The car rental sector’s current challenges are likely to continue causing headaches for travel managers and suppliers alike for the foreseeable future, writes Molly Dyson


The last two years have seen the perfect storm in the car rental and private hire sectors – a dramatic drop in demand caused by the Covid-19 pandemic, followed by a shortage of microchips affecting vehicle production and thus suppliers’ ability to renew their fleets, and now a continued lack of drivers due to staff moving into new careers during the downturn and, most recently, rapidly rising fuel prices. Add to this the growing call for more sustainable vehicle options, and providers have faced a very difficult set of circumstances.

Ron Santiago, managing director of Europcar Mobility Group UK, says these challenges are likely to continue well into 2022. “While we have built strong, long-standing relationships with the car manufacturers and continue to work closely with them to maintain fleet supply, we have not been immune and have taken steps to try and minimise the impact on customers.

“Increasing costs is obviously another challenge for the rental sector in the face of vehicle demand outstripping supply. Transparency around costs is vital to maintain customer trust,” he says.

Car rental providers “defleeted hundreds of thousands of cars” when the pandemic struck, says Sixt’s Stuart Donnelly, which was “necessary to stay viable and reduce operating costs.” He continues: “While this saved the industry, when the restrictions of the pandemic were lifted and demand began to rise, we were met with a global shortage of cars.” The upshot is that corporates are facing a squeeze on supply and rising rates. Nevertheless, the likes of Sixt, Avis Budget, Lyft and Uber posted record earnings in 2021.

Many providers are using new momentum to invest in the switch to electric. Hertz made headlines last year by signing a deal with Tesla to buy 100,000 cars, while Europcar is adding a number of electric and hybrid vehicles to its UK fleet.

We are hearing from a number of buyers about bookings being cancelled at very short notice because there is no ‘give’ when cars are not returned on time

Adding creed to the growing popularity of electric options, Santiago comments: “Every company wants to be able to transition to zero emissions in a manageable way and renting an electric vehicle is an ideal way for individuals and businesses to cut their carbon footprint and to ‘try before they buy’. It means they don’t have to commit to an outright purchase or long-term lease agreement while they are discovering how electric works for their business and people.”

David McNeill, AVP of global corporate sales EMEA at Enterprise, adds: “We’re continuing to examine the role of electric and hybrid vehicles and other alternative fuel vehicles (AFVs) to examine their potential in practical working environments. That includes advising travel buyers on the day-to-day elements – for example, planning trips ahead of time to be sure they have access to recharging facilities.”

But this positive change for the environment still will not address many of the other challenges buyers and travel managers will face this year.

Kerry Douglas, head of programme at the Institute of Travel Management, says many of the organisation’s members are losing confidence in the ability of suppliers to deliver. “We are hearing from a number of buyers about car hire bookings being cancelled at very short notice due to the fact there is no ‘give’ when cars have not been returned on time or are damaged.”

Buyers are also reporting that some providers are not allowing one-way rentals or are requiring minimum terms, says Douglas.

This pressure on supply paired with pent-up leisure demand is causing costs to escalate, according to Douglas. One way to mitigate the impact is to educate travellers about the benefits of early booking, she says. “Our buyer members are also going out to additional car rental suppliers with an RFI or RFP to expand the number of suppliers within the programme to try to mitigate the lack of availability and associated rising costs.”

Enterprise’s McNeill outlines how suppliers are working with clients to manage these risks. “Any impacts on travel managers can be offset with careful planning... This means total clarity over when, where and for how long they will need vehicles as far ahead as possible so we can ensure we have availability to meet those requirements. We’re working with buyers who’ve previously been able to rely on last-minute rental bookings to create a detailed plan of how cars fit into their business travel plans.

“Many travel buyers are also looking at innovative ways to keep employees mobile, such as shared travel, car club and car-sharing programmes. Enabling business travellers to use on-street automated rental reduces pressure on rental branches and can be an easily-accessed mobility option for people working from home.”

Europcar’s Santiago says buyers should also make considerations for their corporate fleet. “With changes in working patterns, a company car for exclusive use by one employee may no longer be the best option for the business.

“Having the option for corporate car sharing can also reduce a company’s reliance on ‘grey fleet’. Employee-owned vehicles tend overall to be older, less fuel-efficient and more polluting, which in turn puts pressure on the fleet budget. With fuel prices at a record high, more up to date, less thirsty vehicles make commercial sense.”

And it’s not just rentals that are impacted by these issues, ITM’s Douglas adds. “A key aspect to note is that the issue also affects private taxi, black cab and chauffeur drive options because there is both a vehicle and driver shortage, which further exacerbates the issue for corporate travel programmes.”

Careful planning – a long-time struggle for travel managers – will be key in the battle against rising costs.


The inevitable consequence of reduced supply and other inflationary pressures is higher rental rates, reports Amon Cohen. “It is an extremely solid pricing environment,” says Nicolay Nedrelid  of car rental consultancy Nedrelid Corporate Advisory. “Average price is way above what it was.”

Sabah Kahoul, Paris-based general manager of travel management consultancy Business Travel Purchase, says suppliers are pushing in many cases for double-digit rate increases. Even with skilful negotiation, she warns buyers are likely to end up paying at least five per cent more.

Nor is the problem confined to new agreements. Kahoul says suppliers are citing unsustainable vehicle and other cost increases in order to push to renegotiate existing contracted rates.

Buyers also face critical availability challenges. ITM members are complaining of travellers being unable to book cars or, even more egregiously, having existing bookings cancelled, sometimes only the night before a rental is scheduled to start.

Nedrelid believes higher rates could be here for good. “In the past, the market was characterised by price wars and indiscriminate capacity management,” he says. “This is a generational opportunity to shift expectations of how much it should cost to rent a car.”

An arguably overdue price correction may be the least of buyers’ worries, however. Kahoul has received reports of some rental suppliers no longer being willing to service corporate clients because leisure is more profitable for them. “There is a theory business travel will never get back to where it was and growth in car rental will be more leisure-oriented, in which case it will be less important to retain business customers. If you increase pricing, it goes straight to the bottom line, whereas if you add volume through signing more corporate clients, there are a lot of costs.”

Many suppliers refute that, of course, with Enterprise saying it is doing the opposite and prioritising the needs of its corporate customers.