Pandemic Impact Leads to Rental Car Shortages

Car Rental companies were faced with identifying immediate opportunities to reduce cost and overhead. During the early months of the pandemic, all were forced to review options including staff reductions, eliminating rental locations, and dramatic reductions in fleet sizes. To add to the crisis, profitability was dramatically reduced due to the low demand for used cars. Companies including Hertz Global Holdings, Inc. – a 102 year old institution – and Advantage Rent A Car, filed for bankruptcy protection.

Although some companies were forced to sell their unused cars at reduced margins (for example, Hertz sold 182,500 vehicles, at a profit of $900 per car), many were able to take advantage of the rebound in demand during August, such as Avis, who reportedly sold over 75,000 cars.

An additional obstacle faced by rental car companies is the international shortage of semiconductors – an essential part for maintenance – due to factory closures. In North America, General Motors, Ford, Stellantis, Toyota, Volkswagen, Honda, Nissan and Subaru have all been forced to adjust their production schedules due to the shortage, which some experts predict could continue into next year. As suppliers try to buy new cars now that travelers are returning, the delivery of these orders is being delayed, rendering suppliers unable to keep up with the quickly-growing demand.

Business travelers have been driving more than flying, and many have a willingness to drive longer distances due to reduced flight routes to regional airports. Rental car companies are also noticing across all brands that rentals are being held for a longer period of time per rental, with 80% of all 4th quarter rentals being held longer than the same period in 2019.

As vaccine availability increases, and individuals are ready to get out and take advantage of new destinations for leisure travel, the second half of 2021 is expected to see significantly increased demand. This demand generation will undoubtedly be led by the vacationing traveler, absorbing the majority of the available inventory.​​

Now that supplies are so low, and the demand for rental cars is picking up, renting a car could become one of the most expensive parts of the traveler’s journey. Based upon the BTN Corporate Travel Index for 2019, the average daily rate for an intermediate rental car in Chicago was $35.05 per day.  A similar search for March of 2021 has a daily rental rate of $98.99, equating to an increase of 282%.

Historically, rental car agreements have always been part of your preferred travel program but rarely took the majority of negotiating time or required significant stakeholder attention. This is changing as the challenges faced by rental companies over the next year could dramatically impact your budget. We have outlined best practices for your consideration.

• Contract with a secondary preferred supplier to ensure price competitiveness, and increased availability.
• Based upon your company’s position of allowing rideshare within your travel policy, consider adding interim language for utilizing rideshare options over a rental car if cost becomes prohibitive and the need for the rental car is minimal.

• To ensure availability – book no less than 10 days in advance of arrival, and preference is to book the car rental at the time of air booking.
• Availability and choice of vehicles are limited – travelers will need to alter their expectations.  “Executive Aisle” choices may temporarily either be unavailable or extremely reduced.
• Longer wait lines should be anticipated.
• Travelers will need to validate in advance of travel the hours of operation for each rental location.

While nothing is guaranteed, and the rental car industry continues to adapt to these changes, being prepared and planning well ahead of time should ease the rental car process for both travelers and travel managers. If you need any assistance with your rental car programs, or require contacts for supplier representatives, reach out to your Client Success Manager for assistance – we are here for you!​​​​​