Car rental rates going down in Europe

Increased competition and economic slowdown is driving car rental rates down, especially in Europe. In North America, however, car rental is expected to get a bit more expensive. Those are two findings from a report by Amex GBT on ‘ground travel’.

American Express Global Business Travel (GBT) consults with companies and organisations to tailor travel programmes. In its Ground Monitor 2019, it analyses the factors that determine the price of car rental across the globe, into 2020. In this context, ‘car rental’ also includes taxis, ride-sharing, ride-hailing and car clubs.

Overall conclusion: the car rental business model is under pressure. Costs are rising, but overcapacity and competition offer little scope for companies to raise their Average Daily Rates (ADRs). Here’s a closer look at some regional forecasts. 

North America

Despite ongoing disruption, US car rental companies achieved record revenues of $30 billion in 2018. With both demand and costs rising, car rental rates in North America are in for a modest rate rise: +1% in both the US and Canada. 

• In the US, ride-hailing is popular for urban transport, but opposition from traditional taxis is leading to more regulation (e.g. a minimum-wage rule in New York) and higher fares. 
• In Canada, ride-hailing will finally become available by Q4 2019, following a decision by the provincial government of British Columbia. 

Latin America

Ride-hailing is experiencing double-digit growth across the region.

• In 2018, Argentina became Uber’s fastest-growing territory in the world, for example. It’s is an important option for business travellers in LatAm.
• In Brazil, strong competition between the four major ride-hail players (Uber, 99, Easy Taxi and Cabify) is keeping fares low.
• In Mexico, competition between Uber and China’s Didi Chuxing is doing the same.
• And in Chile, it’s Uber versus Cabify and others. Fares are expected to remain stable into 2020 – unless and until extra regulation pushes them up. 

Car rental prices across these four countries are expected to rise by no more than +0.75%.

Europe

Increasing technological sophistication is driving up fleet and maintenance costs for Europe’s car rental providers, who are already dealing with tight margins. 

However, an expected economic slowdown and strong competition will push fares down rather than up. In order to generate new revenue, rental companies are turning to new formulas, including carsharing offers (e.g. Enterprise CarShare) and to corporate mobility (e.g. Sixt’s corporate car-sharing services). 

Rental rates are predicted to fall in

• Belgium (-4.5%),
• the Netherlands and Spain (both -2.5%),
• Italy (-2%),
• Germany (-1.5%),
• Sweden and Norway (-1%) and
• the UK (-0.5%).

However, economic growth will push up rates in

• France (+1%) and
• Switzerland (+2.5%).

Africa/Middle East

• In South Africa, car rental rates are forecast to rise by 2% into 2020, outpacing predicted economic growth. Ride-hailing is flourishing, with homegrown South African platforms challenging Uber and other global brands.
• Despite predicted economic growth of up to 4% in the UAE, car rental rates will drop by around 3.5%, due to overcapacity, the rise of eCar, uDrive and other rideshare players, and the softening of the oil and gas sectors. 

Asia/Pacific

The prevalence of chauffeur drive and ride-hail in China and India means there isn’t sufficient data to forecast car rental rates in these countries. 

• Business travellers in China are deterred from car rental by difficult driving conditions, unfamiliar signage and large distances. High-speed rail is a strong alternative for intercity travel, while ride-hailing solves most intracity needs, with Didi Chuxing leading the market. 
• As in China, business travellers to India are more likely to rent chauffeur-driven vehicles (often from big brands like Avis and Hertz) than drive themselves. Competition between ride-hailing providers such as Uber and local player Ola keep prices low. 
• In Australia, the upwards effect on car rental rates by the expected robust economic growth are more than offset by the proliferation of ride-hailing, with many corporations allowing this in policy. Also, car clubs – making it possible to rent vehicles for a short a period as 30 minutes – are increasingly popular for business users. Local player GoGet is just one example. As a result, car rental rates are expected to fall by 1.5%. 

In the longer term, Amex GBT predicts that regulatory and competitive pressures will transform the car rental business into an environment dominated by Mobility as a Service (MaaS) platforms, which will allow travellers to easily manage the growing set of ground services from their smartphones, from ride-hail and electric scooters to local rail services.