What’s behind those high rental car rates in the U.S. - and why Canadians should reserve vehicles as early as possible

What’s behind those high rental car rates in the U.S. – and why Canadians should reserve vehicles as early as possible

TORONTO — When travel started to reopen in the U.S. earlier this spring, all eyes were on airfares and hotel rates, and whether or not they would dip to stimulate demand, or skyrocket as airlines and hotel companies worked to recoup even a small percentage of their COVID losses.

Car rental rates were below the radar, for the most part. But not anymore. The sudden surge in domestic travel in the U.S. has come with supply and demand issues that have sent rental car rates through the (sun) roof.

The situation has been made worse by the global microchip shortage. With all the tech in vehicles these days, the microchip shortage has negatively impacted new car production, and that’s created a knock-on effect for rental car companies looking to secure vehicles – after shedding them in the pandemic’s early days – as demand now rapidly ticks up. 

Anecdotal reports of rental car rates as high as $700 per day in some parts of the U.S. have been making the rounds for several weeks.

Earlier this month, post-pandemic travel trends research from GDS company Amadeus noted the sudden about-face with car rental rates, suggesting it was also fuelled by some travellers’ aversion to air travel in these early recovery weeks and months. 

Says Amadeus in its spring 2021 travel trends report: “This surge has put pressure on car rental companies that scaled back the number of vehicles on hand to reduce overhead last year at the height of the pandemic. Car rentals have traditionally been an afterthought, behind hotels and air tickets. Amadeus car shopping data shows this continues to be the case with more than a quarter of all searches for car-rental pickups happening within seven days. Travellers should be conscious of this car shortage and plan rentals far in advance this summer. In fact, the shortage is so extreme at some destinations that tourists are renting cargo vans and trucks in lieu of rental cars.”

 

 

It’s not that airfare and hotel rates haven’t climbed too. In the early months of the year, when the pandemic still had its grip on the U.S. and travel was still at a virtual standstill, airfares and hotel rates were still low. But they’ve been trending up, up, up in recent weeks. At least in the case of Southwest, according to reports, fares for leisure travel are approaching levels not seen since 2019.

With the U.S. heading into high summer travel season, and with unprecedented pent-up demand, we wondered if Canada will see a similar situation when it comes to rental cars, when travel starts to ramp up again here in earnest. 

We reached out to several major car rental companies. The Avis Budget Group declined to comment, and there was no response from Hertz.

However Enterprise Holdings, which owns the Enterprise Rent-A-Car, National Car Rental and Alamo Rent A Car brands, was gracious enough to comment on the rental car industry’s supply and demand challenges as travel booms post-pandemic. 

 “As restrictions ease and as vaccine distribution becomes more widely available across North America, Enterprise, like the rest of the industry, is seeing increased demand for vehicles for spring and summer travel,” says Ian Dale, Assistant Vice President of Business Rental Development, Enterprise Holdings.

He adds: “We’ve seen this trend in the U.S. and anticipate similar trends in Canada.  A key contributor to the challenge right now is the global chip shortage, which has impacted new vehicle availability across the industry at a time when demand is already high.

“As Canada opens up, our teams will continue to do everything we can to help customers get back on the road again and we look forward to the safe return of travel.”

And a word to the wise, especially for Canadian travel agents looking to advise their clients on rental cars: “If you’re planning travel, we encourage you to reserve a vehicle as early as possible. Providing flexible travel dates and branch pick up locations in your search may also help increase your options.”