Avis Enhances Budapest Operations

Zacks

In an effort to streamline its operational activities as well as enhance customer experience in Europe, the Middle East and Africa (:EMEA), Avis Budget Group Inc. (CAR) recently announced the recruitment of approximately 150 staff at its Business Support Center (:BSC) in Budapest.

Last year in October, the company had employed 235 new personnel at this facility. Moreover, the company expects the expansion to help in generating significant cost savings by 2015.

The expansion will increase the total number of employees to approximately 700 at BSC. Moreover, the company will have personnel with communication skills in ten different languages. Avis Budget had set up this facility in Jan 2004, and was the first international company to have a regional service center in Budapest.

The company has always tried to exploit other inbound revenue opportunities by focusing on new ideas and investments in its brands and technology upgradation. Since the acquisition of Avis Europe in Oct 2011, the company remains on track with its integration plans. Lately, Avis Budget has launched its own sales force in the European region as a means to own and leverage the local opportunities and customers to drive inbound business.

We believe that Avis Budget follows a core global strategy of partnering with leading travel brands to expand its customer reach while creating additional demand. The acquisition of Avis Europe was one of the major steps taken by the company to enhance its operational foothold in the global market.

Furthermore, Avis Budget recently entered into a multi-year deal with Costco Travel. As per the deal, more than 45 million Costco Wholesale Corporation (COST) members across the U.S. will be provided with savings on vehicle rentals and supplementary products from Avis Car Rental and Budget Car Rental.

The above-mentioned partnership will expectedly benefit both Avis Budget and Costco Travel. For Avis Budget, the tie-up will help increase its customer base and aid in top-line growth. For Costco, the deal will help in providing its members high quality services and enhanced savings through Avis Budget.

Further, we remain impressed with Avis Budget’s sustained focus on productivity and cost containment initiatives, which in our view, would help the company achieve its goal of higher operating margins.

However, significant exposure to foreign currency translations and heavy dependency on third-party distribution channels remain causes of concern. Moreover, due to intense competition from other established players such as Hertz Global Holdings Inc. (HTZ) and United Rentals, Inc. (URI), the company may find it challenging to maintain the same level of operating performance.

Avis Budget currently carries a Zacks Rank #4 (Sell).

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