Holidaymakers who rent a car at popular destinations abroad this summer will undoubtedly have noticed: such a rental car is very expensive at the moment. In popular holiday countries such as France, Spain, Portugal, Italy and Greece, daily prices have doubled or even tripled everywhere compared to the year before the corona pandemic, according to a Bloomberg inventory.
A development that has come over from America, says Tjeerd Kramer, director of comparison site EasyTerra. “In the US, prices have tripled as the domestic market picked up last year, and that has continued worldwide. In the Netherlands too.” He sees that the price increase in Europe is strongest on frequently visited islands such as Ibiza, Mallorca and Iceland. People who want to make a trip through Iceland normally pay about 40 to 50 euros per day for a 4×4 all-terrain vehicle that you need on the rugged volcanic island. Kramer: “But now prices fluctuate between 150 and 200 euros per day.
Moreover, according to Alexander Sixt, CEO of the German car rental company of the same name, prices will not fall any time soon. The company (2.3 billion euros in turnover, 242,000 vehicles in 110 countries) is a global player and profits from the return of wanderlust after the corona pandemic. Earlier this year, growth in the US and Europe led to the strongest first quarter ever with revenues of 580 million euros and a net profit of more than 66 million euros. According to analyst Christian Obst of Baader Bank, the recovery of the car rental market is twofold. Firstly, there is scarcity in the car market. Many lessors sold some of their cars to survive the corona crisis and are having a lot of trouble bringing their fleet back up to strength due to the structural shortage of chips and other materials. “Car manufacturers prefer to focus on the more expensive market segment because there is more margin on it. While car rental companies mainly work with smaller, cheaper cars,” says Obst. The second reason is that demand has picked up much faster than expected. This combination of a very limited stock and a rising demand together results in the higher price that the holidaymaker pays. Sixt is benefiting additionally from the increased demand as it managed to increase its market share in the US amid the corona crisis. In July 2020, thanks to its strong balance sheet, it acquired ten airport concessions in New York, Las Vegas and Boston, among others, from Advantage, which went bankrupt in May of that year. The German company, founded in 1912, has also built up close relationships with car manufacturers over the past decades, according to Obst. Part of these are so-called buy-back agreementswhereby Sixt leases a new car, for example renting it out for six months, before returning it to the manufacturer.
Furthermore, unlike competitors, Sixt has its own IT department, which, according to Obst, provides higher margins. He attributes the fact that the share price has dropped somewhat this year to macro circumstances such as inflation and interest rates, which have caused ‘normalisation’ on the stock market. Analyst Hela Zarrouk, who tracks the stock for Oddo-BHF, expects Sixt to benefit the most from the recovery in demand of all car rental companies in the coming period. “Expansion in the US will be the growth engine. Sixt has already largely benefited from higher prices, which has helped margins. All of Sixt’s listed competitors – Avis Budget, Hertz and Europcar – experienced significant financial difficulties during the pandemic.”
The expectations for the second quarter figures, which Sixt will present on Wednesday, are therefore high.
A version of this article also appeared in the newspaper of August 8, 2022