By 8 a.m. on Monday, the Champagne Ballroom at Paris Hotel was already packed for a pre-conference session. The International Car Rental Show hadn’t even officially kicked off, yet the energy was palpable. That vibe continued straight through to the end of the closing keynote the next day. Over 800 registered for the 2022 ICRS, easily besting the last pre-pandemic year of 2019 and rivaling the show’s best attended years post-Great Recession.
You could surmise by the attendance that “the car rental industry is back.” But back to what? We’re in a black swan environment in so many ways: The industry is desperate for cars — yet rates are high, and profits are even higher. How long will it last? This was the elephant in the room.
The consensus takeaway was that the supply issue will not correct for at least two years. Operators will be in a perpetual scramble for cars, but those cars will continue to have unprecedented value in the aftermarket. Black Book’s Alex Yurchenko imparted that retained values will cool somewhat, but by April 2024 will still be 30% to 40% higher than the three-year baseline leading up to the pandemic.
This is a good time to be an independent car rental operator. The record profits enjoyed by the majors allow smaller companies to take some of that demand and still realize a healthy margin. With so few cars, the buying power of major car rental companies is muted, leveling the playing field for everyone else.
When I asked to see the first timers at ICRS, half the attendees in the ballroom raised their hands. There is new blood in car rental. An industry that has seen continuous consolidation in the last 25 years has a renewed vitality.
In attendance were operators like John Hypolite of Premium Car Rental in St. Thomas, Virgin Islands. John came to ICRS in 2016 wanting to learn how to start a car rental company. He’s got over 200 cars today under his own brand and he’s an Economy affiliate. He’s thriving. John represents the entrepreneurs going about car rental the “traditional” way.
Then there are operators such as Marlon Walls. Marlon strictly supplies the Turo peer-to-peer platform with a few dozen cars. He’s a social media influencer and uses multiple platforms to market his services and his personal brand. Marlon came to ICRS to learn the ropes and hopefully start his own company, and perhaps become a version of Premium Car Rental.
And then there’s Karim Kaddoura of Virtuo, an app-based service available in multiple cities in Europe. Kaddoura has grown Virtuo from a few cars in 2016 to a fleet of 7,000 today. Virtuo is carving a niche without brick-and-mortar stores, delivering premium vehicles to a younger rental demographic.
The business is changing, and many of the seminars focused on how to implement technology to provide a more seamless rental experience through keyless systems, QR codes, secure uploads of personally identifiable information (PII), and telematics data. This tech is available to all and at lower price points than before, another leveling of the playing field between the majors and independents.
Aside from supply, the other elephant in the room was what to do about renting electric cars. Not everyone in the room was on board with EVs. The conversation was spirited between the evangelists and the detractors, who gave reasoned (if not downright heated) responses from “we’re just not there yet,” to “EVs are getting shoved down our throats.”
Yes, there are many unknowns on how to scale EV rentals: Will residuals hold up, and how will I get enough power to charge at my rental locations? Working through those problems won’t be easy. But two years ago, virtually no one in car rental was fleeting EVs and we weren’t talking about it at ICRS.
EV rentals are not going to work (yet) for many parts of the country and market segments. But the impetus, backed by billions of dollars, is there. There were a few EV-only rental companies in attendance, which would’ve been unheard of a couple years ago. Cody Enloe of New Mexico Rental Car, a new player who’s already grown to a few thousand cars, wants to be all EV in five years. Luis Navarrete of the Avis Mexico franchise is running 40 Teslas in Mexico City and is getting more. Kaddoura has about 700 electric units in his fleet. There about 100 Tesla Model 3s at the Hertz lot at LAX right now, an attendee remarked.
It doesn't matter if you're for or against EVs; they're coming regardles, says Mike Battaglia, @BlinkCharging in our first concurrent #icrs2022 session. We're doing a deep dive on renting #electricvehicles today! pic.twitter.com/8oVEKBsrAJ— Auto Rental News (@AutoRentalNews) April 25, 2022
The industry will quickly find out how to rent EVs. Car rental is leapfrogging other fleet types such as commercial, corporate, or government and is moving so fast that some locations are fleeting EVs without the charging infrastructure in place. EVs may not be right for you, but it’s time collectively to wrap our heads around it.
Back to the first elephant: During the closing keynote, an operator got up and spoke passionately about how he grew his business in two years, but he wanted to know how to plan for when this bubble will burst.
Indeed, a panelist posited that the automotive market would return to its days of oversupply. The billions sunk into manufacturing plants and vehicle R&D mean that automakers will punch out too many vehicles at lower and lower profit margins. Where does that leave the independent operator?
Sharky Laguana, founder of Bandago Van Rental, told this operator he needs to learn the industry as best he can — make the connections with local dealers, understand depreciation, and know when it’s smarter to sell vehicles and leave rental revenue on the table. Smart operators will always survive. Perhaps not the solace he was looking for, but the best advice anyone could give.
One last thing: The opening keynote marked the passing of a torch in the U.S. car rental industry. Delivered by Gerardo Bermejo and Gary Smith of Europcar, this was the formal introduction of the last global car rental brand into the U.S. And, as Europcar acquired Fox Rent A Car in 2019, it marked the transition of one of the last great independent car rental brands to corporate ownership.
After 30+ successful years running @foxrentcar, Mike Jaberi and Allen Rezapour are officially handing over the keys to Europcar Mobility Group on July 1. Europcar has named Gerardo Bermejo as the new managing director, succeeding Mike and Allen for their U.S. perimeter. #ICRS2022 pic.twitter.com/NBDn61SXpJ— Auto Rental News (@AutoRentalNews) April 25, 2022
During the keynote, Fox co-founders Mike Jaberi and Allen Rezapour offered words of thanks to the industry, effectively passing the torch to Europcar. They’ll stay on in advisory roles. We’ll miss Fox as an independent entity, yet welcome Europcar to our shores. The car rental market is changing, but the independents are alive and well.