During a conference call to discuss first-quarter results, Expedia Inc. cited higher car rental rates as a reason why the company has lowered its earnings outlook. Following the guidance comments, Expedia stock fell as much as 11%, the Wall Street Journal reported.
Constrained fleets have led to higher rental rates, and that trend has had an impact on car rental booking volume, the online travel company said.
In particular, Expedia’s Hotwire opaque discount travel site has seen less demand for rental cars. Hotwire customers book rental cars at a discount without initially knowing which rental brand – Alamo, Enterprise, Hertz or National – will provide the car. These customers book on price alone; brand loyalty isn’t a factor. But in the current business climate, the gap between discount and regular rates has narrowed substantially. As a result, many price-sensitive customers have stayed away.
Expedia CFO Mark D. Okerstrom said he didn’t expect car rental bookings to improve anytime soon.
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