Pandemic economics roils car rentals
Sudden demand, low supply send rates through the roof
“We anticipate this continuing throughout the coming months, especially in pockets of the country popular with travelers.”
LISA MARTINI, SPOKESWOMAN FOR ENTERPRISE
CHRIS FORE was taking all the steps to make his family’s first trip to Hawaii in July affordable: using credit card points for plane tickets, staying in a timeshare and bargain-hunting for a rental car months in advance. That’s where his plans hit a snag. “I usually shop the heck out of things for the best deals,” said Fore, a high school principal from Apple Valley, Calif. “And now I’m regretting not pulling a trigger on a rental car back in November.”
Back then, the prices for an SUV or van were a little higher than his $700 budget for the 10-day trip with his family of five. Now he’s finding options closer to $1,600.
Fore is not an outlier in his struggle. As millions more Americans get vaccinated against COVID every week — and millions take to the skies — demand for travel is skyrocketing.
That growing interest is running smack into a dearth of vehicles after rental car companies shed hundreds of thousands of their cars during the earlier days of the pandemic. And in many cases, the cars that are available are extremely expensive.
“Essentially this is really just kind of an extreme example of supply and demand,” said Chris Woronka, a leisure analyst at Deutsche Bank who follows rental car companies.
It is an unusual starring role for rental cars, which typically don’t command that much of a traveler’s attention — or budget.
“People would book their airfare and they would book their hotel and then they’d book their car rental whenever they got around to it,” said Jonathan Weinberg, founder and CEO of car rental site AutoSlash. “If you do that, you’re going to be left standing when the music stops.”
The problem has been especially prevalent this spring in warm-weather destinations including Florida, Texas, California, Arizona, Hawaii and Puerto Rico, experts say. Social media posts reveal fruitless searches, exorbitant prices and photos of long lines of people waiting for vehicles.
Representatives for Hertz Corp. and Avis Budget Group did not respond to questions, but a spokeswoman for Enterprise Holdings said in a statement that the company is seeing upticks in bookings in the spring and summer.
“We anticipate this continuing throughout the coming months, especially in pockets of the country popular with travelers,” spokeswoman Lisa Martini said in the statement. She added that vehicle supply is a challenge because of a global shortage of semiconductor chips that is holding up auto production.
“We are working closely with our manufacturing partners to continue to add vehicles to our fleet to meet the demand,” Martini said. “We also are leveraging our large network of neighborhood and airport locations to move vehicles where possible to support regional spikes in demand.”
Woronka said moving vehicles around is expensive and time-consuming for the rental car companies, and the chip shortage is making it difficult to rebuild fleets economically. He said there are still unknowns about how the situation will eventually be resolved, but he doesn’t expect a very quick fix.
“I am not overly optimistic that we are going to have all the rental cars we need for peak summer travel season,” he said.
Weinberg said he expects to start seeing shortages in other areas as summer approaches, especially near national parks. In those cases, he said, it might be necessary to rent a car farther from the attraction and include a longer road trip into the vacation.
He said he has already heard stories of people who have canceled entire trips because they couldn’t get a car.
“I think that folks are saying, ‘It’s great that I got this $50 airfare, but the rental car is going to cost me 10 times as much,’ “he said.
Jake Ekhaml, an accountant from St. Paul, Minn., said he thought he and a friend would have a “super cheap last-minute trip” to go fishing in Panama City Beach, Fla. They had a free place to stay and decided to book an inexpensive flight to New Orleans, then rent a car and drive to the Florida beach town on Saturday.
Ekhaml’s friend thought he found a car for $400 or $500 but wasn’t able to confirm the rental. Ekhaml finally found one and booked it — he thinks — for about $750.
“If we get there and we don’t get a car, we’ll just stay in New Orleans,” he said.
Even for non-beach destinations, George Quinn, 50, of Hallandale Beach, Fla., said he’s noticed a pattern: In three trips he’s booked since last fall — to Dallas, Philadelphia and Cincinnati — the cost of a car for three or four days has been more than the plane ticket. Shortly before the Cincinnati trip this week, he saw that the price for a car had jumped from $207 to more than $375.
Quinn said he always uses a site that compares prices across multiple companies, and then goes to their websites directly to check. His advice: “Book early and just keep checking. You can always cancel without any kind of penalty and rebook.”
Weinberg recommends that people make speculative bookings: If they’re not sure exactly when they want to go on vacation, they should search in the area they plan to visit and book rentals for multiple dates. Especially in a scenario like this, “pay later” rates instead of prepaid bookings will allow for the flexibility to cancel without a penalty.
While Weinberg hesitates to suggest making several reservations on the same date, he said if someone knows they will absolutely need a car — and worries that one won’t be available when they arrive — it might not hurt to have a backup reservation.
His company has also found that sometimes companies that don’t show availability for a weekend rental will have cars to rent for a longer period of time. So he recommends expanding a search to include more days in case that reveals more options. In “most cases,” he said, car rental companies will offer a credit if customers return the vehicle early.
Chris Fore, the California principal, got some suggestions after he tweeted about his plight. Someone shared a photo of a friend who had rented a U-Haul truck in Hawaii to get around.
“I’m not going to do that,” Fore said. “But we are just looking at some other options.”
One of them: Turo, a car-sharing company that lets owners rent out their vehicles.
The company has seen its business increase as the demand for cars intensifies.
“We’ve noticed that the rental car crunch is turbo charging the economic empowerment of people building small businesses on Turo,” CEO Andre Haddad said in a statement. “Our hosts are telling us that their businesses are booming due to the surge in travel and sky-high rental car prices, and even as they add cars, demand outpaces them.”