Everyone thought the pandemic was going to last longer and be worse for the economy, and made plans that they’ve now come to regret. Rental car companies sold off their fleets. Cars are scarce because manufacturers didn’t order the chips they’d need.
So we’re looking at long rental car lines, and in some cases sky high prices up to $600 a day. The cost of rental cars is actually holding back the travel recovery, imposing costs on airlines, hotels, restaurants, entertainment venues and other attractions.
People are renting cars from dealerships, renting U-Hauls, and skipping rentals altogether in favor of Uber and Lyft – which themselves are seeing a driver shortage and raising prices.
This should be the ideal time for solutions like Turo and Avail to step into the breach, allowing people to rent out their personal cars to visitors. Except incumbents rental agencies like their sky high rates, and airports like the slice off the top of car rentals that they take. And so we’re seeing airports cracking down on services that help travelers connect with underutilized cars.
Avail offers free parking at the airport, and rents out cars while travelers are gone. The traveler gets a cut, and if their car doesn’t rent they get it back washed. They use an off-airport lot and a shuttle to the airport in Salt Lake City – but the airport shut them down by requiring the lot and shuttle provider to stop working with them.
The airport’s director says he shut them out because they won’t pay a percentage as pizzo (they’re lucky it doesn’t wind up in a bust out.
Shane Andreasen, a director at the Salt Lake City airport, said his office has been trying since Avail’s beginnings to get it to sign a car rental operating agreement.
“They don’t view themselves as a rental car company, and they so far have refused to sign our agreement,” Andreasen said. “We have an obligation to treat similarly situated tenants the same. … We can’t give one of them a competitive advantage over the other, and that’s really what they’re looking for.”
The airport director even flat out acknowledges it’s a protection racket to keep revenue flowing to car rental companies, explaining “They pay a significant amount of rent, so we’re always looking to preserve their revenue stream.”
Avail for its part say rental cars don’t pay a tax for parking but they have to, so the airport wants to double tax them.
Denver airport has at least discounted the pizzo, taking “a daily $10 per parking stall fee plus 5% of the company’s local revenue” instead of 10%.
Even if you aren’t renting through Avail or Turo, the long line you’re facing at the rental counter or the wait you’re subjected to hoping someone returns their car to the place you rented from is still because of this crackdown since other people who are waiting there too and driving up rental prices might have rented from Avail or Turo.
This should be a good reminder that airports rarely have the best interests of passengers in mind. That’s because passengers aren’t the airport’s customer. Remember that Dallas Fort-Worth and Chicago O’Hare took out moving walkways because forcing passengers to walk longer distances makes it more likely they’ll drop into shops along the way rather than skipping over them. Airports take a slice of retail revenue, price the more money passengers spend the higher the lease rates airports can charge.
As soon as I plan a trip I book the car (have 4 reserved through August right now). Typically get good rates (and have had good availability even recently) as a National Executive Emerald club member. However I still book a backup for a couple hours after my initial rental with a different rental car company that can cancelled with no penalties (and I always cancel as soon as I get my original car).
Crazy summer and I don’t envy people trying to book last minute or doing so without status in a program. Even if you have a car reserved it is basically first come/first served so no guarantee they will honor your reservation
All the more reason to get my car tuned up and ready to go.
Have plans to drive my own car from coast to coast and from mid Atlantic to all the way north. Looking forward to the All American great road trips this summer covering 37 states.
Airports are expensive to operate, and losing rental car revenue means those costs have to come from somewhere. Airports receive significant Federal funding, and as a result, are not able to divert airport finding for non-airport purposes, including the provision of free airport space to non-aviation purposes. Losing rental revenue is putting a hole in airport budgets. The airports don’t really care if the revenue comes from Hertz or Avail, as long as they get the same revenue. Even off-airport rentals or parking have to pay the airport to allow shuttle pickups from the airport. The sooner these new rental companies realize this, the sooner they can negotiate better terms, such as on-airport parking and in-and-out privileges for people parking with them. Car rental companies are releasing space, someone has to use that space. But they have to pay the game
Of course, some of that expense is caused by things like this – https://www.chicagotribune.com/news/ct-xpm-2008-08-10-0808090439-story,amp.html but presumably not a huge amount. Vendors are also likely to get calls for political contributions with implied consequences if they don’t give enough.
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Gary: Your statement that “Cars are scarce because manufacturers didn’t order the chips they’d need.”, is incorrect. Manufacturers have standing orders and releases for pc boards from their suppliers using those chips. Due to.issues in Asian manufacture and in logistics in shipping (lack of containers, among other things), those manufacturers have not been able to get deliveries of the needed pc boards against those releases.
What they are missing however are the number of people who chose to drive to a city rather than fly given the difficulty and prices with rental cars. The airlines should be encouraging the airport authorities to encourage this as it gets more people on planes, in the airports, and benefits everyone, I am a perfect example. All of my trips under 1000 miles now are driving since Covid. I would always fly to anything over 300 miles before. So as much as they are protesting the rental car companies they are hurting the main customer, airlines.
Another possibility is to rent away from the airport. Phoenix for example is notorious for its add on fees at PHX. Going into town avoids them. This may not help with the shortage but it is cheaper.
With shortages of multiple products and services, covid exposed the failures of the US management model of maximizing short-term profits which has resulted in just-in-time delivery and a highly tuned distribution system.
The rental car industry was being pressured pre-covid by a shift of business travelers to car share services over rental cars; getting rid of millions of rental cars seemed logical given that no one knew how long the pandemic would really last or what business travel would look like after the pandemic. Unlike airlines, rental car companies did not receive massive amounts of designated government cash during the pandemic.
Airports are trying to protect their business models which also reduce the costs to airlines.
Factor in that covid has hurt short haul air travel in the same way that happened post 9/11 and that change will likely be permanent and improvement in the finances of rental car companies is less cloudy than for airlines.
I’m no longer counting on being able to find affordable rental cars as I could easily do pre-covid.
@Retired Lawyer – automakers absolutely cut their chip orders
https://www.bloomberg.com/graphics/2021-semiconductors-chips-shortage/
“Carmakers got hit first in part because of poor inventory planning. The industry underestimated vehicle consumption and thus the amount of chips they needed when the pandemic hit.”
https://jabberwocking.com/the-great-reopening-will-generate-a-million-identical-stories/
“American car companies cancelled their chip orders and never bothered to reinstate them. Then in December, when car sales “unexpectedly” began to rebound, they panicked and realized what they had done.”
I suspect this is an artificial shortage that rental car agencies and airport authorities are exploiting, as I can rent cars away from the airport for a fraction of airport prices. Just take an Uber or Lyft to the rental agency and save hundreds. Yes, prices are still higher than they should be, but I just booked a car 11 min from Boston Logan in August for almost 25% of the airport rate – $54/day vs. $200/day, same company. Reservation can be cancelled, so if things become reasonable, I can switch. The only problem with off-airport rentals is the agencies often have odd hours, so you often can’t arrive in the evening or on the weekend and find them open – given the cost of a trip is now mainly driven by the rental car, not the airfare, switching to a flight time that allows you to pick up a car at a reasonable price might be a new strategy.
This all sounds somewhere between majorly shady and outright illegal. Your use of mafia terminology is certainly apt here.
I just returned from Rapid City. I was able to book a car via Costco and Hertz. A week before I checked on available cars and Costco was sold out and Hertz had some for 1500. When I arrived at RAP the rental car lot was full -all agencies. This was Memorial day week. When I returned the car on the Saturday before Memorial Day the lot was still full. Although the websites still showed sold out.
I think most of this is the rental car agencies using Covid as an excuse to raise prices. I do have pictures of a full lot on the Saturday before Memorial Day when the lots should have been empty.
Last week I was looking to book at trip to ORD in September for a conference. Then I looked at rental car prices. Holy Moses! I’ll sit tight, not making airline reservations either. I can check back later this summer. Otherwise forget it. I’ll stay home.
Great article, Gary!!!!!
On a trip to Tampa in mid-May, I marveled at the overflowing rental lots at the airport both on pickup and on return. Like Ralph T, I am wondering if the “shortage” is real or just a money scam.
I have rented cars a couple of times in the past couple of months (FLL & DFW). I didn’t see any issues with cars, but I noticed a ton of issues with missing people.
II had a car reserved with National in FLL. I had tried to contact National because of flight delays but no local agents ever answered…. Once I got there, there was no one at all, even though the busses were running and Nationals 800 number and Twitter support said someone would wait up to 2 hours if my flight was registered on my rental (it was). I had to take an Uber/Lyft to my hotel in Miami and go back the following day. The next day I found out why no one at all was manning the National Counter. All the rentals at the airport were being managed out of the Alamo counter. So, of course, no one is answering the local phones as they were ringing in offices without people. I will say the local team made things right with the situation and helped me out but the whole mess was due to staffing issues, not car availability.
Thursday I returned my car to DFW. Whilst I was waiting for my Lyft to pick me up I was sitting in the rental center. There was a line of people for Dollar rental that stretched throughout the rental center. I don’t know how many, but I noticed bus after bus, most of the people were getting in line with Dollar. Finally, at one point the people in a line broke out into applause as it looks like another counter agent showed up. Who knows if they had enough cars, but it was pretty obvious there weren’t enough people staffing the counter with demand…
All and all I wonder if the issue isn’t as many cars, as the rental companies haven’t brought enough people back or like the Delta Lounges, everyone is finding better paying options… or unemployment is paying better than the companies.
Watch out for car rental companies trying to rent you a car with expired plates or temporary tags. In April 2021, We went back to the Avis counter in Nashville 3x b/c 2 of the cars they tried to rent us had temporary tags that either were expired or were expiring by midnight on the day of rental. Then the third on had Washington plates on it that had expired in January( so expired 3 MONTHS before our rental date).
“Watch out for car rental companies trying to rent you a car with expired plates or temporary tags.”
Expired tags or plates is the new in-thing – cops have had no desire to pull people over for such a minor infraction, both because of the anti-police environment and COVID. The chances of something going wrong during such a stop are not worth their career, therefore you see expired plates and temporary tags all over the place.
Gary – You stated in your piece on rental car prices: “This should be a good reminder that airports rarely have the best interests of passengers in mind because passengers aren’t the airport’s customer.” Your opinion is very far from the truth! Having served as General Counsel for two different airports (LAX and SDIA] over a period of more than 20 years, I know first hand that airport managements view those who visit and use their airports as customers. Airports work hard to provide all the amenities they can economically and environmentally afford. Airports by law cannot charge a head tax on passengers, mainly because the airlines pressured Congress to ban such charges. This curtails the revenue stream that airports can generate. They are constrained by federal law as to their use of revenues and mandated to charge fair prices. They, therefore, must charge all commercial users of the airport in order to function. They use this revenue stream to build and operate the airport. I write to respectfully ask you to cease bashing airports. Airports, just like airlines and rental car companies have all of us in mind when providing services. In closing, there is one other important consideration: Public airports don’t and can’t make a profit, while the rest of the commercial entities using airports have as their objective making a profit. Airports are generally public entities answering to a political system and eventually the voters. These distinctions affect how customers are treated.