Ajax Grows Dramatically With Daily Rental Industry

A number of factors, such as lower air fares, soaring energy prices and an influx of foreign travelers, have contributed to unprecedented growth in the daily rental market.

 

The increasing daily rental activity has not only allowed the major car rental firms to snare a lion's share of this new business, but also has given rise to a number of smaller systems that someday may rival the industry leaders.

Perhaps the fastest growing of these smaller systems in the country today is Ajax Rent A Car, a relative newcomer to the industry, having started as an outgrowth of a leasing company in 1973. Despite its late start in terms of the competition, the company's performance during the 1970s allowed it to grow faster than the booming rental market.

With over 140 locations across the United States, and several locations in Austria, Finland and the Netherlands, Ajax has experienced its greatest growth in recent years, opening 43 locations in 1979 alone. System-wide, the fleet has over 10,000 vehicles and it is expected to grow to the 15,000 to 20,000 unit level within the next two years.

The founding of Ajax reads like a Horatio Alger story, Jean G. Barrier, a Frenchman, immigrated to Canada with $250 in the late 1940s working as a salesman and peddling everything from pots and pans to pharmaceuticals. He later moved to California where he became involved in the automotive industry and founded Gibraltar Leasing, a retail leasing firm, in 1969. That company proved to be a springboard into the daily rental industry.

In 1973, he spun off Ajax, choosing the name because of its simplicity, its alphabetical positioning and ease of remembrance. In 1974, the company had sales of $750,000 which quickly mushroomed to $23 million in three years as other locations were added to the five corporate offices in the Los Angeles area. By 1978, sales had grown to $40 million and then nearly $55 million at the end of fiscal 1979.

The initial phase of the firm's development consisted of creating a basic network of licensed, independent car rental agencies that were capable of servicing their local airports. This framework served as a base for franchise sales in new territories, conversion of licensees to franchise owners in existing ones, and the opening of corporate locations in other selected markets. The changeover to a 100 percent franchise and company owned system was completed in early 1979.

"That's how you start," Barrier said, "using airports as a base. Once the company is established, with the airports as a base, you are able to establish satellite locations. Once you've covered the airport locations you can project your growth."

These projections are based on airline travel and can be used to determine the system's share of the business. The success of the daily rental industry can be related directly to the increase in U.S. air passenger volume. That volume has doubled every seven years since 1951 when it totaled only 24.8 million. By 1978, that figure had soared to some 275 million, an average increase of 9.3 percent annually for the 27-year period.

According to Ajax, if these trends continue, annual domestic passenger volume should reach about 510 million by 1985. The company feels the potential for future air travel growth appears virtually unlimited, considering that almost 40 percent of adult Americans have never taken a commercial airline flight. These non-flyers, along with those who fly infrequently, are among the targets of new low-cost fares that have proliferated since the passage of the Airline Deregulation Act of 1978.

That piece of legislation has resulted in a shift in the composition of the traveling market from business to leisure. While in the late 1960s most air line passengers were business people, during the last decade, the number of leisure travelers has increased significantly to the point where many major air carriers report that the split between business travelers and tourists is about even. Los Angeles International Airport officials give the edge to vacationers 55 to 45 percent.

This shift is also being felt by the daily rental industry, which in the past attributed up to 90 percent of its total volume and 75 percent of airport activity to the business sector. In addition, as a result of economic developments, the U.S. has become a bargain for foreign travelers and estimates put the number of foreign visitors in the U.S.  during 1978 at 20 million.

Part of this growth in air travel, especially in the leisure category, can also be attributed to a sharp increase in energy prices. High fuel prices combined with lower air fares have greatly increased the popularity of fly/drive vacations. These factors, which have benefited the rental industry overall, have greatly helped Ajax, as well.

When Ajax began business, its airport activities were confined to off-airport locations. Using station wagons to transport customers to rental cars, Barrier feels that it takes the renter less time to get into an Ajax car than it does with the competitors who have offices within the airports themselves.

Whether on or off airport, Barrier said "the customer still has to leave the airport premises to get to his destination, whether he drives himself off in a rented car or we shuttle him out to his waiting rental vehicle."

With on-airport space at a premium, one of the first things to go when airports look for extra space to handle expanded operations is the rent a car companies. While many of the major rental car companies maintain counter space at airports, increasingly they have taken to shuttling their customers to off-airport locations where the cars are garaged and serviced.

Notes Barrier, "When I started in this business we were off-airport and everyone else was on. Now they are like us and are shuttling people off the airport and telling them what a great service it is."

The company, since its inception, generally considers off-airport locations more desirable than in-terminal rental counters due primarily to the lower cost of operation. Off-airport sites eliminate the necessity of leasing counter space in each building where airports have multiple passenger terminals, and of paying prohibitive rents and commissions they often command. The off-airport locations also allow for centralized reservations and fleet storage facilities.

To capture its share of the airport traffic, Ajax Rent A Car's advertising programs through the years have been two-fold; first to establish consumer recognition and acceptance of the Ajax name on a national and international level, and second, to provide timely information on the company's rates and services. The primary means of carrying the message to prospective customers has been in-flight magazines. By 1978, for example, year-round use of in-flight publications allowed Ajax to reach about 240 million domestic airline passengers.

The Ajax advertising program in the past featured such celebrities as Lloyd Bridges and Robert Stack. Recently, the program has been changed and now emphasizes the speed and convenience of the company's off-airport locations under the banner "Avoid Counter Fits." A recent study has shown that one of the key factors in rental car selection by business travelers has been the speed of check-in and car return.

While in-flight magazines form the backbone of the company's advertising efforts, Ajax has branched out into business-oriented publications on a corporate level and requires its franchisees to advertise in the Yellow Pages on a local level. According to the company, a recent independent study has shown that of the total number of adults who inquire about renting automobiles every year, 53 percent use the Yellow Pages. Also on a local level, Ajax franchises run one-third column ads in the Official Airline Guide (OAG).

While the success of the rental industry in the 1970s and the growth of companies like Ajax can be attributed to the travel industry, Barrier feels that even greater growth and potential lies in the non-travel markets of in-city and suburban rentals. As a result of this potential, Barrier has geared his organization to tap these markets through an aggressive franchisee program.

Barrier said his company is actively expanding his franchise base in secondary markets. "We are selling more territories in smaller towns," he noted. Barrier said once the major markets, including airports are covered "there's nothing much you can do to dramatically increase market share," in that portion of the market. Currently, there are Ajax locations in 33 of the top 50 markets for approximately a 60 percent penetration. Barrier estimates that his market penetration into the next 50 markets is slightly higher.

Once the public is aware of a rental company, through in-flight magazines and brand-name familiarity, Barrier feels it is easy to project one's share of the market.

"As air traffic increases, you're going to get your share," he said. Of course, there is some stealing of customers between rental companies, but it is not that much of a factor." If the level of service is high and the rates competitive as they are with most major rental car companies, Barrier feels there is a certain percentage that will be return customers. "Repeat business is key because it's too costly to find a new customer to replace the old one," he said.

But, he added, "Only 10 percent of the population flies airplanes on a regular basis. There is a much larger market than the flying market and it is virtually untapped." This market encompasses people who rent cars while their own are being serviced or repaired. Others rent them for special occasions when their own car is too small to do the job. Still other local customers are families that have given up the second or third car in favor of renting one when needed, thus avoiding the rapidly rising costs of ownership, maintenance and insurance. Also included in this suburban market are corporate accounts that have moved their headquarters out of city centers. They, too, require rental vehicles for visiting executives.

"Our best source of expansion is the car dealer," Barrier said of this new market. "It is logical when you can't sell a car to rent one out." The attractiveness of car rental for a dealer is an idea factories have been selling for years. There is the built in traffic generated by body shop and service department rentals. A dealer renting cars has a source of late model, low mileage used cars. Dealer involvement also means building a total transportation image in their community.

But why would a dealer be interested in an Ajax franchise instead of participating in one of the many factory rental programs? "The factory supported programs are not a system," Barrier replied. "I doubt if the general public is aware the factory programs exist."

Barrier feels that a dealer who participates in a system receives many more benefits than if he were to enter the rental industry through the factory. A system can offer national advertising, computerized reservations and a listing with a company that is known for renting cars rather than selling them.

"When a person wants to rent a car, they look in the phone book for national names," Barrier said. Especially in the suburban markets, where the rental industry has the greatest potential, Barrier feels that people looking to rent a car for a vacation or a special occasion will look for a rental company that they've had exposure to, either in their travels or advertising. It's an important growth market that Barrier thinks dealers should be in.

"Instead of just catering to captive service business and so on, we're saying 'why don't you get into the business.' We show them how. We tell them to get into the business as a separate entity, using separate management and to think in terms of additional locations off the dealership," Barrier said. Such strategy allows the dealer to offer a mix in his fleet other than the make he sells at his store. It also gives him a mix in the late model used cars that he cycles out of his fleet.

As part of Ajax Rent A Car's advertising and promotional effort, the company features Ford and Lincoln-Mercury products. As a result, many of the 49 dealers holding Ajax franchises are Ford and Lincoln-Mercury dealers.

While the suburban, non-travel market has great potential, Barrier feels that many of the systems in business today have not geared their operations to take advantage of the opportunities that currently exist. Unless the rental companies tap the resources that car dealers offer in these markets, Barrier feels those who are late in recognizing the importance of the non-travel sector will be playing catch-up for a long time to come.

Barrier believes his company is in position to be a leader in this new market, but admits Ajax does not have the resources to bump heads with industry leaders at this early date. "You look at the top companies in the industry, Hertz is a part of RCA, avis is owned by Norton-Simon, National is part of Household Finance," Barrier said with a wry grin, hinting that a similar arrangement with a corporate giant would give Ajax the help it needs to be among the leaders.

With or without such a link-up, Ajax has established itself in the daily rental market with a strong franchise base and has been able to share in the industry's phenomenal growth. Alert positioning in the suburban and secondary markets has insured that Ajax will continue to share in the daily rental industry's growth as it pushes into new markets during the 1980s.