Rideshare is good for getting to the airport and back, but if I'm spending a few days at the destination (which in my case is usually suburban), a rental car can be both cheaper and more convenient than rideshare in smaller, underserved markets and in the suburbs. Also if you're making multiple stops of indefinite length, catching rideshare each time can be frustrating. Rideshares also have a limited radius while rentals don't. If you need to drive 2-3 hours from the airport to your destination, it's easy on a rental but not really advisable on a rideshare (possible but rideshare drivers hate it).
I wonder if the problem with car rentals maybe isn't the business model, but how modern the operations are.
I'm with National so I get to pick my own car. National has really nice cars so sometimes I end up with nice rides like Audi A3s for the price of a midsize (~$30/day -- I have free executive membership through my credit card). It's really not that much of a hassle with the app -- get off plane, walk to lot, pick a nice car, drive off. Driver's license, credit card + insurance etc. are all electronic. No dealing with any CSR. Only human interaction is at the exit where they check your DL (or QR code on your phone), scan your car's barcode and then open the barrier arm. My avg time to check-out is ~10 minutes, and returns are ~5 mins (excluding gas fill-up). This is with National.
The Hertz experience is much more plodding. Their systems are a little more archaic. You have to check in at the counter if you don't have Hertz Gold, and you can't pick your own car. They're more expensive than other rental companies but their vehicles definitely are not nicer. Hertz has the largest market share but the worst customer experience of the majors.
Bring ourselves back to 2020. We have some new factors that we have visibility into that are changing the dynamic for the rental car industry:
* Work is becoming increasingly remote. People are becoming more comfortable not traveling for business meetings or conferences.
* The gig economy is heating up. Even if the rideshare business is still in its relative nascence, there is no doubt that the rideshare will continue to be a trend.
* It's quite possible that the ride share firms will move to a subscription-based model (closer to Netflix) rather than a consumption-bsaed model (closer to Blockbuster) in the future. Paying per-ride has its hassles. A monthly fixed subscription model with predictable consumption limits can change the picture.
Your $30/day rental probably didn't end up being $30/day. With all the extra fees (which usually doubles the daily rate or more), gas, parking, and tolls, you're probably spending closer to $60-$70/day. This is a daily rate. Would you pay $100-$200 on a monthly rate for unlimited trips within a radius? Possibly, if there was sufficient ride share supply.
The problem of course is on the supply side. How do you pay drivers a share of a monthly subscription model when supply-side pricing is on a consumption-basis while demand-side pricing is on a subscription-basis? This is the challenge for the industry. But I think that challenge will be solved.
So there's one big factor that plays into all of this: for business travel, the company's paying. Employees don't really bear the cost, so the incentive is to choose the more convenient option. Parking etc. can all be expensed (not a big deal with Spothero, etc.). And companies usually have negotiated rates with rental car companies. So there's inertia.
I just checked my National invoice for my last LAX rental: the nominal daily rate for was $31/day, but with airport concession fees, tax, etc. it came out to $37/day (the car was a 2019 Dodge Challenger). I don't remember how much I paid for gas but gas is pretty cheap these days so it couldn't have been more than $40 (200 miles driven). So yes daily rate is higher, but not really double.
Would I pay $100-$200 for unlimited trips on rideshare? Not for business travel, no because like I said, for the non-urban geographies I work in, a rental car is just more convenient and the company's paying (plus my time costs money).
For personal trips? Well, Lyft does have a subscription program for commuters but I'm probably not the target demographic (I have my own car for groceries, but otherwise I walk everywhere or take the L). I also have a free Lyft Pink subscription through my credit card but that hasn't really increased my Lyft use.
I suspect during COVID the attractiveness of rideshare will actually decline -- I'm personally wary of getting into a confined space with someone else even with every precaution taken. But post-COVID, it's likely things will return to normal. Rideshare has been and will likely continue to be an important component of my urban transport mix. I just don't see it being dominant over all others.
BTW, your calculation agrees with my statement. $37 for car including fees, $30-$40 in gas, plus unknown parking. I was spitballing $60-$70 for day, and it seems those things do indeed add up to that amount. Higher gas prices, more expensive parking, and longer commutes make those figures even moreso.
I agree with you that if the business foots the tab, the employee might not care and would just go for convenience. But the biggest factor impacting business travel is not the cost of rental cars, but the shift to virtual events and remote meetings. This is another indelible force for the rental industry.
As mentioned, I think the demise is not in these next few years, but by 2030 I believe we'll be writing the post-mortem on rental cars and how the industry has transitioned to something else.
Uber pricing and convenience make me think harder about the equation. If I'm really pretty much just going to a hotel for a few days, it's probably a wash so I may just take the Uber.
I'll still rent if I'm going to also be visiting friends or going for a hike--or taking a longer drive to somewhere that I may not even have cell reception. But definitely less than I used to even pre-COVID. And I imagine that urbanites who default to not driving rent even less.
Playing around with variations on a 7/13-7/17 M-F rental (also trying 7/11-7/18 Sat-Sat, checking in Manhattan, at LGA, and at DSM in Des Moine, IA for comparison) I'm seeing numbers 1.5-3x higher. I'm curious if the difference is entirely price discrimination or if there is something else like a negotiated bulk rate at play.
Numbers are for lowest tier car, same pickup and drop off location.
Manhattan M-F: $72/day base ($348 w/ taxes and fees)
Manhattan Sat-Sat: $59/day base ($501 all in)
LaGuardia Airport (luxury car, economy car is $22/day more) M-F: $94/day base ($512)
LGA Sat-Sat: $73/day base ($693 total)
Des Moines International Airport (standard car, economy car is $6/day more) M-F: $92/day base, $472 total
Des Moines International Airport Sat-Sat: $49/day base ($463 all-in)
----
So...
1. Lowest I'm seeing is $49/day, which is why I ask in the first place.
2. Pricing shenanigans of a Saturday to Saturday rental coming out cheaper than a Monday to Friday rental in the case of a) 7 day Manhattan vs 5 day LGA and b) 7 day DSM vs 5 day DSM are so frustrating. Surely there's room in the economy for a competitor who offers transparent, predictable pricing? Dealing with industries where you know they are milking you based on reverse IP look up/browsing history/demographic profile is infuriating. How can someone be loyal to any company whose pricing model is "the absolute most we think we can get out of you, personally"?
Yes. But I believe I get the same prices on my personal account.
> I don't see anything about discounts in the Emerald Club benefits section.
This may be why. I'm Emerald Executive -- my employer has negotiated Executive tier for every employee. I also have the same tier on my personal account through my credit card.
I don't rent cars in NYC (that's one place where rentals are inadvisable -- NYC is hostile to driving). But just priced out DSM for you 7/11 - 7/17. For Economy and Compact = $152/week base, $219 total with fess included. Midsize = $157/week base, $226 total with fees included.
(Someone else with Executive membership but without a company negotiated rate, please verify.)
With Executive level membership, I can get a midsize and pick any vehicle from the Executive aisle. This can be anything from an SUV to a lower-end luxury car. This is why National is amazing.
> How can someone be loyal to any company whose pricing model is "the absolute most we think we can get out of you, personally"?
It's differential pricing as a result of yield management [1]. You can hate on it but it's part of the reason the economics even works for certain classes of goods and services. Without it, large swaths of services in the hospitality industry (hotels, airlines, etc.) would not be accessible to the masses or be profitable.
Thanks for taking the time to look this up. $226 vs $472 is wild. 2.1x the price for the same service.
Playing around with other car companies at DSM for 7/11-7/18:
- Budget: $347 all-in
- Avis $410 all-in
- Hertz $484 all-in
- Enterprise $374 all-in
I was expecting all of these prices to be pretty similar given "economy class rental car" feels like it would be fairly commoditized.
> It's differential pricing as a result of yield management [1]. You can hate on it but it's part of the reason the economics even works for certain classes of goods and services.
Being familiar with the concept doesn't make it more enjoyable to be the one being fleeced!
- Zipcar got bought out by Avis (big traditional car rental company), and many properties terminated their contracts with Zipcar
- BMW's car share program left both the SF and Seattle markets
- In SF, the problems preventing carshare were mostly regulatory -- they couldn't get permission to use on-street parking (made both public transit and car-ownership factions unhappy)
- Lyft started a pilot of traditional full-day car rentals(!)
Ride share solves urban car problems far better than the old taxi services — mostly problems around parking.
Carshare tries to solve the parking problem, but for long or complex urban trips, or trips involving city to suburbs and back.
But for longer trips in areas where parking isn’t a problem, carshare doesn’t add much compared to established rental car networks (or owning).
Traditional rental mostly continued to be the better choice for weekend rentals or maybe even long day rentals, unless car share had a pickup location advantage.
But Uber took a slice out of short-term private transportation for trips that weren't too long or too complex. I know a couple who live car-less in SF and they still use Zipcar and whatever the competitor is. But it's a pretty narrow use case.
Yea, I'm not buying it. People generally won't switch to a subscription unless they think it's going to save them money. And these companies are struggling for profitability as it is.
Actually, from a business use perspective, pay-per-ride is probably a lot simpler. I expense the rental. A company is probably not going to typically let you expense a subscription fee unless it were some subscription for the whole company which seems as if it would be challenging for a variety of reasons.
My experience of renting has always been just like you describe for National. Walk to the lot, find my name on the screen, go the indicated row, pick any car from that row, get in, drive out.
I've been Hertz-loyal all this years precisely because the experience is so zero-effort.
This is my experience with Hertz Gold as well and I suspect it is about the same with all rental car companies: if you are a member of their club, you can breeze right through and drive off the lot in about five minutes.
Except abroad ... I can only speak about European cities, but the Hertz locations have no idea what I am talking about when I talk about my name on the screen or just grabbing the car and driving out - they think I am a crazy person and they work for Hertz. Renting in Europe is the same (terrible) experience as walking up to a rental desk in the US as a non-member.
Or any of the national parks that's far enough you can't drive your own car all the way from your home? After you finished your activities for the days and are ready to go back to your hotel, you might not even have phone signal to call Uber/Lyft in the national park.
I guess you and me just have very different definitions to "vacation".
But vacationers aren't the bread-and-butter of rental car companies, business travelers are, which make up 75%+ of revenues.
They are very great solution in my opinion and it doesn't have the issues of classic car rentals. It takes seconds to rent one through an app and you don't need to see any human.
The current industry is a dinosaur. The industry is going through a shakeup. Maybe it's car sharing, maybe it's a new rental model. Regardless, the existing Blockbuster-like, Sears-like, K-Mart like companies have a lot to be worried about.
and incur new costs of buying, maintaining, parking and cleaning the vehicles
There's been an [older] thesis that in a nutshell, unless one happens to chase the surge, driving for Uber/Lyft/Grab is a money-losing proposition.
https://www.fastcompany.com/40538647/nearly-a-third-of-uber-...
1) I travel frequently, for instance to the SV area which provides a good example. I opt to rent a car 95% of the time for my (US) trips, and the reason is that I prefer to move freely. When you're on the whim of an Uber (and in the States you usually can't walk anywhere), it's psychologically unpleasant having to rely on someone to constantly pick you up from somewhere. So much more liberating to have a car parked and move when you please.
2) When you end up moving, you can joyride, which I often do.
If I could order one on my phone, have it be ready or turn up, and avoid all of that complexity over insurances and tolls then I would probably sell my own car and use that.
I’m sure the rental companies have some digital stuff, but I generally associate rental cars with queuing at an Avis counter for an hour after a long flight, lots of paperwork and getting hit with fees etc. For exactly this reason I tend to stick with Uber on business trips over rental cars.
I just rented cars two times in the past two weeks. I was able to shop online between a few different rental car agencies (there’s only 3 big ones that own all the major brands, although I like to stick with Enterprise/Alamo/National). I made a reservation after a few minutes of shopping, I walked up to the counter, gave my ID and credit card, had the car in next 5 minutes and drove away in a total of 10 min max with the clean car that I wanted.
I’ve done this many times too. I don’t see why I would trust a random stranger more than a business who should have established best practices and proper insurance.
I also prefer proper hotels to stay in than random Airbnb. I don’t even have to talk to anyone at many Hilton branded hotels, and they have an online chat option in their app with the front desk.
The good part about Uber or Airbnb is that there isn’t any of that. You find what you want, pay the price they ask for and that’s it. I agree that there are other major problems with them but at least the user experience for buying the service is on point.
When it comes to hotels I either have to book direct and fill in my details every time (I don’t have a preference for any brand, so having an account with one particular brand doesn’t solve the problem either) or use sites like Booking/Expedia and suffer the constant upselling or dark patterns.
I don’t need your “loyalty” or “offers” or anything. I need you to tell me what’s available, take my money and get out of my way. I’d gladly pay money if such a service existed (that doesn’t belong to any particular hotel chain so that all the hotels are on there).
As far as Uber is concerned I've used it up to last year and I don't recall ever getting an unwanted marketing e-mail from them (disabled all marketing comms in the app early on when I signed up and they respected that just fine).
It has a big enough majority that for all intents and purposes you can rely on it. They have other problems which is why I've stopped using it but at least in the locations I've been to, driver shortage was never the problem.
> You can make an account book direct at a hotel chain
This means I'd either need to find and sign up for all the potential hotels I'd be in the vicinity of in advance, or spend time signing up (and making sure to opt out of any marketing/loyalty/etc) a couple days before I arrive (I travel on very short notice).
That's the problem I'm trying to avoid. I want a single app/service/etc that will give me a big hotel selection (from several brands, and independent ones) with easy booking at a fair price (can be higher than the mainstream websites, I'm willing to pay more for convenience and to make sure the hotel isn't being ripped off) and no upselling.
All the times I needed a hotel it wasn't a planned thing - it was "I'm here in this coffee shop thousands of miles away from home and I need a bed to crash on". An app that can just find me the nearest place and a no-BS user experience would've been lovely even if it means paying a premium for the convenience.
Run up a multi-billion dollar loss?
Unfortunately they merged with BMW's DriveNow and became "ShareNow" ... and pulled out of North America completely :(
* Insurance not included in prices displayed in search
* Underage surcharges not included in prices displayed in search
* Receiving a different model compared to what was booked
* Paperwork(sometimes digital Onan iPad) should all be done via an app
* Phone should unlock car
Some of the traditional rental companies have tried to solve some of these issues and there have been a few startups in the space. I'm not aware though of anyone trying to build a ground up tech first competitor to Hertz or Avis Budget. It is an expensive industry. SoftBank money would be needed to achieve scale.
[1] https://turo.com
With Hertz & friends, easy to rent a van, take it some where and either leave it there (and fly home) or drive back. It'd probably be a wash when milage depreciation is thrown in?
And driving with a cello is a lot better than flying... :-)
Surely the cost of renting a car is far, far higher than the depreciation on a car caused by driving the same distance?
Let's take a drive I did recently: Minneapolis to Boise. Twenty-ish hour drive; if you have a couple of drivers, you could maybe get it done in one day. Let's budget two days for car rental. Pick up, drive, stay over night, drive, drop off. Hertz is quoting me between $100 - $150/day depending on car size. Let's say 2 days @ $150 = $300. According to a random internet article [0], the cost of driving (minus gas -- which we're spending either way, though maybe in different quantities) is $0.16/mile (yes, includes maintenance -- forgot to mention earlier). Boise is 1450 miles away from Minneapolis @ $0.17/mile = $232. Yeah, a little more expensive; Hertz needs to break even after all. But not by as much as one might think. And for three passengers, much less than a short-notice flight.
[0]: https://www.mymoneydesign.com/what-is-the-real-cost-of-drivi...
If you've ever been stuck in foreign garage waiting for your car to be repaired you'll appreciate the convenience of having a national network of replacement cars at the ready.
As someone over 25, renting a car is dead easy and seems to be cheaper than multiple ride shares. When I had business trips in smaller southeast cities, renting a car and actually driving the entire trip was more convenient than air travel because I got to listen to podcasts the whole way instead of dealing with the airport and still needing local transport when I got there.
You also have improved safety and security for employees vs John Doe and his 2010 Odyessy Uber that is falling apart. Uber is a shitshow experience compared to what it used to be.
If any of us ever figure out why, I'd love to know. It can get very difficult at times where I always have to drive and have to consider buses hard.
I used to suffer motion sickness as a passenger in cars, sometimes buses, and ships, but at least the first two went away along with the ‘VR sickness’. (I haven't been on a ship since.)
Business demand for rental vehicles doesn't seem to be falling?
The ride-sharing model is on the cusp of proving a sustainable business, but they aren't there yet.
Because airports are often located on the edge of a city, this is a pretty common situation. Convenience matters, but so does cost, so I expect rental car companies will continue to get this sort of business.
Whether or not ridesharing can survive without being subsidized by losing its investors billions of dollars remains to be seen.
I got a motorcycle which works perfectly when I Uber would be too expensive and Transports too slow.
Therefore I rent a car when I go on a holiday not too far away, it costs me less than $200 for 4 days and doesn't happen that often anyway so it's way less than investing in getting a decent car and maintaining it.
I can't remember the last time I really needed to rent a car. Maybe for the random site-seeing roadtrip. But vacationers aren't rental company's bread and butter: it's business travelers. And business travelers are seeing much more convenience from rideshare than from rentals. The hassle of renting a car, parking, tolls, gas, dealing with insurance and liability, and just the shenanigans of rental car companies is not worth the hassle.
It took a solid decade before the impact of video on demand was felt on Blockbuster, but it was inevitable.
Just how COVID is bringing the water out of shore on the low tide, all it is doing is exposing already weak companies. Those that fail can't simply blame COVID, altho it's certainly a contributor. For some, the writing was already on the wall.
In 10 years we'll be writing the post-mortem on the rental car industry.