San Antonio Express-News (Sunday)
Lack of supply sending prices for rental cars way up
San Antonio resident Stacy Seaborn was shocked recently when she started looking into car rentals for her vacation in July.
She needs a vehicle for a nearly three-hour drive with her husband and 10-year-old daughter to the beachfront community of Arcadia on Lake Michigan.
In the past, she had paid between $350 and $400 a week for a rental car at the airport in Grand Rapids, Mich., for the every-other-year family vacation.
This year, she was stunned to find that the small SUV she prefers to rent costs $2,500. An economy car was $1,000 a week.
“I just started looking and said, ‘Oh, my gosh, this is crazy expensive,’” she said. She searched the rates for Hertz, Avis, National and other car rental companies.
Seaborn finally found a $708per-week rental car using a discount code that comes as a benefit of her Costco membership.
Industry observers say it’s a classic supply and demand problem.
Car rental companies sold about 35 percent of their fleets nationwide, and up to 50 percent in some markets, to raise cash after COVID-19 effectively shut down the travel industry last year. One of the largest companies, Hertz Rent-a-Car, filed for Chapter 11 bankruptcy and was forced to sell 182,500 cars to satisfy creditors.
Leisure travelers are now returning to the road as more people get vaccinated against the coronavirus — but car rental companies are having a hard time finding enough new vehicles to replenish their fleets.
A worldwide shortage of computer chips has left auto manufacturers with fewer vehicles coming off the production lines. And they’d rather sell their cars, trucks and SUVs to dealers than to rental companies who demand huge discounts as part of their fleet purchases.
The lack of rental vehicles is “unprecedented from an historical perspective,” said consultant Neil Abrams, who has advised car rental companies for nearly 40 years.
With travel grinding to a halt in the spring of 2020, he said, “the demand was down 50 percent to 90 percent in some markets. So, how does any business sustain a 90 percent demand drop?”
Too few cars to meet demand
The hunger to travel is returning. But rental prices are too steep for some who are longing to get away.
“People are being priced out of the market. They can’t afford to pay $200 a day for a car rental,” said Jonathan Weinberg, founder of AutoSlash, a website for rental car price comparison and booking.
Even renters willing to pay high prices may find it difficult to rent a car because demand has exploded. It’s especially bad in rural travel destinations, which travelers consider safer from the coronavirus.
Destinations sold out of car rentals for most of the summer include Anchorage and Fairbanks, Alaska; West Yellowstone and Missoula, Mont., as well as that state’s Glacier National Park; and Jackson, Wyo., according to Weinberg.
Resort areas are also on trav
elers’ preferred lists, meaning finding a vehicle won’t be easy. And if they find available rentals, they will be expensive.
“Hawaii is getting extremely tight for most of the summer, especially Kauai, and we expect most of the Hawaiian Islands to be sold out for the entire summer in the coming weeks,” Weinberg said.
The average price of a weekly rental in Honolulu from May 10-17 is $1,351, AutoSlash data shows.
Vehicles are available in most Florida cities, but they, too, are costly. Planning a trip to Walt Disney World? An average rental at the Orlando International Airport will cost $147 a day for the May 7-10 weekend or $441 for a three-day weekend.
Weinberg said the rates are, in some cases, five times what they were before the pandemic.
Some rental car customers are getting creative.
In Hawaii, some travelers are renting U-Haul trucks and vans at prices that can be as low as $80 a day.
“We have seen a considerable uptick in U-Haul rentals from customers who are visiting the islands now,” said Kaleo Alau, president of U-Haul Company of Hawaii. “We realize this demand is occurring when tourists are unable to secure a rental car, or they learn that our rental fleet options are more affordable.”
Weinberg said travelers who want the best rates — or just an available car — shouldn’t wait till the last minute to make their reservation. It’s not wise to book rentals as an afterthought, once they’ve booked airline and hotel reservations.
A spokeswoman for Enterprise Holdings — the largest U.S. car rental company, which includes the Enterprise, National and Alamo brands — said being flexible with travel dates and pickup locations will help secure a car.
While the company is working with automakers to secure additional vehicles, she said, “a key contributor to the challenge right now is the global chip shortage.”
Auto analyst Jessica Caldwell, executive director of insights at Edmunds.com, said the shortage is expected to get worse over the next few months. And dealerships’ vehicle inventories are dwindling.
“It’s going to get bad before it gets better,” Caldwell said.
She doesn’t expect vehicle manufacturers to be able to ramp up production until the last quarter of the year, making it difficult for rental car companies to replenish their fleets.
In other words, vehicle shortages and high prices will be the norm in the rental industry for months to come.
San Antonian Seaborn, who’s director of sales and marketing at the Hotel Valencia Riverwalk, said she’s just glad she was able to secure a rental for her Michigan vacation for the $708 weekly rate.
“It’s a little crazy,” she said, adding, however, that she’s still happy to be going on vacation.