Last updated: 12:21 PM ET, Tue May 12 2015

Travel is Thriving, So Why Are Car Rental Companies Idle?

Car Rental & Rail | Donald Wood | May 12, 2015

Travel is Thriving, So Why Are Car Rental Companies Idle?

Photo courtesy of Thinkstock

Whether you travel for business or pleasure, renting a vehicle is something many Americans do each year, but the car rental industry is struggling right now compared to other businesses in the travel sector.

According to Phil LeBeau of, two of the car rental industry’s biggest publically-traded companies, Hertz and Avis, are struggling right now due to a lack of upgrades on the technology side of booking, too many cars on the lots and the lack of pricing power.

While Avis is up four percent on the stock market, Hertz is down more than 25 percent in the last year.

On the technology side, the airline and cruise industries have made major upgrades to how customers book their flights and trips, but car rental companies are just now making the necessary upgrades. For many travelers, it’s too little too late.

Another major problem is the number of rental cars in the United States. According to LeBeau, there are more than two million rental cars in America today. The average rental car spends 21 to 22 days being used by customers per month, leaving eight or nine days of inactivity. That’s far too much downtime for any company.

One major problem that spawns from the number of cars in the field is the lack of pricing power the companies have over customers. With the car rental industry desperate to get customers in vehicles, the consumer has all the negotiating power, resulting in better deals for those who book last minute.

Despite all of the struggles in the car rental industry, other industries in the travel sector are thriving. The airline, cruise, online booking and hotel industries are improving right now (with airlines up an astounding 66 percent last year,) but car rental companies are still failing to take advantage of the favorable market.

Barclays rental car industry analyst, Brian Johnson, told, “We look at [the rental car industry] and say, 'Why can't this become more like airlines when you went from maybe eight hub airlines to four?' We have gone from six rental car industry companies to three, yet we haven't seen the same type of benefits to investors from consolidation that we have with airlines.”

All hope is not lost for the car rental industry, though, as vast improvements to fleets have kept customers coming back to enjoy the newest cars on the market. Add in the fact that car-sharing services like Uber have not hurt the business as much as expected, and the industry can once again thrive with some smart choices moving forward.

For the customers, renting at the last minute could help save you money. Enjoy the benefit for now before the industry finally wises up.


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