Skift Take
Car rental companies are desperate to raise rates, but the reality is that reduced demand due to ridesharing and an expected slowdown will keep prices from rising significantly in 2020. This is good news for companies and vacationers alike.
Global car rental companies have been desperate to raise rates in recent years, but a drop in demand has made it challenging.
The latest Ground Monitor report from American Express Global Business Travel crunched the numbers on the last seven years’ data from clients to predict the outlook for the rental car sector in 2020.
“Looking at the price forecasts and combining them with insights from GBT subject matter experts, the traditional car rental model appears to be under pressure across much of the world,” reads the report. “Costs are rising, but the car rental companies are restricted in their ability to respond by raising rates: overcapacity — and competition between the rental companies — means there is little scope to push up average daily rates.”
Europe is a fragmented market for car rentals, but according to the research, countries including Italy, Germany, and the United Kingdom will see a decline in car rental prices next year. The report proposes that increased demand for leisure travel will make corporate rentals more competitive, particularly as car rental companies have had trouble maintaining appropriate fleet sizes in Europe in the past.
“In Europe, car rental companies are contending with… rising fleet and maintenance costs,” said John Bukowski, director of global content and distribution strategy for American Express Global Business Travel. “Operating on tight margins, these companies want to increase [rates]; however, Europe’s economic slowdown has car rental rates forecasted to decline slightly in most countries. Seeking new revenue streams, car rental suppliers are combining classic rental options with car sharing (i.e. Sixt Share or Enterprise CarShare) and looking to persuade companies to outsource fleet management to them.”
Check out the projections for various European markets.
EMEA Car Rental Rate Growth Outlook
| Belgium | .5% |
| France | 1% |
| Germany | -1.5% |
| Italy | -2% |
| Netherlands | -2.5% |
| Norway | -1% |
| Spain | -2.5% |
| Sweden | -1% |
| United Kingdom | -.5% |
| Switzerland | 2.5% |
| South Africa | 2% |
| United Arab Emirates | -3.5% |
Source: American Express Global Business Travel
In North and South America, though, prices are set to rise slightly. It would seem that car rental companies have done a better job managing their operations in the Americas and that stronger economies will allow for slightly higher rates.
Americas Car Rental Rate Growth Outlook
| U.S. | 1% |
| Argentina | .75% |
| Brazil | .75% |
| Chile | .75% |
| Mexico | .75% |
Source: American Express Global Business Travel
Beyond 2020, things could get even more difficult for car rental companies if they don’t develop new revenue streams and embrace alternate forms of ground transportation.
“Looking ahead, regulatory concerns around congestion and the environment will drive further innovation around green transportation technologies,” said Bukowski. “Hundreds of cities across the world have already implemented congestion charging and low-emission zone schemes, which have spurred the introduction of low and ultra-low emission vehicles, autonomous vehicles, and bicycle-share schemes. Over time, mobility-as-a-service platforms will emerge to allow travelers to easily manage the growing set of ground options from their smartphones, from ride-hail and electric scooters to local rail services.”
Check out the full report below.
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Tags: car rental, corporate travel, ctir
Photo credit: A traffic jam in Paris, France. Christian Scheja / Flickr