Business Travelers Facing a Potential Rental Car Shortage

“Can you even get a reservation?” “How long are you willing to stand in a line?” Those are some of the questions business travelers may have to ask this summer if car rental suppliers don’t have enough vehicles available to service them, according to DK Consulting Group CEO David Kilduff. If travel resumes faster than expected, some car rental companies—managing already reduced fleets—may come up short due to ongoing small fleet orders and a global shortage of semiconductors, which are critical components in car manufacturing.

Suppliers are starting out 2021 with smaller fleets due to the cost-cutting measures they took last year. “When demand dropped by 90 percent in the spring, the industry was able to immediately lay off its staff in the tens of thousands as well as de-fleet by canceling orders,” said car rental consultant Neil Abrams. Not taking in new cars while aggressively taking out cars likely slated to be de-fleeted anyway unloaded “hundreds of thousands of cars,” for struggling suppliers, he said. 

Avis Budget Group, for one, in 2020 sold more than 22,000 vehicles to consumers, according to the company’s fourth-quarter earnings report.

Stretching Rentals 

National Car Rental SVP of business rental sales and global corporate accounts Don Moore told BTN, “The market will be smaller in regard to car availability. There are certain companies that have had to constrict their fleets to stay viable.” 

Changing rental patterns and increasing demand could challenge these smaller fleets if the corporate market awakens in the latter half of 2021. 

Business travelers, many of whom during the pandemic have been driving more than flying, also are holding on to their rentals for longer periods of time and over longer distances. “We have noticed a significant increase in customers willing to drive further. They are definitely driving further than they used to,” said Moore. “Our length of business rental has gone up. Typical business rental is between four to six days, depending on the types of rental. Now it’s closer to six days. I think that trend will not change much over the next couple of quarters.”

Avis Budget Group CEO Joe Ferraro noted the same trend this month during the company’s fourth-quarter earnings call. “What we are seeing is our commercial clients are keeping their cars a whole lot longer,” he said. “If you look at our fourth quarter, our commercial customers kept their cars almost 80 percent longer than they did in the previous year.” 

In the second half of 2021, it’s very likely more travelers will rent vehicles, compared with 2020. “Road warriors are saying, ‘I want to get out and travel,’ especially if we keep up the pace with vaccines,” said Kilduff said. Leisure travelers, he said, will drive the rebound more so than business travelers. “This summer, there will be a lot of leisure travel,” he said.

Some car rental companies have ordered very few cars going forward, enough where it can be an issue for availability for corporate travelers when renting during the summer and in the future when travel starts back.”

– DK Consulting Group’s David Kilduff

Moore said he cautiously expects the third and fourth quarters to “be reasonably good.” 

Avis Budget and Enterprise Holdings each have said they are still signing up corporate accounts and maintaining high retention rates, with Ferraro noting a retention rate “somewhere in the area of 98 to 99 percent, which is very good.” Kilduff, meanwhile, said he’s seen an increase in corporate requests for proposals for car rental suppliers.

Seeking Semiconductors

Financially challenged car rental companies, however, have not increased their car orders, according to Kilduff. “Some car rental companies have ordered very few cars going forward, enough where it can be an issue for availability for corporate travelers when renting during the summer and in the future when travel starts back,” he said. 

“We have thousands of vehicles already ordered all the way through the end of the calendar year,” Moore told BTN. Kilduff said Enterprise Holdings, the parent company of National Car Rental, has ordered more new cars than have other car rental firms.

On top of the fewer industrywide orders, there’s a semiconductor shortage that may delay the delivery of the few orders that were made. In North America, General Motors, Ford, Stellantis, Toyota, Volkswagen, Honda, Nissan and Subaru are being forced to adjust their production schedules due to a scarcity of semiconductors, according to Car and Driver. Some financial analysts expect the shortage to continue into next year, according to MSN’s MarketWatch.

“The semiconductor shortage is going to have an impact on new cars in general and our industry,” said Ferraro. “We do believe this will have an impact on fleet delivery and availability in our industry,” he said 

“As for Hertz, we have long-standing close relationships with our OEM [original equipment manufacturer] partners and we are working closely with them to receive fleet orders as soon as possible but do anticipate some delays,” a Hertz spokesperson told BTN. 

Stemming a Shortage

On Wednesday, President Joe Biden signed an executive order mandating a 100-day review of supply chains for semiconductors and other critical materials in order to formulate policies that ramp up domestic production. The White House said the order won’t solve the semiconductor shortage in the near term and is intended to support long-term plan formulation. In the meantime, car rental providers will vie for their share of fewer vehicles in the market.

If there aren’t enough cars to meet customer demand, both leisure and business travelers will feel the consequences. “Leisure prices will most likely skyrocket because fleets are currently very reduced and there are some rental car companies ordering very little fleet for delivery at this time,” Kilduff said. “Whereas corporate accounts are locked in long-term on their pricing. What will happen will be availability issues if travelers start traveling starting this summer and beyond.”

A car rental shortage can lead to mounting inconveniences for travelers, according to Kilduff. “Location closures are also problematic—a traveler with a company books a car, and when they land the location is closed,” Kilduff said. “In other words, [the car rental company] had not taken the rate out of the system but had closed the location earlier. The person gets there, and there’s no car.”

Car rental suppliers said they are confident that their logistics, staff and relationships with car manufacturers are strong enough to weather any potential shortage. “Based on our discussions, we believe we have the logistics and internal sophistication within our team to manage our fleet size appropriately,” Ferraro said during the earnings call when asked about the semiconductor shortage. 

“We can grow our fleet by adding new cars, and we can also grow our fleet by not selling cars that we were supposed to sell,” Moore said.  “At any given month, because we own a billion vehicles, we sell thousands of vehicles, but if we decided that we can’t, we’ll get our new cars that come in, but we’ll keep the ones we were going to sell for an extra month or two.”

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Travel industry calls potential COVID-19 test mandate for domestic flights ‘unwarranted’

Travel industry calls potential COVID-19 test mandate for domestic flights ‘unwarranted’

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Vaccine and Pent-Up Demand Could Drive Potential Comeback for Travel

A new study from Strategic Vision surveyed affluent consumers and travel advisors on their outlook for travel this year.

The results show that luxury travelers are hopeful about their plans and advisors are cautiously optimistic about business returning.


“Affluent travelers have been constrained by the pandemic, and they’re intent on fulfilling their travel dreams as soon as they’re able,” said Peter J. Bates, president and founder of Strategic Vision. “Our research shows this pent-up demand is generating keen interest in safaris, European vacations and far-flung destinations—if not in the immediate term, then in the near future. At the same time, luxury travelers are being careful and following the science on vaccines, testing and therapeutics.”

The annual Pulse of the Industry Survey includes the viewpoints of executives from the top travel management firms in the United States and, for the first time this year, included high-end consumers to reveal a comprehensive behavioral outlook of the American luxury traveler.

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Travel technology, man with airplane and laptop

This year, the survey found that 48 percent of luxury travel consumers said they feel somewhat or very positive about their leisure travel outlook in 2021, while 44 percent said they feel somewhat or very negative.

According to the survey, of those with a positive outlook, 14 percent identified as “very positive” and indicated they would definitely be traveling in 2021, whereas only 4 percent said they felt “very negative” and don’t plan to travel at all.

A majority of consumers are already booking travel. Fifty-three percent said that they had already booked a trip for 2021, and 41 percent indicated that they are likely to do so. Most are planning trips for the second half of the year.

Travel farther out had an overwhelmingly positive outlook. Two-thirds of respondents signaled their intention to book a trip for 2022 or beyond.

“While the results were closely divided, we were pleasantly surprised to see that more consumers felt positive momentum going into 2021. And this was before any vaccines were approved or administered,” said Bates. “It bodes well for a year of recovery that will start slowly but pick up steam in the second half.”

Travel advisors were also upbeat. Ninety-six percent said that their clients were anticipating domestic trips, 63 percent said their clients were planning an international vacation.

Many have made placeholder bookings in hopes that travel will resume, however, of those who have booked a trip, 65 percent are cautiously optimistic that the trip will actually take place, versus 25 percent who are not as confident.

For those with future plans, Strategic Vision research shows that 58 percent of travelers said their 2021 planned trips are do-over vacations.

North America and Europe were the most popular destinations with Florida and Italy the most sought after. Other destinations that are showing increased interest include Mexico, Colorado, Hawaii, France, California, the United Kingdom, Greece, the Caribbean and Japan, which will host the 2020 Olympic Games.

Oia town in Santorini, Greece.
PHOTO: Oia town in Santorini, Greece. (Photo via iStock/Getty Images Plus/Maglara)

For those who have yet to make plans, 50 percent said that they were likely to plan a domestic trip in 2021 that includes a flight.

A majority of travel advisors (53 percent) reported planning long-haul trips, including Africa, Asia, and South America.

“We predict that long-pent-up wanderlust among luxury travelers is making farther-flung locales seem even more appealing than before,” said Bates. “Our research shows a striking amount of interest in African safaris for later this year and beyond. That reflects a desire for unique travel experiences in remote, wide-open locales, where it’s easier to maintain social distancing and limit exposure to the virus.”

For obvious reasons, travel advisors have had a rough year. Almost all (94 percent) said their 2020 revenues were down over the previous year, with the vast majority reporting decreases of 70 percent or worse.

Forty-one percent reported increasing their number of independent contractor (IC) advisors, which suggests that full-time employees were replaced by (or converted to) freelancers.

“As a host agency, we only have ICs, and the demand is growing,” said Vanessa McGovern, co-founder and chief sales officer of Gifted Travel Network. “We are seeing inquiries every day from ‘desk agents’ and former employees from brick-and-mortars expressing interest in hosting with us.”

Bates predicts that the popularity of ICs will only continue to grow.

“The pandemic has made clear that the host agency model—where an agency can expand or reduce the number of IC’s on its team as demand fluctuates—provides the flexibility that travel management firms need to succeed,” said Bates. “For better or worse, this is the way the industry is going.”

The PPP program, despite all of its problems, has helped agencies survive. The research showed that more than 82 percent of firms in the survey took advantage of PPP funds or other programs last year, and 78 percent said they would do so again.

Respondents generally see this year as one of recovery. Seventy-six percent of respondents said that they expect to increase their revenues over 2020. Most do not expect a full recovery until at least 2022. Only 12 percent said they see revenues returning to 2019 levels this year. However, 51 percent see a return in 2022 and 35 percent in 2023 or beyond.

“International travel will take longer to recover, so there will be fewer high margin, ‘big ticket’ trips this year,” said Bates. “In addition, travel has become more complex, so advisors will spend more time managing a booking – which also impacts profitability.”

One of the positive ways the pandemic has impacted the travel advisor community is that travelers are aware of their value more than ever.

“I can’t tell you how many advisors told me about the countless hours they spent rescheduling trips, figuring out quarantine rules, and pleading for refunds. But if the trip ultimately didn’t happen, they didn’t receive their commission,” said Bates. “More work for less pay is not going to cut it in the future. The consulting model, where clients pay travel advisors a set retainer, is only going to become a greater necessity.”

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