22 Takeaways & Sage Advice from ICRS 2023

If you hadn’t heard, we reached 1,000 registrants for the 2023 International Car Rental Show (ICRS). That’s the best attendance in 23 years. I had a few folks ask me why this year was one for the record books. There’s no pat and easy answer.

Covid obviously disrupted the past three years, when we pivoted to a virtual show in 2020 and had two shows with condensed turnarounds. The world wasn’t yet fully open for the 2022 show. It is now, and this year we welcomed a record 42 countries (while increasing our domestic audience substantially too).

Consider this: Back in 2019, there were 733 registrants to ICRS, which was close to average for the years coming out of the Great Recession. This year’s total was a whopping 36% over that. What gives?

Here are a few thoughts:

Record Car Rental Profits, Forced Discipline

Last year, the major car rental companies made record revenues and profits. This allowed the independent and franchised brands, our primary audience, to also book record earnings.

Add to this a discipline the industry hasn’t seen in modern times, created by the tightest fleet supply in history. That kept rates high and padded profitability. It also kept new, undisciplined entrants and bottom feeders out of the market. The strong not only survived; they thrived. And they turned out in Vegas this year.

Technology Levels the Playing Field

Another factor is technology, which has helped the smaller operators level the playing field with the major brands. In the last few years, independents and franchisees have benefitted from new systems and tools that are now available at reasonable price points, from fleet management software and vehicle inspection programs to remote vehicle access systems.

This technology stack also includes new connectivity to a much wider customer audience through brokers, franchisors, and affiliate networks, which brings a wider reservation faucet than ever before.

Multiple Reservations Channels

Whereas the major OTA’s such as Expedia have worked traditionally with the major brands (though this is loosening to an extent), the rise of brokers allows independent operators to book reservations from all over the world.

The majors have all but abandoned franchising domestically. Yet there are several newer, smaller franchising networks signing up clients in the U.S. It’s the same with new affiliate programs.

This has led to a situation in which independent brands are juggling multiple ways to get reservations through non-exclusive franchise and affiliate contracts and a series of brokers. This is all well and good, providing operators can manage it all and keep the customer happy. That can be a tall order.

This issue and many more — from fleet buying, customer experience, remarketing, telematics, electric vehicles, risk, and legislative concerns — were discussed from the stage, during networking breaks, and in the exhibit halls.

This is just a sample of the takeaways, along with some advice from speakers and seminar panelists on how to navigate today’s challenges:

Takeaways & Advice from 2023 ICRS

• Supply is loosening. In Q1, car rental fleeted 66% more vehicles than it had in last year’s first quarter. Sky-high cap costs are still historically high, but no one is paying $4k over MSRP anymore.
• There are about 1.8 million units on U.S. dealer lots now, compared to about 750,000 last year. That’s still below the usual 2.1 million.
• Overall, however, fleet acquisition is going to be tight by historical standards for the next three years.
• That means remarketing vehicles with higher miles. In the words of one operator, “The luxury of selling within warranty has gone away.”
• Official allocation from the automakers for non-major operators is all but dead. Operators are getting more creative with a) their dealer relationships and b) picking up vehicles not normally for rental and making them work for the customer.
• However, if you don’t say yes instantly to a dealer’s text, someone else will buy them, said Mark Eckhaus of Eckhaus fleet.
• Fleet will be tight but thankfully so will value retention. (According to Black Book, average retention of two-year-old vehicles is expected to hold at 73% through 2025, down from astronomical peaks but higher than the 58% average from 2016 to 2020.)
• High interest rates remain a burden — we can now identify holding costs as “depreciation plus financing” — but these higher costs will keep operators from over-fleeting.
• Be flexible: Amortize your vehicles at an accelerated rate to get out of fleet if you need to, said Kirk Browning of 1^st Source Bank.
• Car rental has untapped potential to explore new ways to remarket vehicles and thus realize greater returns. Operators not in a position to set up a full retail used sales operation could consider partnering with an existing mega-store retailer.
• Phil Spink of Tom Wood’s Sixt franchise in Indianapolis said he spends an average of $300-$400 in reconditioning per unit to get an auction grade of at least 4 (out of 5). This helps his units to stand out against the majors that don’t bother to recon their units. And it’s better for online buyer’s peace of mind.
• Overall, the “guiding light” of the industry appears to be profitability over market share.
• Rates are holding firm. This will continue through the summer but won’t scale the peaks seen in early 2022. Anecdotally, however, there was mention of $5 a day rates in Florida.
• With a show of hands, few operators at ICRS have to date implemented telematics in their fleets. Yet in Brazil, the majority of operators have telematics.
• For rental, a major benefit of telematics besides geolocation is accurate fuel reporting, but there are other data-based benefits that haven’t yet been fully exploited.
• Electric vehicles wove their way into most conversations on stage. Yet the vast majority of operators are not in a position to begin this journey. Biggest barriers are a) lack of public infrastructure, b) cost to install infrastructure onsite, c) education needed to begin, from understanding incentives and working with utilities to how to make a profit from EVs.
• There is a mindset to let the majors such as Hertz do the groundwork on EVs before the smaller operators jump in.
• That said, there is a growing group of operators who are ahead of the pack in renting EVs; they’ve made it their core competency. Independent operators have traditionally thrived by finding a niche and doing it well — think replacement rentals, specialty vehicles, or location-based services. EVs represent a new niche to exploit in the right markets.
• An example of smart EV rentals: Sixt Indy is offering Chevy Bolts as a low-price leader. And why not? After taking advantage of federal incentive of $7,500, Bolts are one of the cheapest vehicles in fleet. The franchise expects to hold them for up to three years in fleet — and will take advantage of IRA’s new $4,000 credit when they’re sold.
• Used EV values are still a big question mark, as brought to life by keynoter Scott Painter (latest venture, subscription EV startup Autonomy). He bought 500 Teslas in November, after which Tesla announced a substantial discount on new models, which tanked the value of all used Teslas. “I was $8 million underwater the day they did that,” he said. Luckily, that value was only lost on paper, as he’ll have those units in his fleet for some time.  
• In a session with a focus on the customer experience, Kelly VanDamme of Expedia said that travelers trust online reviews more than they trust advice from their own family. You can price higher based on better traveler reviews, she said.
• From Expedia’s data, car rental customers’ biggest pain points are long wait times and unexpected fees.

ICRS23: More to Come

The above does not cover a fraction of my notepad scribblings, which runneth over with many more bits of wisdom, news, scuttlebutt, and guidance on the larger industry and how to run a car rental company more efficiently, sustainably, and profitably.

Look for more articles and content based on intel from the show in the coming weeks.