the region either on vacation or an official trip. These are the kind of people that need to hire a car so that they can commute during their trip. Residents on the other hand usually have their own cars or hire cars for certain special occasions.

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