Skift Take

Weakening business travel demand, and the impact of ridesharing on the leisure market, is leading to lower rates and decreased revenue for car rental companies.

While Hertz reported notable weakness in business travel in its fourth quarter earnings call this week, the car rental company doesn’t believe that the extreme weakness in the global energy sector will spill over into other markets.

“We saw a degree of softening in business travel in the market place in the fourth quarter but outside of the energy sector, it was a more muted softening in that demand,” said Hertz chief revenue officer Jeff Foland. “We are trying to be very rigorous about the accounts in the portfolio, the profit levels we need to achieve with that portfolio and that has certainly contributed to the volume decline during that time period.”

Hertz executives also said they don’t think sharing economy services are to blame for the lack of demand for rental cars. The company is working on building partnerships with several ride sharing services instead of building its own competing products.

“It is very early days as you say, but we do think there is a fleet management opportunity within the ride sharing business that we’re going to continue to pursue,” said Hertz CEO John Tague. “And we also think there are a lot of use cases between ride sharing and car ownership that we intend to build products and services to respond to. So we’ve really have not seen an impact, I don’t think that our numbers would be very different from our public comp in terms of what impact we may or may not have seen from ride sharing but we do see an opportunity in these trends within the market.”

Overall, the team at Hertz posted a picture of an industry whose main players need to collaborate in order to keep prices from sliding even further in 2016.

“As you know, all the industry participants have taken actions to improve price over the last several months,” said Foland. “Clearly, seasonally this is the most difficult time of year to realize the price increase given the fleet circumstances. We remain optimistic that as fleets tighten over the spring and summer that we’ll see an improvement in price.”


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Tags: corporate travel, ctir, earnings, hertz

Photo credit: Empty car rental kiosks in Lublin, Poland. Jurek D. / Flickr

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