Will Hertz Run Zipcar Off the Road?


A neat car-sharing initiative is being introduced at the San Francisco Airport Marriott Waterfront. Marriott (NYS: MAR) guests, hotel employees, and even locals will be able to rent electric cars by the hour.

Petite EV Smart Car and Nissan Leaf models will be fueled by a pair of charging stations that the hotel recently installed. General Motors' (NYS: GM) Chevy Volt will be added as more units roll off the assembly line.

If you're expecting Zipcar (NAS: ZIP) or some eco-friendly Bay Area start-up to be behind this move, you're way off. Marriott is actually teaming up with longtime partner Hertz (NYS: HTZ) .

Hertz On Demand -- formerly known as Connect by Hertz -- is stealing every page out of the Zipcar playbook. It also offers hourly rentals, covering insurance and throwing in 180 free miles of gas per outing. Unlike Zipcar, Hertz On Demand is actually free to sign up. There are no annual fees.

However, Hertz is in fewer cities and on far fewer university campuses than Zipcar. Is it because of Zipcar's first-mover advantage, or is it that the Hertz brand is more of a liability than an asset with the young renters who flock to car-sharing services?

Clearly there's enough market to go around. Zipcar's revenue soared 34% to $61.6 million in its latest quarter. Adjusted EBITDA margins are widening, and Zipcar's successful IPO four months ago is going to broaden brand awareness.

Hertz is putting up a good fight, but there comes a time when a company can't be its own disruptor. There's nothing stopping Hertz, Avis Budget (NAS: CAR) and Dollar Thrifty (NYS: DTG) from growing in the dynamic car-sharing business. However, the louder that Hertz gets about promoting its hourly rentals, the harder it will be to get conventional renters to continue paying up for marked-up fuel or get hoodwinked into paying a hefty premium for insurance coverage.

This is about as cool as Hertz can afford to get -- and even then it will have to brag about it very quietly.

Is car sharing a viable business or are Zipcar's nearly 605,000 members crazy? Share your thoughts in the comment box below.

At the time thisarticle was published The Motley Fool owns shares of Zipcar and Hertz Global Holdings.Motley Fool newsletter serviceshave recommended buying shares of General Motors and Zipcar. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.Longtime Fool contributorRick Munarrizlives a short walk from several Zipcars, but he is currently not a member. He is a shareholder, though. He is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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