1. Tourism Economics TRM 490 Dr. Zongqing Zhou Chapter 6: Economics of Other Tourism Sectors

2. Chapter 6: Economics of Other Tourism Sectors (1) Overview –A multibillion dollar business –Controlled by Major Rental Companies: Hertz, Avis, Budget, and National –Has financial or ownership relationship with all three major US auto companies –Hertz, Avis, Budget, and National control about 80% of the US market in terms of number of locations (see figure 6-1 for rankings)

3. Chapter 6: Economics of Other Tourism Sectors (2) Revenue and profit sources –Difference between prices (30% or more discount) paid for cars and prices the cars are sold for after being used by customers Some auto manufacturers own parts of rental car company (Ford- Budget rental car; GM-National rental car and Avis; Chrysler-Thrifty, Dollar) A chance to showcase new cars Car typically sold at under 20,000 miles to ensure maximum profits –Factors affecting car rental economics General economy (rising and falling as economy moves up or down –Major costs Purchase or lease of automobiles Cost of borrowing money Labor costs –Measurement of a company’s perfermance Fleet utilization (see Fig 6-2, p. 115)

4. Chapter 6: Economics of Other Tourism Sectors (3) –Cruise Line Economics Rapid growth since the fly/cruise introduced in 1971 The fastest growing business in the travel industry Carnival cruise lines is the biggest and most profitable See the latest development in the industry herehere –Costs Once the breakeven point is reached, marginal cost of an additional passenger is low Food cost does increase as number of passenger increases, but labor costs for service personnel increases very little Wages and salaries remain fixed, tipped employees’ income increases at no cost to the ship.