Kusinitz took this photo of customers waiting outside an Avis location on Manhattan’s Upper East Side. That line is less a function of a spike in demand and more of an imbalance of cars at that location, he believes. - Photo by Ian Kusinitz.

Kusinitz took this photo of customers waiting outside an Avis location on Manhattan’s Upper East Side. That line is less a function of a spike in demand and more of an imbalance of cars at that location, he believes.

Photo by Ian Kusinitz.

Quoting a recent New York Times article: “Now New Yorkers desperate for a break from the city but wary of traveling by plane or train are reimagining their summer vacations — and turning to rental cars in record numbers.” 

It’s the situation the car rental industry was hoping for — a shift in business to keep operators afloat as the pandemic rages on. Indeed, the article headline, “$279 a Day: Good Luck Finding a Cheap Rental Car in N.Y.C.” indicates a tantalizing revenue spike as stay-at-home orders are eased, yet air travel remains suppressed.

For consumers looking to get out of the city, the situation provokes a dose of dismay, adding rental cars to the long-list of pandemic-induced shortages such as toilet paper and air conditioners. The thrust of the article: “But if you really want it bad enough, you’ll pay a pretty penny.”

From an operator’s standpoint, the situation isn’t as rosy. “The volume still just isn’t there,” says Ian Kusinitz, owner of Empire Rent A Car, with 11 locations in the boroughs and Long Island. 

Before Kusinitz’s perspective, a look at the data: The article states that Priceline showed a 73% rate jump at non-airport rental locations compared with June of 2019. While that is a noteworthy jump (for a month, at least), the $279-a-day figure seems a bit suspect. 

That figure is sourced from an analytics company called Thinknum Alternative Data. This article posted on Thinknum’s website reveals that, at least back in 2018, the company only tracked rates for Avis Budget Group’s global brands. (A chart in that analysis didn’t identify car class or even where in the world the data was derived, though the data revealed rates regularly topped $200 from April 1 to Dec. 31.)

The NYT article states that the $279-a-day rate represents a 12% year-over-year increase over June 2019, according to Thinknum. That means rates in New York City were about $250 a day last June. That seems awfully high, even for New York City, pandemic or not, though again other important metrics such as car class aren’t mentioned.  

Kusinitz offers context to the car rental situation in and around New York. 

He says not having his usual lucrative customer base of out-of-towners that come in during the late spring and early summer have hurt the business. 

“They come from the South and Midwest or even Europe; they fly in to tour the city, head out to the Hamptons, maybe head up to the Baseball Hall of Fame in Cooperstown,” Kusinitz says. “They pay a good rate, they’re insured, their overall mileage is reasonable, and they don’t abuse the cars.”

With those customers not traveling, “What’s left is the local renters, and they’re much more abusive,” he says. To source new business Kusinitz also reached out to Amazon DSPs (delivery service partners) to rent cargo vans but found that the issues and accidents those rentals produced weren’t worth it. 

In terms of the $280-a-day rental quoted in the Times article, “I haven’t seen it,” Kusinitz says. “Maybe a last-minute reservation on a Saturday, but those are few and far between.”

At Empire, Kusinitz is seeing average rates of $100 to $115 a day. That does allow for some profitability, but must be weighed against incidences of unpaid contracts, uncollected damage, and toll violations that have shot up during the pandemic. 

He believes that the shortage is based on an imbalance of cars where they’re needed, as the NYT article alludes to. They may drive up rates in the city, but it’s a nightmare for operators. 

“Yes, there is a massive shortage of cars, but they’re in the wrong place at the wrong time,” he says. “With the just-in-time aspect of the business these days, it costs a lot of money to move them.”

During the pandemic, car rental companies have moved massive numbers of fleet vehicles, parking them where they can as they wait to sell them or ride out the pandemic. 

In high-rent areas like New York, they’re trying to avoid astronomical parking costs. Agreements with parking companies allow for a certain number of spaces at a discounted rate. Anything over that pays the retail consumer rate, easily $50 a night in Manhattan. 

“There goes your profit on those cars,” he says. 

Cars at the airport are renting for a lot less per day, if local renters want to make the trek. Then again, car rental companies have more parking — thus more cars to rent — at airports than in the city.

“They don’t have the usual manpower to drive them from airport to Manhattan,” he says. “When they do hire someone to (transfer the cars), they pay an astronomical fee for the labor.” 

Another issue, Kusinitz says, is the rentals that were booked in the beginning of the pandemic, when the world wasn’t moving. “We have cars that were booked for $25 a day in April and we have to honor them.”

The problem is exacerbated with long-term rentals booked early as well. Kusinitz rented cars at $800 a month in early April to get them on the road. (That revenue per unit, per month is sustainable elsewhere, but it isn’t in New York.) Some customers are extending those rentals for another month. 

“I can get at least double for that car if I rented it today, but I can’t double the price for someone I gave a deal to in April for a month rental, it’s just not good customer service,” he says, adding that informing them of 10% or 15% increase is acceptable. 

He has a lot of cars out on monthly rentals, “but really it’s break-even at best,” he says.

Of course, there’s always an exception. Kusinitz rented to a guy whose mom paid for the car for him to have in case of an emergency. “It was rented on March 19 for 13 weeks for $7,300,” he says, “and the guy only put 40 miles on it.”

As the NYT article mentions, carsharing service Zipcar is virtually sold out. Daimler’s car2go left the city last year. If they were still around, it would’ve drove down pricing, he says. 

Kusinitz wants other independent companies that “This business is a marathon, not a sprint.” He should know — Empire Rent A Car, the company, started by his father, celebrated its 50th anniversary in June.

Kusinitz hasn’t over leveraged the business, which is helping him survive this lean period, he says. The pandemic will subside, and business will come back. But it’s hard to optimistic just yet.

“Right now, we’re holding onto a capsized boat, we’re treading water to get through,” he says. “We’re not profitable, we’re not comfortable, but we have no choice.”

Author

Chris Brown
Chris Brown

Digital Editor

As editor of Automotive Fleet (digital), Auto Rental News, Fleet Forward, and Business Fleet, Chris Brown covers all aspects of fleets, transportation, and mobility.

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As editor of Automotive Fleet (digital), Auto Rental News, Fleet Forward, and Business Fleet, Chris Brown covers all aspects of fleets, transportation, and mobility.

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