Internet drives down profits at Avis
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Technological changes hurt car rental giant.
2 September 2005 European car rental company Avis Europe is still struggling to come to terms with the Internet, its CEO has revealed, as an increasingly competitive market places has driven down prices.
Avis has announced that its pre-tax profits fell in the first half of 2005 to €3.2 million, from €9.6 million in the same period in 2004. Revenues were down 0.6% to €582 million.
Executives at the rental company blamed the drop in profits on the impact that the Internet has made on business models. Customers are better equipped to search for cheap holiday and car rental deals, forcing suppliers to slash costs. Avis executives now admit that it maintained premium prices for too long.
Avis CEO Murray Hennessy told The Financial Times: "Avis has made its fair share of mistakes and we certainly didn't put in place a strategy to deal with margin compression driven by price pressure when we should have."
But now Hennessy believes that Avis can use Internet technology to its advantage. It currently takes 23% of reservations online; it aims to increase that to 40%. That will lower the cost of transactions for each rental, allowing the savings to be passed on to the customers.
Avis embarked on a restructuring programme to improve its fleet utilisation rates, and increase its ability to sell off older cars directly to dealers rather than through wholesalers to increase resale prices.
