The cost of a vacation is getting more and more expensive for travelers everywhere, and that trend is not letting up, according to car rental company Hertz.
Stephen Scherr, a former Goldman Sachs finance chief who was named Hertz CEO in February, spoke about the rental car market and what that says about the prospects for the travel industry’s future during this week’s first-quarter earnings call.
According to Scherr, forward bookings this summer show that there is still more room to go for the travel industry.
“All indications point to an extremely busy summer,” he said, adding that “a delayed consumptive response” should see the travel industry continue to recover this summer.
“The rental car industry and the travel industry more broadly is going to be the beneficiary of what I would describe as a delayed consumptive response, meaning if you look across a range of other industries, stimulus led to increased consumption in the back half of 2021. If you think about travel, travel has not had that opportunity just yet, largely by virtue of COVID and restrictions that have been in place,” Scherr said.
Two segments, in particular, will drive that summer travel demand—corporate travel, which hasn’t yet recovered according to Hertz’s data, and inbound international travel to the U.S., which also hasn’t recovered.
However, while Scherr said that Hertz would be the beneficiary of that “delayed consumptive response,” there are still fleet supply issues that will impact Hertz and other rental car companies going forward, and those issues will continue to keep prices elevated.
According to data from the St. Louis Fed, which tracks car rental vehicles, average costs for car rentals have gone from $102 in April 2020 to $258 in July 2021. That number has come down from that high as March 2022’s pricing was at just under $220, according to that same data, but that number is already on the uptrend from the January 2022 low of $183.
And a continued shortage of used cars, and a supply of new vehicles coming into Hertz, along with inflationary cost pressures, could continue to keep those prices elevated through the summer.
“The recent industry dynamics of limited fleet supply, combined with rapid post-COVID recovery of travel have led to demand for rental cars materially exceeding available supply, which is reflected in pricing,” he said.
Outside of car rentals, the cost to fly is also increasing for Americans.
The average U.S. round-trip air ticket price for March 2022 was $540, a 41% increase from $382 in March 2021 and an 11% increase from March 2019 when the average ticket was $487. That’s according to new data released from the Airlines Reporting Corp. (ARC).
According to ARC, the $540 price tag is the highest average ticket price since June 2015, when the average ticket price was $548. And even with the increases, consumers are still more than willing to spend in order to travel.