Home research company Looking to rent a car? Expect higher prices, long waits, and slim selections

Looking to rent a car? Expect higher prices, long waits, and slim selections

0



Travelers looking to hire cars encounter higher rates and little choice if they can find a car at all.

The rental car shortage that emerged earlier this year has worsened as companies such as Hertz Global Holdings Inc.

HTZ 4.71%

are struggling to restock their fleets after selling off large chunks at the start of the pandemic, analysts and executives say. Pleasure travel has also rebounded with more Americans vaccinated and booking trips, they say, further taxing already limited availability.

Some customers who can find cars make compromises, such as downsizing or reserving a vehicle that doesn’t quite meet their needs.

The average daily rental rate in the United States in December – already one of the most expensive times of the year to rent a car – was $ 81, up 31% from a year ago, according to the Kayak travel agency. Before the pandemic, the average rental rate was closer to $ 46 per day in December, Kayak said.

This summer, it’s harder than ever to rent a car in the United States, especially at popular vacation destinations. To find out what is behind the surge in rental car prices, WSJ spoke with an industry analyst and WSJ’s Nora Naughton. Photo credit: Luke Sharrett / Bloomberg

In some cities, especially those located in warm climates and destinations for winter sports, rates have increased further. In Maui, Salt Lake City and Bozeman, Mont. — some of the most expensive places right now to rent a car — the average daily rate was over $ 100 for this vacation season, Kayak found.

The spread of the new Omicron variant has further complicated the situation for travelers, prompting some to abandon their plans to travel by plane and hire a car instead.

“It was overall a high stress situation,” said Rebecca Girimonte, who recently decided to fly to North Carolina from Chicago, rather than fly to the New York area for vacation. .

Higher rental rates bolstered revenues for Avis and other vendors.


Photo:

David Paul Morris / Bloomberg News

As she scrambled to find a rental car, she was baffled by the prices and the lack of options. When she arrived at the Enterprise rental counter, there were only two cars: a Dodge muscle car and a Chevy Spark subcompact. The price for her nine-day trip was around $ 725, about $ 25 per day more than if she had booked a year ago, based on the national average. She chose the Spark, but had to stuff her 5’11 ” boyfriend in the small back seat with luggage.

“I couldn’t think too much about the budget or something like that because if we hadn’t figured everything out in a few hours we would be out of luck,” said Ms Girimonte.

Rental car executives say there is little relief in sight as a shortage of computer chips continues to restrict the supply of new vehicles. To secure more vehicles, some companies have turned to buying used vehicles through auctions and dealer lots, analysts and executives say.

Rising rates are helping to boost profits across the car rental industry, which translates into strong profits. For example, Avis Budget Group Inc.

AUTO 3.24%

said in November that its adjusted operating profit exceeded $ 1 billion for the first time, in large part due to rising rental car prices.

“The Americas booking models for the fourth quarter and holiday periods appear robust and currently exceed 2019 levels,” said chief executive Joseph Ferraro during Avis’s third quarter earnings call.

“I won’t be seeing my family for Christmas at all, due to the car rental situation.”


– Cassie Clark, New York resident

Hertz and Enterprise Holdings Inc. said they understand that renting a car is a challenge right now and are taking steps to alleviate the stresses, such as moving staff and vehicles to high demand locations and purchasing cars and trucks through non-traditional channels, such as buying from dealerships instead or directly from manufacturers.

Both companies urged travelers to book as early as possible for better options and more affordable rates.

A spokesperson for Avis declined to comment.

At the start of the pandemic, many car rental companies sold off much of their fleets, responding to a sharp drop in bookings. However, demand returned faster than expected and at a time when automakers were already struggling to catch up on factory output.

Hertz said it had around 390,000 vehicles in its fleet in the third quarter, about 130,000 fewer than at the end of 2019, before the pandemic struck the United States forcibly.

Rental fleet utilization rates have increased in recent months. Avis said average fleet usage – an indication of how much of its vehicles in operation versus parking – reached 71% through September, up from 50% for the first nine months of last year.

The outlook for the availability of new vehicles remains uncertain. Auto executives say inventory levels are expected to improve as factory production normalizes, but many companies are also looking to permanently reduce the number of vehicles they manufacture, a move that could affect the amount that rental car suppliers pay for vehicles, analysts said.

“The car rental situation will only improve if the auto manufacturing landscape improves,” said Henry Harteveldt, travel industry analyst for San Francisco-based Atmosphere Research Group. “Until then, it will be one of the darkest times to hire a car. “

Many travelers are already waiting longer at airport counters and in some cases have had their reservations canceled due to a lack of vehicles, according to industry analysts and travel advisers.

24-year-old New Yorker Cassie Clark said she couldn’t find a rental car to drive to her parents’ house in Rochester, NY, for Christmas. Because she was traveling with her dog, she ruled out taking the train or the plane.

Ms. Clark has scoured websites and locations across town looking for an affordable rental car, only to receive “Sold Out” notifications or rates of around $ 350 a day, well over her budget. . Eventually, Ms. Clark gave up and decided to stay at her East Harlem home for the holidays.

“I won’t be seeing my family at all for Christmas, because of the rental car situation,” she said.

Write to Nora Naughton at [email protected]

Copyright © 2021 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8