Top 5 Issues Facing The Car Rental Industry In 2021

Issues Facing Car Rentals

The double whammy of the pandemic and a precarious economy shook the entire car rental industry to its foundations in 2020. Every player, whether conglomerate or independent, took a variety of hits, which permanently sunk a few companies, leaving others treading water as they still await a recovery of sorts. All told, the combined circumstances torpedoed industry revenue which dropped by more than 27 percent to slightly more than $23 billion, the lowest in a decade.

And while pundits predict a recovery in 2021, it’ll hardly be quick, as a turnaround isn’t expected until the third quarter. It’s hopeful news that’s riding on a lot of factors, from a new federal administration coming to grips with some harsh realities to a vaccination campaign slowly trying to get the multitudes to achieve herd immunity. That’s simply an aerial shot of the proverbial iceberg, however.

Below the surface, a number of issues, related or otherwise, lurk in the darkness and need to be overcome before any fruits of a turnaround can even be remotely realized.

1. Taking Advantage of the Local Market

For years, rental car companies based in airports benefited from a stream that at times made up 95 percent of its earnings and to that end, new terminals were constructed in places like Hawaii and California to facilitate that flying cash cow. But when international and to some extend local flights were canceled to mitigate the spread of COVID-19, those revenue wings were drastically clipped. One avenue that’s helped keep companies afloat and that other players will need to pursue is a shift in focus toward local markets. And with that comes the need to deploy a great deal of creativity.

For example, a ride-sharing industry that threatened to take a considerable chunk out of the car rental market also suffered greatly, with companies like Uber experiencing a drop in revenues as high as 75 percent in the second quarter of 2020. But a move towards food delivery in response to meeting the dietary needs of citizens in lockdown has mitigated those losses. That’s when car rental companies like Dollar and Thrifty had the bright idea of offering rental incentives to food delivery drivers.

Other companies became flexible with their rates, presenting discounts to healthcare workers and essential staff during on-again, off-again lockdowns. Additional opportunities that have surfaced of late range from catering to Amazon Flex workers to partnering with body shops and car garages.

2. Make Online Bookings More User-Friendly

While a few car rental companies are buddying up with their ride-sharing counterparts as a potential revenue stream, the caveat remains that the latter still remains a formidable competitor. Ride-sharers depend totally on online bookings, meaning that having a robust and easy-to-use app for booking a trip is essential.

The need for user-friendly and trouble-free apps is an argument that sales staffs at car rental companies as well as those who make high-tech management systems have been voicing even before the pandemic. And while several major car rental companies have upgraded their online booking systems to include everything from additional vehicle choices to more flexible payments systems, in many cases, many of their apps remain a frustrating booking exercise among users.

A 2020 study that examined what was believed to be the best car rental apps in the world were impressed with the availability of additional features and perks, yet still found issues with everything from navigation to loading speed. The findings that included apps from the likes of Enterprise and Sixt discovered a wide range of flaws that included cumbersome login and user verification processes, inefficient search filters, inability to change booking times, lack of flexibility in automatic billing, poor mapping and GPS features and poor interface designs.

While customers are getting more fickle about their service, especially with the coronavirus forcing them to make more specific choices when it comes to booking and the cars they rent, additional features like contactless transactions and safer servicing will undoubtedly help address that demand. But if an app fails in any of its basic functions, those amenities won’t be enough of an incentive.

3. Competition With The Car-Sharing Industry

Somewhat lost in the mix is the car-sharing sector of the transportation industry, which according to The Guardian, has enjoyed a rise in business. With the need to avoid being in the proximity of strangers during a pandemic, a feat that’s next to impossible when using public transportation, taxis or ride-hailing, car-sharing companies like Turo and Zipcar service actually increased during 2020. Much of that had to do with folks feeling the pinch during isolation to leave their homes on occasion the safest way possible: in vehicles that eliminate contact with potentially virus-spreading strangers.

There’s little doubt that car-sharers do pose an advantage for users who occasionally need a vehicle for an hour or so. But beyond that, car rental companies have the potential to sway that user market by offering deals and incentives to hang onto a car for longer if need be by offering flexible rates and promoting the amenities of renting a car that’s been disinfected and properly maintained. Renting is more of a boon if a user needs to travel longer distances. And unlike car-sharers, rentals have the additional advantage of offering additional amenities from bonus points to subscriptions.

4. Contend With Fleet Management Issues

While the pandemic has cut heavily into the service end of the car rental industry, that hasn’t stopped companies from gravitating over to the product side to garner revenue by selling off part of its fleet rather than let those vehicles gather dust. Taking that approach has been tough sledding at best, given that sales of commercial vehicles have also taken a hit, experiencing a drop of more than 20 percent from 2019.

That said, sales of used cars outpaced their wholesale equivalents, which plummeted by 3.5 million units in the U.S. in 2020. While getting a grip on actual figures remains an arduous task due to a great deal of these sales taking place online by independent owner, the number of transactions over the past year has been estimated at 41 million units.

The advantage posed by car rental companies is in product quality. Right up to the time a vehicle exits the fleet, they’ve been properly maintained and could easily pass a vehicle inspection. Additionally, those vehicles are still relatively new and are usually sold before depreciation devalues the product. It’s a tactic that Avis used to ease the bottom line.

5. Customer Service Will Be More Important Than Ever

It doesn’t matter if the state of the economy is boom or bust, or whether the country is plagued with anything from a pandemic to divided political loyalties, customer service will always be vital. Circumstances often call for ingenuity from marketing to the front desk. Most telling has been the emphasis on safety, such as promoting disinfected vehicles and perks like free masks and hand sanitizer. As the pandemic wanes over time, there will be a need for customer service to address changing demands.

Better software. Better support. Better value. For over thirty years, Bluebird Auto Rental Software has been supporting its many, many happy customers around the world. Our flagship product, RentWorks, provides all the tools you need to run every aspect of your car rental business or service loaner department from the front counter to the back office. Call us today toll-free at 800-304-5805, or contact us here. We will be happy to walk you through Bluebird’s full suite of car rental software.