DRIVING CHANGE
Car rental has been viewed as a ‘safer’ form of travel during Covid but there could be bumps in the road as business travel recovers
Travel buyers have always had a pretty wide remit but it’s unlikely the supply of computer chips has popped up on their radar very often.
While the current worldwide lack of semiconductors for electronic chips doesn’t initially seem like a problem for corporate travel, they are key components of new cars and their shortage is likely to affect the pricing and supply of rental vehicles in the next few months.
This problem has forced a slowdown in the delivery of new vehicles around the world including to car rental firms, which cut their fleets in 2020 to bring in much-needed cash during the early stages of the Covid-19 pandemic. This potential shortage of rental vehicles comes as demand picks up for self-drive options due to their perceived health and safety benefits.
Although airlines have been really clear in advocating how clean their aircraft cabins are, people have felt, in the depths of the pandemic, if it’s just them in a vehicle it’s safer. The problem now is the balance between new vehicle supply and demand
SUPPLY UNDER PRESSURE
This supply squeeze is being felt most keenly in the US, particularly in popular holiday destinations such as Florida, and could be a factor in Europe with buyers facing higher prices and a lack of availability.
CWT's Rob Coomer says leisure travellers in Florida were prepared to pay $150 a day for a week’s rental during Easter which led to car hire firms not “honouring negotiated $30 per day corporate rates”.
This situation could repeat itself in Europe, says Josh Collier, head of proposition rail and ground transportation, at Agiito. “It’s not a concern right now but it could impact prices – we’re already seeing that in the US with car hire prices in Florida typically up by 50-60 per cent,” he says.
“It’s about educating people. If they want to have a car, trying to get that done at the last minute may start to become a problem.”
In a way, car hire companies are victims of their own success because they so effectively instigated stringent health and safety procedures to reassure travellers during Covid.
“Travellers preferred private transportation that reduced their exposure to other travellers, plus they were reassured by the car rental firms’ sanitation protocols,” says Sesilia Kalss, from GBT Global Business Consulting. “As a result, car [hire] did not see anything like the dramatic dips in air and hotel and volumes have recovered strongly.”
Car rental firms have also been quick to respond to trends such as demand for longer and more flexible rental periods, as well as improving their digital processes to create a more ‘touchless’ pick-up system for travellers.
Scott Davies, CEO of the Institute of Travel Management (ITM), agrees car rental firms did a “really good job of sanitisation and seamless process”. He adds: “Providers are reporting longer rentals as travellers want to use this as a safe option for longer periods.”
This is reflected by car hire’s market share rising by 80 per cent during the pandemic compared with other modes of transport, according to Gray Dawes Group – further indicating the potential for short-term pricing and availability issues.
“We advise clients to book in advance and secure preferred contracts with suppliers to stabilise costs,” says Gray Dawes’ consulting manager Aman Pourkarimi, who expects car availability issues to ease later in the year.
Even given car rental’s relative success, compared with other transport sectors, it’s hardly been an easy ride – iconic brand Hertz entered bankruptcy protection in the US last year, while Avis Budget says it’s unable to provide any “guidance” on its financial results this year due to “macro uncertainties” such as vehicle availability and the impact of vaccine rollouts on global demand.
SUSTAINABLE QUESTIONS
While availability and pricing will be hot topics in the very near future, longer-term trends focus around reducing emissions from car hire, as well as providers being able to offer a wider range of flexible transport services built around the concept of mobility as a service (MaaS).
Most in the corporate travel industry agree progress is required in making more electric and hybrid vehicles available, while many countries also need to improve their vehicle-charging infrastructure.
Availability is an issue when it comes to hybrid and electric vehicles. Clients have negotiated these greener vehicles in their corporate rates but when they try to book, they can’t get the cars
ITM CEO Scott Davies says there is “going to be such a huge demand” for electric vehicles as organisations focus more on sustainability and this will be a “key opportunity” for rental companies.
“There are many concerns about the readiness of the charging network,” adds Davies. “A lot of people’s first experience of electric vehicles will be through renting one and it needs to be a good experience.”
As for offering more flexible options, Enterprise is seen as one of the market leaders with several innovative projects combining traditional rental with car clubs, as well as trialling ‘mobility hubs’ which also offer bicycle and electric bike hire.
“Travel managers will increasingly need flexibility,” adds GBT’s Kalss. “In big metropolitan areas like London, Paris or Munich, cars are less and less welcome. More cities are introducing air quality regulations, low emissions zones and restrictions like low traffic neighbourhoods.”
With this changing environment, car rental firms will be under pressure to provide the type of services and flexibility travel buyers will quickly view as a necessity rather than something that’s “nice to have”.
Travel buyers have always had a pretty wide remit but it’s unlikely the supply of computer chips has popped up on their radar very often.
While the current worldwide lack of semiconductors for electronic chips doesn’t initially seem like a problem for corporate travel, they are key components of new cars and their shortage is likely to affect the pricing and supply of rental vehicles in the next few months.
This problem has forced a slowdown in the delivery of new vehicles around the world including to car rental firms, which cut their fleets in 2020 to bring in much-needed cash during the early stages of the Covid-19 pandemic. This potential shortage of rental vehicles comes as demand picks up for self-drive options due to their perceived health and safety benefits.
Although airlines have been really clear in advocating how clean their aircraft cabins are, people have felt, in the depths of the pandemic, if it’s just them in a vehicle it’s safer. The problem now is the balance between new vehicle supply and demand
SUPPLY UNDER PRESSURE
This supply squeeze is already being felt in the US, particularly in popular holiday destinations such as Florida, and could be a factor in Europe with buyers facing higher prices and a lack of availability.
Coomer says leisure travellers in Florida were prepared to pay $150 a day for a week’s rental during Easter which led to car hire firms not “honouring negotiated $30 per day corporate rates”.
This situation could repeat itself in Europe, says Josh Collier, head of proposition rail and ground transportation, at Agiito (formerly Capita Travel and Events). “It’s not a concern right now but it could massively impact on prices – we’re already seeing that in the US with car hire prices in Florida typically up by 50-60 per cent,” adds Collier.
“It’s about educating people. If they want to have a car, trying to get that done at the last minute may start to become a problem. I don’t think travel buyers are aware of it yet.”
In a way, the car hire companies are victims of their own success because they so effectively instigated stringent health and safety procedures to reassure travellers during Covid.
“Travellers preferred private transportation that reduced their exposure to other travellers, plus they were reassured by the car rental firms’ sanitation protocols,” says Sesilia Kalss, from GBT Global Business Consulting. “As a result, car [hire] did not see anything like the dramatic dips in air and hotel and volumes have recovered strongly.”
Car rental firms have also been quick to respond to trends such as demand for longer and more flexible rental periods, as well as improving their digital processes to create a more ‘touchless’ pick-up system for travellers.
Scott Davies, CEO of the Institute of Travel Management (ITM), agrees car rental firms have done a “really good job of sanitisation and seamless process”. He adds: “Providers are reporting longer rentals as travellers want to use this as a safe option for longer periods.”
This is reflected by car hire’s market share rising by 80 per cent during the pandemic compared with other modes of transport, according to Gray Dawes Group – further indicating the potential for short-term pricing and availability issues.
“We are advising clients to book in advance and secure preferred contracts with suppliers to stabilise costs,” adds Gray Dawes’ consulting manager Aman Pourkarimi, who expects car availability issues to ease later this year.
Even given car rental’s relative success, compared with other transport sectors, it’s hardly been an easy ride – iconic brand Hertz entered bankruptcy protection in the US last year, while Avis Budget says it’s unable to provide any “guidance” on its financial results this year due to “macro uncertainties” such as vehicle availability and the impact of vaccine rollouts on global demand.
SUSTAINABLE QUESTIONS
While availability and pricing will be hot topics in the very near future, longer-term trends focus around reducing emissions from car hire, as well as providers being able to offer a wider range of flexible transport services built around the concept of mobility as a service (MaaS).
Most in the corporate travel industry agree progress is required in making more electric and hybrid vehicles available, while many countries also need to improve their vehicle-charging infrastructure.
Availability is an issue when it comes to hybrid and electric vehicles. Clients have negotiated these greener vehicles in their corporate rates but when they try to book, they can’t get the cars
ITM CEO Scott Davies says there is “going to be such a huge demand” for electric vehicles as organisations focus more on sustainability and this will be a “key opportunity” for rental companies.
“There are many concerns about the readiness of the charging network,” adds Davies. “A lot of people’s first experience of electric vehicles will be through renting one and it needs to be a good experience.”
As for offering more flexible options, Enterprise is seen as one of the market leaders with several innovative projects combining traditional rental with car clubs, as well as trialling ‘mobility hubs’ which also offer bicycle and electric bike hire.
“Travel managers will increasingly need flexibility,” adds GBT’s Kalss. “In big metropolitan areas like London, Paris or Munich, cars are less and less welcome. More cities are introducing air quality regulations, low emissions zones and restrictions like low traffic neighbourhoods.”
With this changing environment, car rental firms will be under pressure to provide the type of services and flexibility travel buyers will quickly view as a necessity rather than something that’s “nice to have”.
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