Hertz's bankruptcy restructuring allowed the rental car company to exit or renegotiate "a number of unprofitable contracts," which later became "almost all of our contracts," Hertz interim CEO Mark Fields said Wednesday during a fourth-quarter earnings call.
"As corporate travel returns, that will be a favorable tailwind for us," he said. Business travelers "tend to travel in the beginning of the week where utilization is low. That will improve our [revenue per unit] quite substantially."
The ability to exit or renegotiate pre-Covid corporate contracts could prove advantageous. During the Avis Budget Group earnings call on Feb. 15, CEO Joe Ferraro noted that his company's large corporate contracts were "negotiated a while back. Those rates are what they are. It's the mid- and small business that allows us to have higher rates."
CFO Brian Choi added that "large, contracted business always had headwinds regarding rates."
As for Hertz, Fields added that rates for small and midsize clients are more attractive, but large corporations provide volume and stability. "Combine that with the renegotiation of all those contracts, we are quite pleased with that business as it comes back over time," he said. "Even if it doesn't come back at levels pre-Covid, we are well-positioned."
The company also suggested corporate clients have "a lot of interest" in their business travelers renting electric vehicles. Hertz has a partnership with Tesla and now offers EVs in nine U.S. markets. Demand is good and customers are willing to pay a premium, and they are satisfied with the experience, Fields said, adding that Hertz is "very bullish" on its ability to grow this business as vehicles are delivered. The company now has 700 Level 2 chargers in 65 markets.
Record Q4 earnings
Hertz reported fourth-quarter 2021 revenue of $1.9 billion, up 58% year over year, but down 26% compared with 2019. The company had quarterly adjusted net income of $426 million.
Full-year 2021 revenue was $7.3 billion. Both fourth-quarter adjusted corporate earnings before interest, taxes, depreciation and amortization of $628 million and full-year adjusted corporate EBITDA of $2.1 billion were company records.
The Americas segment reported $1.7 billion in revenue for the quarter, just 2% below 2019 levels. According to the company's annual report filed with the U.S. Securities and Exchange Commission, 25% of revenue in the Americas and 29% of 2021 transactions in the region came from business travel. Internationally, the shares were 52% and 50%, respectively.
Newly named CEO Stephen Scherr steps into his role on Feb. 28.
Source: Business Travel News