Latest car rental industry trends will notably shape the journey of car rental companies in 2018. From carsharing taking the lead in 2017, to changes in customer persona to ‘blessure traveler’, the car rental industry had already tested its limits of flexibility. Following the recent performance, car rental companies must have done something right.
According to Zion Market Research 2017 (source), the future of the global car rental industry is bright. In 2016, the global car rental market was estimated at approximately $58.26 billion USD, and is expected to grow at a CAGR of around 13.55 per cent between 2017 and 2022. By 2022, market is expected to reach approximately $124.56 billion USD.
The global economic recovery played a significant role in the performance of the travel industry. The global GDP growth went from 3.1 per cent in 2016 to 3.5 per cent in 2017 (source). Consequently that lead to an increase in the disposable income for travellers, especially in developing countries.
Travel industry prospects seem bright for this year as well, as the International Monetary Fund is expecting 3.6 % global economic growth in 2018. (source)
We can certainly argue that the increase in the buying power of consumers, combined with low-cost airfares in the airline industry, directly influenced the growth in the car rental market. Still car rental companies cannot rely only on global economic growth for future success.
There are few more aspects that will have a disruptive effect on the car rental industry. Some of them bringing opportunities and some of them representing challenges.
It is up to the car rental companies to play their cards right in order to ensure positive results in 2018.
Disruption at the car rental desk
One of the main challenges for car rental companies is to provide superior customer service, especially when it comes to customer complaints. The dissatisfaction comes from different situations. From a lack of information on additional payments and excess amount, to waiting for hours in line to get the car they already booked .
Car rental companies have done an amazing job improving response rates, becoming completely transparent and improving the booking process with new technologies. However, there is one aspect that hasn’t been tackled yet – completely getting rid of the car rental desk.
The source of this challenge is the increased sensitivity of travellers to the travel experience quality, followed by the increased importance of customer reviews. Reviews play a huge role in convincing a customer to take a leap of faith and trust an unknown brand.
For customers, skipping the car rental desk would mean a seamless experience. But car rental companies have a long way to go, even in times with such accelerated growth in travel technology. Whether it is going to start as a service for VIP customers, allowing them to pick up the car with a security code and then expanding it to the whole customer base, it is for us to see.
The sharing economy
”Now that the car rental giants have sold off their extra cars, they can focus on continuing to grow revenue. But is there really a long-term future for car rentals in a world that has embraced ridesharing?”
— Andrew Sheivachman
Carsharing has been keeping car rental companies on their toes for a few years now. At the same time, it pushed them to expand and find opportunities in this shift in customer trends.
Offering car rental by the hour was one of the first resolutions that the leading car rental companies implemented. which resulted in taking a share of the new demand. (source)
However, the carsharing trend is not slowing down, so again, it is expected that the car rental companies need to show ingenious ways to keep their share. The leaders in the car rental industry stepped up first again to lead the game. Both Hertz Global Holdings and Avis Budget Group reached substantial financial results last year. They accomplished the positive outcome by matching their fleet size with the actual market demand, and selling all the extra vehicles. (source)
Hertz is taking this challenge one step further by finding additional revenue streams. One is offering their expertise in fleet management solutions to Uber and Lyft, and another is selling their vehicles to carsharing drivers. (source)
“Autonomous, the OEMs [Original Equipment Manufacturers], Uber, Apple, Google —nobody manages large fleets other than the rental car companies, not dealers, nobody,”
– Kathryn Marinello, CEO of Hertz Global Holdings
Increase in oil prices and inflation
While the travel industry can enjoy the outcome of the predicted economic growth in terms of GDP, the car rental industry will have to face one direct and inevitable economic factor – the increase in oil prices.
With the constantly growing demand for oil supply, the experts are predicting an increase in oil and petrol prices in 2018. (source) This will directly influence the car rental industry, since it adds up to the total cost of car rental products. Even more, this might lead to higher inflation level, which will directly affect the purchasing power of consumers.
One may say that there is nothing to be done in this case, since car rental companies cannot influence such economic factors. This leads us to the next trend – the green vehicle.
The green vehicle
Shifting the focus to green vehicles will not only give a more economical alternative to customers, but will contribute to a bigger cause – increasing awareness about pollution and the negative effects it has on the environment.
For some car rental companies, this step might be as an alternative to higher oil prices, and for others, it may be a push by the rigorous emission standards that governments are imposing across countries.
One recent example is Paris with Mayor Anne Hidalgo’s plan to ban all diesel vehicles from the city by 2024 when hosting the summer Olympics, and all gasoline-powered cars by 2030. (source)
Getting on this ride and being part of the green movement seems like a smart strategic decision for car rental companies in order to strive in the already dense travel market.
While some of the trends above seem to be a big challenge for car rental companies, the fact that they still demonstrate positive growth shows firm determination for keeping their share in the ground transportation and travel market. We are enthusiastic to see their creative and strategic approaches that will shape the outcome in 2018.