Avis Budget Group continues to maintain a strong retention rate in the corporate segment, CEO Joe Ferraro said Wednesday during the company's fourth-q
Avis Budget Group continues to maintain a strong retention rate in the corporate segment, CEO Joe Ferraro said Wednesday during the company’s fourth-quarter earnings call.
“I’m very pleased with our commercial [corporate] business. If you look at it, we have a very high retention rate. Our corporate accounts are still signing up for us somewhere in the area of 98 to 99%, which is very good,” Ferraro said. “They are just not traveling as much.”
Corporate recovery is still far off. “I think for the commercial market to come back there’s going to have to be a couple things that are going to have to happen. One, everyone has to go back to their offices,” Ferraro said. “Right now, a good deal of our accounts we are dealing with are not there yet, then they are going to have to let people into their offices to see if they want to travel, and that of course isn’t happening yet. Then, it’s whether there is a willingness.”
Ferraro mentioned the Global Business Travel Association’s plans for in-person meetings as a sign of a potential recovery this year. “I did hear the other day that GBTA, which is a large travel group, is having in-person meetings this year. This disconnection that is probably felt in the commercial and companies … working remotely and working from home is going to have to be remedied. Whenever that is, I don’t know when that is, but when it is, we will be ready.”
For the fourth quarter, Avis Budget reported a 37% year-over-year drop in revenue to $1.36 billion. Revenue in the Americas region was down 33% year over year to $1.03 billion. International revenue fell 48% to $326 million.
Leisure continued to carry Avis Budget in the fourth quarter as Covid-19 cases increased. “As November and December were as challenging as they appear to be after the second wave, what we have seen is our business is still centering in around leisure customers traveling on weekends or leisure periods mostly in off-airport,” Ferraro said.
There was some improvement in the corporate segment, Ferraro said. “Our commercial [corporate] business has been transacting better than what you see in the Transportation Security Administration [enplanement] stats that are generally published. We do see growth in the account types you would imagine. [like] defense contracting, logistics and distribution, aerospace, even some healthcare,” he said.
Corporate travelers on average are holding onto their rentals for longer periods, he said. “What are seeing is our commercial clients are keeping their cars a whole lot longer. If you look at our fourth quarter, our commercial customers kept their cars almost 80% longer than they did in the previous year,” Ferraro said.
For the quarter, Avis achieved an adjusted EBITDA of $74 million through cost removal of more than $500 million, helping bringing expenses down 31% year over year. The car rental provider capitalized on a robust used car market to shrink the fleet, selling more than 40,000 cars worldwide.
For the full-year, revenue dropped 41% year over year to $5.4 billion. Broken down by customer segment, 40% came from corporate while 60% came from leisure in 2020. In the Americas region, revenue fell 38% to $4 billion. For the region, rental days were down 36% year over year and revenue per day fell 3% year over year. International revenue was down 49% year over year to $1.4 billion. Rental days fell 42% year over year and revenue per day fell 13 year over year.
Adjusted EBITDA loss amounted to $175 million. Americas delivered positive Adjusted EBITDA reaching $72 million, with revenue improving significantly since the start of the pandemic. International Adjusted EBITDA loss totaled $202 million, due to continued restrictions causing a slower reopening of crossborder travel.
Avis achieved more than $2.8 billion in cost savings for the full-year 2020. Avis sold 250,000 vehicles worldwide.
Source: Business Travel News