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Feb 19

U.S. Gov’t Shutdown Takes Toll On Car Rental Market

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January’s shutdown of the federal government, the most severe in U.S. history, wreaked havoc on roughly 800,000 government employees, it also negatively impacted the car rental agency and other transportation and hospitality industries.

As reported by Barron’s, information compiled by research firm Guidepoint Data released in mid-February revealed that government bookings for auto rentals plummeted by 53 percent. Also affected, albeit not as harshly, were purchases of airline fares which dropped by 45 percent and hotel bookings which plunged by 36 percent. Tumbles in non-government bookings in the three industries profiled were far less extreme, although the January lull was to be expected in the wake of heightened activity during the holiday season in December.

The record 35-day shutdown resulted in the car-rental industry taking in only $20 million during the month, while airline revenue streams at $173 million and those for hotels were reportedly around $113 million. Had a deal not been reached in Congress on Friday, those numbers would obviously have continued to nose-dive. Government rentals usually comprise roughly 13 percent of overall car bookings, roughly 50 percent more than what airlines and hotels normally enjoy. During the shutdown, governmental rentals only accounted for 6.7 percent of bookings.

Guidepoint added that its findings might demonstrate a number of implications not only for the remaining first quarter of 2019, but for the rest of the year. Although government bookings make up just more than a tenth of car rental economic activity, ripple effects could resonate further into corporate bookings, which account for a much larger contributor to revenue. The research firm said that its proprietary software dubbed Qsight reached its conclusions not only through credit receipts and other accessible financial data, it also took into account what it calls “line-item bookings” reported by most of the largest players in the car rental market as well as “forward-looking” reservation information and “time-of-travel” bookings.

With a great deal of uncertainty already affecting the economy, the shutdown has already affected factors like consumer spending and investor confidence. While it’s too early to assess the shutdown’s impact, pundits are already weighing in that Gross Domestic Product might experience zero quarterly growth or an increase of 1.6 percent at best, only half of what the final quarter of 2018 experienced.

Normally, the Commerce Department is responsible for providing more solid information, but unfortunately it was one of several federal offices affected by the shutdown.

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