What's Behind Higher Holiday Rental Car Prices? Industry Consolidation is a Major Culprit
Holiday travelers know they have to brace themselves financially as they take to the skies this week. But picking up a rental car isn't going to be much of a picnic for your wallet, either.
A new CheapCarRental.com survey of rental car rates at 30 U.S. destinations shows a lot of companies have jacked-up their rates just in time for the holiday season. Denver, according to the survey, tops that list – with car rentals there nearly triple their usual rate for the month.
New York City, to no great surprise, is the priciest overall destination for a rental car over the Thanksgiving holiday – with rates running about twice their already-high average of around $60 daily.
It's not all highway robbery, however. The survey notes rental car rates at some destinations, like St. Louis, San Antonio and Charlotte, are actually lower over the long holiday weekend. But on the whole, drivers should be expected to shell out more for that rental.
One of the major factors behind these rising rental car prices is industry consolidation. As the Wall Street Journal reported earlier this year, 98 percent of the airport rental market is currently controlled by three companies. And Auto Rental News has the breakdown:
Enterprise Holdings. This privately-held company controls not only Enterprise Rent-A-Car but also Alamo and National. It averaged over 941,000 vehicles in service in the U.S. last year, at more than 6.200 locations. Earlier this month, Enterprise Holdings and its affiliate, Enterprise Fleet Management, announced strong growth for fiscal 2013, generating $16.4 billion in revenue.
Hertz Global Holdings (NYSE: HTZ). This past July, the Federal Trade Commission allowed Hertz to purchase Dollar Thrifty for $2.3 billion – on the condition that Hertz sell off its Advantage brand to create more competition. But earlier this month Advantage filed for bankruptcy. Reuters reports Advantage's new owners are questioning “the book value of the fleet that was causing losses.”
“American consumers rent more than 50 million vehicles at airports nationwide each year, spending $11 billion, so this is a real pocketbook issue for everyday people,” then-FTC Chairman Jon Leibowitz said last year, when announcing the terms of the Dollar Thifty deal with Hertz. “Today’s bipartisan action by the FTC will ensure that consumers are not forced to pay higher prices for rental cars when they travel.”
But industry analysts seem to think otherwise.
“Historically, the rental industry has been an intensely competitive oligopoly that reluctantly demonstrated pricing power only during periods of rising fleet costs,” said a Morgan Stanley note from this past March, as quoted by The Wall Street Journal. “Investors are now contemplating lasting structural improvement as the oligopoly has crossed a tipping point that can create materially more rational pricing behavior.”
© 2015 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.