"The industry is scrambling."
A wise, simple statement from an industry expert who raised flags to TravelPulse Canada last month about the car rental market. Stuart MacDonald, founder of Expedia.ca and now an industry consultant, first told us how severe the impact the pandemic was having on the rental car market, one that as we all started talking about pent-up demand, possibly overlooked.
"When the pandemic hit and demand for travel stopped, car rental companies worldwide either chose or were forced to sell or return many thousands of vehicles, rather than paying to have them sitting around," MacDonald explains. "At the same time, the Hertz Corporation, operator of the Hertz, Dollar, Thrifty, and Firefly brands, filed for Chapter 11 bankruptcy and they also sold thousands of vehicles as a part of their restructuring. This all made sense at the time, as there wasn't a lot of demand, and the rental companies avoided a lot of cost."
A quick search of top rental companies reveals little to no availability, both in Canada and worldwide, with those that are available costing about 10x more than usual.
Hawaii first sounded the alarm in April after shock value of the rental car prices hit the news and shortages led many to rent U-Hauls. It seemed to be only happening in Hawaii at the time, however, U-Haul of Hawaii President Kaleo Alu said that was because there's only one office overseeing all transactions in the state, and they can track out-of-state addresses and driver's licenses and know who's a tourist.
Markets outside of Hawaii don't have as close-knit operations so it's hard to officially gauge who's renting what for what reason.
"There is really no way for us to speculate on the specific number of customers in markets outside of Hawaii who are renting U-Haul pickup trucks, cargo vans, or even our large box trucks for the purpose of local transportation in place of rental cars," Alau explained. "This is because we do not typically request or document the reasons for our customers' rental transactions."
"We traditionally see an uptick in demand for this equipment during the summer months, when so many residential moves occur. Our focus is not as a rental car operation since we are a self-move and self-storage company catering to the DIY customer."
Supply and Demand
"Demand for leisure rentals has come booming back, especially as people have gravitated to local and domestic travel and driving is viewed by some as safer than flying," says MacDonald.
During the pandemic, many rental car companies sold their cars to cut back on costs. As we now emerge from the pandemic, rental companies can't buy more vehicles to replace them - mostly because of a production problem. The Associated Canadian Rental Car Operators told CTV News that fleets are down because a shortage of semi-conductor chips has impacted new vehicle production.
What's next?
MacDonald suggests it's going to take a while to for car rental industry to bounce back.
"All told, rental cars will be in scarce supply for some time to come. Travellers should book early, expect high prices and be aware that even with a confirmed reservation they might have problems when they get to the counter to pick the vehicle up, since reservations presume that cars will have been returned and ready to go again. Normally there are enough cars that this isn't an issue. But when there are so few around, even a confirmed reservation isn't, really."
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