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Las Vegas tourists are struggling with a car rental shortage following a national fleet sale

Date posted: April 27, 2021, 11:29 a.m.

Last Updated: April 27, 2021, 12:20 pm

Ed Silverstein

Las Vegas is facing a car hire shortage, as are many other US locations. It follows the sell-off of domestic rental companies 30 to 40 percent - and maybe even more - of their fleets after the initial COVID - 19 outbreak.

rental car companies are a low margin business for the auto companies
Edward G. Anderson Jr., professor at the McCombs School of Business at the University of Texas, shown here. Anderson said the demand for car rentals has soared. Las Vegas is missing. (Photo: University of Texas)

This leads to higher prices. In some US rental markets, the current rental cost is as high as $ 500 a day, warns Alfred Marcus, professor at the Carlson School of Management at the University of Minnesota.

Car rental companies have spotted the problem in recent months. They moved supplies to vacation areas like Las Vegas.

But the problem turned out to be too big to be solved by simply moving inventory, said Stephen M. Miller, director of UNLV's Center for Business and Economic Research.

It is nationwide, but most visible in tourist destinations ", Edward G. Anderson Jr., professor at the McCombs School of Business at the University of Texas, said about the shortage.

In addition to Las Vegas, the other hardest hit locations, "with often doubled or tripled prices," are Florida, Phoenix and Austin, Texas, he said.

"Of course, which is assuming that cars can even be found in these locations, which is unlikely," Anderson said. "You have to book in advance if you have any chance of renting."

Last year, car rental companies came under pressure as there were hardly any travels in the early stages of the pandemic.

"Rental companies could not afford to keep cars that were not rented" Anderson said. "So they sold most of their fleets."

Hertz has received the most attention in the country for the sale, said Victor V. Claar, professor of economics at Florida Gulf Coast University .

Car production slowed down, no chips in deliveries

Car production fell last year due to a parts shortage related to the pandemic. The current stock of cars to buy is fairly low, Anderson said.

The industry is also suffering from a shortage of semiconductor chips. They are used to power computers that control engines, gearboxes and entertainment systems of passenger cars and trucks. There are more than 100 in a typical car, said Claar.

As a result, now that the demand for rental cars has risen sharply, rental fleets are also small and there are no cars to buy. "Anderson said. "The fact that car rental companies are a low-margin business for automotive companies also doesn't help."

Stephen Miller agreed that the pandemic has "devastated the demand" for car rentals.

Car rental companies began selling their inventory, reducing it by 30 to 40 percent " Miller said Casino .org. “When demand has recently improved, there has been a shortage of rental cars, increasing rental prices and leaving demand unfulfilled. "

Miller adds that the rental companies "are now trying to reinvest in their car stock, which will take some time." Miller further warns that if the pandemic "recurs and slows demand again, then car rentals will be deducted because they are currently borrowing money to restock."

In addition, Zo Rahim, head of Economic and Industry Insights at Cox Automotive, said the entire automotive industry is facing a shortage of stocks for new and used cars.

Retail demand for vehicles is strong thanks to low interest rates, available credit and government incentives.

"Due to the high demand and low supply, car rental companies are struggling to stock up to meet rising demand," said Rahim. "Sales of new vehicles fell during the crisis, including sales in the rental fleet channel."

He says that as the economy and consumption improve: “It becomes more difficult for fleet buyers, such as rental companies, to acquire new vehicles given the constraints of supply in the market. "

Try Ridesharing

In addition, many travelers who faced the decision to board a plane or rent a car to reach their final destination are choosing to rent because of COVID - 19 Risk, Claar said.

Meanwhile, Alfred Marcus and other management and economics professors recommend tourists to try car-sharing services instead of using a rental company.

But Las Vegas has a shortage of carpool drivers and many delays in services like Lyft and Uber. Nevada officials also enforce local laws against drivers of illegal carpooling services. They are for cash only and require no application.

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