2020 is a year that the car rental industry would want to forget.
NB: This is an article from RateGain
The pandemic and the challenges it brought in terms of lockdowns and social distancing had the industry witnessing an unprecedented slump. Fortunately, with the development of the Covid-19 vaccine, demand for car rentals is now gradually picking up.
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With the US accelerating vaccination efforts combined with the ease in travel restrictions, we are witnessing a spike in travel activity across the US and North American markets. There is an increased demand for domestic trips, vacation rentals, and staycations, with many people opting for interstate travel. By analyzing the trends of the past few months, revenue managers can effectively plan better revenue strategies for forecasted demand.
Car rental demand saw an upsurge in most of the cities in the US and Canada. We are witnessing higher pricing arising out of lesser supply, spurred by the fleet and car inventory shortage. This brings about inevitable price volatility, which is hard to anticipate and plan for without advanced analysis and pricing automation.
How is Summer Looking for Car Rentals?
Prices for summer rentals look more expensive in the US, with an average of 20-30% increase in the rates for daily ADRs. However, Canada is following a more linear growth path for ADR prices.
Most of the areas in the US have plateaued and settled down on pricing that is somewhat aggressive compared to Canada and other locales. Summer demand seems to have peaked in the US, with averages of around 180 dollars on ADR, higher than the peak in Aug 2019. Comparatively, the summer demand isn’t yet getting that sharp spike in Canada.
With this rising demand, rental companies are trying to maximize their revenues through a fleet size similar to previous years. This has resulted in aggregated utilization of over 95% in the top 25 locations of the US market. The overall utilization calendar is around 70% and looks poised to continue that way unless the industry jointly takes corrective steps.
It would be interesting to see how revenue managers try and find ways to increase the revenue based on demand for the pre-existing fleet. To better understand pricing factors, we need to analyze car rental price variations based on location and car type.
The last-minute prices for Canada are considerably low when compared to the farther out dates, which have prices on the higher side. For the US, however, the last-minute prices are way higher, across all pickup dates spread over four months up unto October.
Volatile Locations Across the US and Canada
Car Rental Trends on the US East Coast
Akin to the national trend, the prices in Newark, EWR, and New York, JFK witnessed an increase as the booking date approached, followed by a two-week dip, which then stabilized for a 3–4-month period.
Atlanta, ATL, and Boston, BOS had a different picture to show, with revenue managers opting for static pricing for future dates, due to the lower yield from demand.
Car Rental Trends on the US West Coast
Interestingly on the West Coast, key cities Los Angeles, LAX, Las Vegas, LAS, and San Francisco, SFC kept the price flag on the higher side, with San Francisco opting for a 25% higher price flag compared to LAX and LAS.
In the Florida region, Miami, MIA had a few summer dates with huge spikes, with on-demand pricing crossing 160 dollars as ADR. Overall, Miami, MIA, Orlando, MCO, and Tampa, TPA showed varied pricing strategies for both long-term and days closer to the booking date.
Car Rental Trends for Top Cities in Canada
Although there has been no upsurge in demand for car rentals as with the recovery in the US, revenue managers in Canada have adapted by framing their pricing strategies based on the location.
Edmonton, YEG, Victoria, YYJ, Calgary, YYC, and Vancouver, YVR have mostly followed the same trend with an ADR of around 100 dollars a day. Toronto, YYZ, however, has shown a lot of price volatility with prices going down drastically closer to the booking dates and peaking out at around 2 months with an average of close to 250 dollars.
The overall market outlook in Canada leans towards reduced prices closer to the booking date. Pricing volatility and uncertain demand pose a challenge for revenue managers and car rental operators while pricing the far-out dates, on whether to price it higher or at a range similar to the lower rates closer to the booking date. For June, car rentals price look 20% cheaper when compared to the same timeframe last year.
Car Rental Pricing Insights for other markets
We have collated a similar list of such statistics and insights for other markets as well, which we would be happy to share with our clients. Contact us via email or call for more information on how you can come aboard with us.
Which Car Categories should you Focus on
It is impractical to arrive at a pricing decision based solely on the rate insights of a given location. Revenue managers need to consider the type of car rented out, as pricing most often varies across the different car categories. Here are some market insights based on car types that should help car rental companies set up better pricing points.
Owing to the pandemic, the shortage in supply of electronic chips for intermediate and full-size cars resulted in lower car availability in this segment. This led to an increase in prices to 300-350 dollars a day, almost 30% higher than what was witnessed last year in the US.
Car Rental Pricing Trends in Canada based on Car Categories
In Canada, the intermediate and full-size car segments proved to be the most dynamic category compared to other segments. This is quite similar to the US market, for the same reasons of pandemic-driven supply chain disruptions and component shortages.
