Major car rental firms, feeling the pinch from the rollback in their bread-and-butter corporate travel, have substantially reduced their fleets and raised car-rental prices.
Consumers are wondering why car-rental prices have gone through the sun roof during a recession.
For example, Avis Budget GroupÂ reduced its average fleet 21% in the third quarter, and saw revenue decline 14% to $1.5 billion. The company’s pricing in the U.S. increased 13% compared with the third quarter of 2008.
The dynamic has left OTAs’ and consumers short of inventory, particularly in opaque channels, where the OTAs generally do not have up-front commitments from the car-rental firms, but offer inventory dynamically when the car companies choose to make it available.
Here’s how Orbitz Worldwide put it in its recent 10-Q filing with the Securities and Exchange Commission:
“The current economic environment has also significantly impacted the car rental industry. As a result of lower demand for air travel, demand for car rentals has also declined. We expect this trend to continue through the remainder of 2009. Lower demand for car rentals could reduce the net revenue that OTCs generate from the booking of cars. In addition, car rental companies currently have limited access to financing and have reduced their fleets. The overall reduction in rental car fleets has resulted in a significant increase in ADRs for domestic car rentals. This increase in ADRs has partially offset the negative impact of reduced demand for car rentals. Also, the financial condition of certain car rental companies has deteriorated, which may result in bankruptcies and industry consolidation, which in turn could cause further increases in ADRs for car rentals and a reduction in the number of cars available for booking on OTCsâ€™ websites.”
Priceline President and CEO Jeffery Boyd also took up the issue in response to a question when discussing the company’s third quarter financial results.
“… there’s no question that the rental car companies have skinnied down their fleets in order to make sure that they can maintain yield integrity, and that absolutely has had an impact on opaque availability from time to time and has been a headwind for the opaque rental car business,” Boyd said.
He added: “We are fortunate to have very broad distribution of retail rental car product, and we’ve designed our website to deliver the best available deal to the customer no matter what the supply environment is, so it really is a one-stop shopping experience for the customer. And if there are good opaque rates available we have them, so there really is no need for the customer to go any further.”
The car rental segment pales in comparison to hotels in importance for the online travel agencies, but the squeeze in the car-rental industry doesn’t help things much, either.
And it doesn’t assist consumers, particularly leisure travelers, in finding a decent deal.