For the U.S. car rental industry, this year turned out better than expected.
In 2019, U.S. car rental hit a new revenue record of $31.87 billion — a 5.3% increase over the year previous. The industry managed to grow overall fleet size at a smaller pace, which drove average revenue per unit, per month to a new record.
To what do we owe this good fortune? A strong economy is certainly helping, which is driving a positive travel outlook and creating a robust wholesale market to sell off-fleet rental cars.
Let’s also credit the car rental companies themselves: They’ve been applying new connected car technologies, data analytics, revenue management techniques, and remarketing diversification strategies to squeeze more juice from the orange. Another fruit of this labor: J.D. Power & Associate’s 2019 Rental Car Satisfaction Study saw its highest average score ever.
Enjoy these solid fundamentals, but not for long. The new year brings challenges from market disruptors, incumbent players new to the U.S. market, and new mobility models. And these challenges come questions that need answers for 2020 and beyond.
The benefits of the connected car are far reaching, yet there are issues to resolve before full payback is achieved. How will rules regarding data access and control be written, and when will they come to fruition? When will telematics move from a clunky aftermarket install to simply checking a box when ordering the car?
Connected cars promise to deliver an on-demand, app-based rental experience. The technology has been available for years, so what’s the hold up? Will a catalyst or tipping point free customers from the rental counter? Can the industry shift ancillary sales to an app-based rental?
Avis Budget Group and Enterprise Holdings are undergoing senior level management changes. Will new leadership bring fresh initiatives to the industry?
Europcar has finally entered the U.S. with its purchase of Fox Rent A Car. Will this new combination shift existing market share? Is there any room for growth for a new player in the most mature car rental market in the world? Will Europcar bring any of its mobility initiatives stateside?
Lyft is now renting an owned fleet to the public in San Francisco, Oakland, and Los Angeles. Lyft has built-in customers and the capital to grow ancillary initiatives. How will its diversification into fleet ownership affect car rental? Will Lyft continue as a fleet owner and manager, end up partnering with fleet suppliers, or eventually exit these new services altogether?
In that vein, Hertz and Avis have found a profitable formula to rent to Transportation Network Company (TNC) drivers. How large can this business-to-business niche grow, and will other car rental companies jump in?
The future of transportation might be shared and on-demand. Yet the traditional carsharing market has stalled: Both Daimler’s car2go (now Share Now) and GM’s Maven went through major layoffs and service terminations in scores of North American markets. Like the TNCs, do automakers still have the appetite to provide services with an owned fleet?
The peer-to-peer (P2P) rental industry, however, is growing. P2P operator Turo doubled growth over the past two years and now has 400,000 vehicles available on its platform. Rival Getaround bought Europe-based Drivy to boost its international presence and now claims 5 million users worldwide.
But is the future of P2P built on sharing private, consumer-owned cars or an owned fleet?
In its third quarter conference call, HyreCar, which rents vehicles to TNC drivers, reported a dramatic shift away from peer-to-peer rentals toward dealerships that already operate rental fleets. The company added 130 commercial accounts and about 2,000 cars as of early September.
In the long view, will fleets fill the void to supply P2P platforms as vehicle ownership wanes? The more immediate question: When does profitability replace the cash injections from investors?
Answers to these questions won’t come immediately, but the industry has proven, at least for now, that it can meet these challenges under a largely traditional model. We’ll see how rapidly this changes, if at all, in the coming year.
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