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From: Jon Koplik4/14/2021 1:42:11 PM
   of 61
 
WSJ -- Wait, Where Did All the Rental Cars Go ? Rental-car companies sold huge chunk of fleets

The Middle Seat

April 14, 2021

Wait, Where Did All the Rental Cars Go?

Hertz, Avis and Enterprise sold enough of their fleets during the pandemic to create a shortage now that demand is picking up ahead of the summer travel season

By Scott McCartney

When you book a trip, do you start by shopping for convenient flights? Maybe reserving a favorite hotel?

Here’s the new priority for 2021: Get the rental car first.

The sudden surge in post-vaccination travel is colliding with a relative shortage of rental cars. Rental-car companies sold a huge chunk of their fleets -- hundreds of thousands of vehicles -- to survive the pandemic. Now they can’t get cars onto their lots fast enough to meet the new demand, especially with car factories stalled by semiconductor shortages.

Travelers report sky-high prices and sold-out dates even in non-beach destinations like Kansas City, Houston and Memphis. Even travelers with reservations complain that they now sometimes show up and, with no cars on the lot, must wait for a car to be returned and cleaned before they can drive off.

Parks Shackelford of Washington, D.C., bought a ticket on Southwest Airlines to Jacksonville, Fla., for a hunting trip in southern Georgia in late March. Then he found he couldn’t get a rental car. He tried Tallahassee -- no luck. Finally, he had to cancel his nonrefundable flight and buy a Delta Air Lines ticket to Valdosta, Ga., near the Florida border, because he could get a car there.

“If you’re going to have to have a car to travel, you need to check that first,” he says. “I can suck it up and pay more for the car, but I just could not get a car nine days before the trip no matter what.”

Hertz Global Holdings, Avis Budget Group and Enterprise Holdings, the three big U.S. rental car companies, declined interviews but responded to questions with statements saying that they expect shortages to continue. They say they’ve run into delays because of the auto-manufacturing slowdown. Hertz includes the Dollar and Thrifty rental-car brands. Enterprise includes National and Alamo.

Hertz, heavily dependent on business travelers at airports, suffered losses of $1.7 billion in 2020 and a 46% drop in revenue. In financial reports, the company said the pandemic prompted it to reduce commitments to purchase vehicles by $4 billion, and to dispose of leased and owned cars. In the fourth quarter, Hertz reported that its average number of vehicles in the U.S. was below 300,000, down 42% from more than half a million cars in the fourth quarter of 2019.

Hertz, which is reorganizing in bankruptcy court, announced last fall that it had secured commitments for $4 billion in financing to start rebuilding car inventories. Avis also suffered heavy losses even after it said it “profitably disposed” of 250,000 vehicles globally last year.

Analysts say it could have been even worse. Many past downturns have meant a weak market for used vehicles, leaving rental-car companies in a bigger bind. This time they were able to get good prices for their cars and easily get out of leases.

“They were dumping cars into an historically high used-car market, and it saved them,” says longtime industry analyst Neil Abrams.

Mr. Abrams, president of Abrams Consulting Group, thinks it will be the second half of next year before major auto-rental firms have supply back in balance with demand. “We’re going to see shortages and high prices for a while when you’ve got more customers than cars,” he says.

He also thinks travelers need to get used to paying more for car rentals, even when the imbalance eases. In the past, “customers have been spoiled by low prices and plenty of cars. You can rent a car cheaper than renting a tuxedo,” he says.

Like many travelers, Larry Pearlman has elite-level status with rental-car companies and is used to walking up to a line of cars, picking one and being on his way in minutes. On an April 5 trip to Memphis he found himself in an empty President’s Circle row at Hertz.

“Customers were waiting for cars to be driven in and returned,” he says. “In my world, any wait at a rental car when you have elite status is unacceptable. You should be able to just go in and get it, and that’s not what’s happening.”

He only ended up waiting about 15 minutes; on social media, travelers report occasional waits at various rental companies of an hour or more. Mr. Pearlman, a consultant based in Raleigh, N.C., ended up with a Nissan Versa compact instead of the full-size car he reserved.

Another factor in the quick rise in car-rental demand: Some travelers are avoiding ride-sharing or taxis during the pandemic. With a rental car, you have the vehicle to yourself (though take precautions with masks on rental-car buses).

Many travelers had grown used to renting a car for $39 a day or less before the pandemic. A quick price scan suggests how much has changed.

The cheapest price at Hertz, National or Avis for a one-day rental for Friday at Chicago O’Hare Airport, priced a week in advance on Kayak, was $117 for a Ford Fiesta economy car. Major agencies were all sold out for Friday at Houston’s Bush Intercontinental Airport, at least according to a Kayak search over the weekend. Sixt offered a Toyota RAV4 for $373.

And on Friday in West Palm Beach, Fla., one day with a Chevrolet Impala sedan would set you back $234 at Hertz. A follow-up found that Hertz location all sold out. (Those daily prices are without any sort of corporate discount.)

Travelers like Mr. Shackelford have some sympathy for the whiplash that hit car-rental companies. He still finds airline fees and penalties more egregious.

“I haven’t built up nearly the anger for the rental-car companies that I would have for major airlines, which are up there with cable companies and mortgage companies,” he says.

Write to Scott McCartney at middleseat@wsj.com

Copyright © 2021 Dow Jones & Company, Inc.

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