Reserve rental cars well ahead, as demand still outpaces supply

Holiday travelers intent on putting the top down on a convertible for a spin down the coastline or taking a four-wheel-drive vehicle into the mountains for ski season should continue to plan well in advance, according to analysts and advisors tracking the car rental market.

The supply chain turmoil that constrained the car rental industry this summer, leading to exponentially rising prices, shows no sign of abating, and the trend is likely to continue into the winter travel season and beyond as high demand butts heads with short supply.

In a recent Securities and Exchange Commission filing, Hertz acknowledged that the supply chain issues plaguing a range of industries across the globe are likely to continue into the new year. 

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“To accommodate increased demand, we typically increase our available fleet and staff during the second and third quarters of the year,” the filing states. “However, the continuing semiconductor microchip manufacturing shortage has impacted our ability to obtain a sufficient supply of new vehicles to align with rental demands and may continue to do so through the first quarter of 2022.”

Online travel search engine Kayak is predicting the rental car shortage will continue at least through the end of the year based on a review of searches and pricing on its site.

For the holiday season, Nov. 12 through Jan. 7, both searches and prices for car rentals have increased compared with both 2019 and 2020. Searches are up 230% compared with 2019 and 243% compared with 2020.

Meanwhile, the average cost per day is 75% above 2019 rates and 66% above 2020 rates. 

Pre-pandemic, Kayak’s data indicated booking a rental car two weeks out was the best time to find a good deal.

Now, according to Matt Clarke, Kayak’s vice president of North America marketing, waiting that late will risk leaving travelers with few or no options. 

“Traditionally, people would wait to book a rental car, but now you should be booking as soon as you possibly can,” Clarke said. “There are some benefits tied to what days you book. If you can pick up the vehicle on a Tuesday, that day of the week offers the best deals.”

Clarke also suggested expanding the search beyond the biggest rental agencies like Hertz, Avis Budget and Enterprise to include companies like Turo, a car-sharing service that allows individuals to rent out vehicles ranging from sedans to luxury sports cars, and Kyte, which delivers rental cars directly to a customer’s door. 

Of Kayak’s current list of the 10 most expensive cities to rent a car, half are in Hawaii, where the car rental companies have struggled to replenish their fleets to keep pace with returning demand in part because of the remoteness of the Islands.

“Rental cars have been a real problem in Hawaii ever since the return of visitors,” said Maui-based advisor Melissa Blue of Blue Hawaii Vacations. “I’m literally making choices for clients based on rental car availability. In some cases I’ve convinced clients to change wha island they’re going to just for the rental car. Others have switched when they’re coming. One client I had was going to come in the summer but pushed back to fall when they couldn’t get a car.”

Other destinations that are currently experiencing particularly high car rental prices are in the Mountain West region, including Utah, Colorado and Montana, according to Kayak.

San Francisco-based advisor Calvin Kanoho of Inner Circle Travel said that as soon as he books clients on a trip, one of the first things he does is also book a rental car. 

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“Once I have their dates, I’ll just go ahead and book the rental car just to be safe,” he said. “I can always cancel it later.” 

Kanoho agreed that Hawaii is particularly challenging at this time, and the car rental is often the very first thing he locks in before even booking flights or hotels. 

On the other side of the spectrum, many urban areas in California, where it is easier for car rental companies to redirect vehicles to meet the need, are some of the cheapest places in the country to rent a car, including San Diego, Sacramento and Los Angeles. 

“It’s very hard to predict, and I think we all wish we had that crystal ball for when the microchip shortage will end,” Clarke said. “It is looking like this is going to be something that is here to stay for a while.”

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