Denmark to Italy or Switzerland is a long way by car – Copenhagen-Milan is a 16-hour drive, for example. Yet since the coronavirus crisis started, some business travellers have been renting cars to drive across Europe, including to both those countries, says Anne Mette Berg, general manager of the Danish Business Travel Association. “A lot of companies are asking rental providers about the rules for crossing borders in their hire vehicles,” Berg adds.
Not that 2020 is a boom year for car rental. Car hire companies are “having a hard time,” says Nicolay Nedrelid, France-based founder of the car rental consultancy Nedrelid Corporate Advisory. “Car rental is closely linked to air travel and when that’s down 90 per cent, rental is affected too.”
Loss of this particular area of business was one of the key reasons that Hertz, perhaps the industry’s most venerable name, filed for bankruptcy protection on 22 May.
Nevertheless, “there are still people who need to move around” in sectors such as construction, engineering and pharmaceuticals, says David McNeill, EMEA and APAC assistant vice president for global corporate sales at Enterprise Holdings, which owns the Enterprise, National and Alamo brands.
For those who do need to travel, hiring a car is emerging as a favoured option. Car hire appears to be gaining market share from more than one form of transport, but the most obvious shift is from air.
A survey by GoldSpring Consulting of 600 business travellers found 93 per cent would consider driving rather than flying for longer trips. Car rental bookings are up 300 per cent at TravelPerk, says chief commercial officer J-C Taunay-Bucalo, who adds that his company has had to adapt its booking tool to meet demand for longer rentals. And Enterprise has seen the average length of rental shoot up from 12 days to 22.
The main motivation appears to be fear of flying. “Although airlines say it’s safe to fly, business travellers prefer a car right now,” says Berg.
But even if business people are prepared to board an aircraft, that may not be possible where services have been axed by airlines. Sun-Air, for example, a small Danish franchise carrier for British Airways, recently announced its entire fleet will remain grounded until August 2021 at the earliest.
How successfully airlines will win back passengers is an open question. “Once foreign travel restrictions are lifted there will be growth in car rental before growth in air,” Berg predicts.
Some travellers are also getting behind a wheel in preference to boarding a train, observes Ana Gibson, travel supply manager for Hilti, which makes products for the construction industry. “We’re not really travelling much at the moment but we are allowing sales staff to visit clients,” she says. “If it involves staying overnight in a hotel [domestically], that’s fine. We’re finding they’re preferring not to use rail and would rather drive, which means they’re travelling longer and are more likely to stay over at hotels more than they necessarily would have done before.”
Car rental may even be regaining some business from ride-hailing and taxi providers. “There can be more confidence that a car rental operator has properly sanitised the vehicle,” says Nedrelid. Enterprise, for example, has launched a Complete Clean Pledge, a 20-point cleaning process that requires staff to check they have sanitised all likely contact surfaces such as key fobs, driving wheel and stereo buttons.
GoldSpring director of hotel and air sourcing Neil Hammond says customer confidence in the car rental sector’s hygiene is high. Consequently, he believes suppliers will benefit from corporate travel policies that aim to “reduce the number of touch points for travellers with other people”.
When corporate travellers do opt for rental, Hammond warns its relative popularity may have consequences. First, in the US at least, Hammond is observing cases of non-availability. According to Nedrelid, rental companies have reduced their fleets by as much as 40 per cent compared with this time last year. “They are buying fewer cars and selling more of the ones they have,” confirms Hammond. “Travellers may have to get into the habit of booking earlier.”
Reduced capacity also means, Hammond believes, that rental rates are likely to hold firm and potentially even increase. There are other inflationary factors. If corporate clients offer suppliers less volume than previously, they are likely to be offered less generous discounts in return. At the same time, operators’ costs are growing due to increased time spent on deep-cleaning vehicles and spreading fixed asset costs like location leases across a smaller inventory.
On the other hand, suppliers can hardly be bullish in a market where overall demand is greatly reduced. “You can argue it both ways,” says Nedrelid. “It’s a bit too early to say which way price will go.”
Rental operators are trying to accommodate both their needs and those of their corporate customers by dreaming up more creative pricing plans. “Flexibility is increasingly important for companies of all sizes,” says Vinzenz Pflanz, president of corporate sales for Sixt.
“By using flexible long-term rentals or car subscriptions, the risk for companies can be significantly reduced in the current period. The cost base can be adjusted quickly and easily if necessary, thus saving cash.”
Ideas like subscriptions also point to a trend which predates the present crisis but may be accelerated by it. Speak to any executive connected with the car rental industry and it is usually only a few sentences before the buzzword “mobility” is invoked.
Suppliers want conventional business rentals to be managed as only one of a range of options they sell for moving travellers by road. This broader vision encompasses everything from ride-sharing and chauffeur-driving to car clubs, by-the-hour urban rentals and leasing.
“While we believe the market will come back, we do not expect this any time soon as companies have learned that face-to-face meetings can be replaced via videoconference, resulting in less travel,” says Pflanz. “The industry needs to find new business channels to make up for these losses.”
Expect more sales approaches over the coming months promoting “mobility” rather than car rental alone.