In 2024, the car rental industry is poised for another successful year, growing 4.4% year-on-year and posting revenues of USD90 billion, in current value terms. Revenues in 2024 are projected to be 15% higher than in 2019. Yet annual growth is gradually slowing following the high rebound growth in the travel industry over 2021-2023 due to the COVID-19 pandemic.
Car rental brands need to prioritise three commercial areas to improve future competitiveness: advance new models of flexible ownership, implement more convenient online rentals and progressively adopt AI and big data applications in various business processes. The three trends will play an important role in articulating new sources of income, while also helping to reduce overhead costs in the long run.
Advancing new models of flexible ownership
Car rental companies are responding to more flexible consumer ownership demands such as subscriptions, flexible leases and car sharing. This has largely precipitated from the rising cost of vehicle ownership, which reflects slowing wage growth, but also the high cost of vehicle servicing and maintenance.
According to AAA (the American Automobile Association), drivers in the US spent USD12,182, on average, towards their new cars (not including the purchase price) in 2023 – a rise of USD1,454 from the previous year.
With the car rental industry poised for only modest growth through to 2030, companies are looking for faster-growing revenue opportunities to help diversify existing car rental operations that typically rely on travelling renters. This has partly underpinned the encouraging performance of Localiza in Brazil, which also launched its subscription service, Meoo, to tap the growing market for flexible vehicle ownership. By targeting the broader market of automotive consumers (people looking for both short- and long-term mobility solutions for their everyday lives), new ownership models can offer car rental companies greater revenue stability.
Implementing more convenient online rentals
Online car rental bookings continue to gain traction as consumers increasingly place more emphasis on digital reservations. High ownership of smartphones and the widespread prevalence of the internet have supported growth.
By 2030, 78% of car rental bookings are projected to be online
Source: Euromonitor International
While most car rental brands have online booking platforms, continued improvements in functionality, convenience and flexibility continue to be areas of opportunity.
For example, Hertz’s recent partnership with digital payments firm Stripe underpins this trend. The partnership will help to facilitate a better consumer experience of its bookings; for instance, clients will be able to improve the ease of extended authorisation for weekly or monthly rentals.
However, while online rentals are gaining traction overall, regional-specific differences remain. For example, by 2030, nearly 90% of car rental bookings in Australasia are projected to be online, whereas in Latin America this is set to achieve only 16%.
Adopting AI and big data applications in various business processes
The car rental industry is gradually embracing AI and big data across various business processes to improve efficiencies. This includes delivering more personalised and dynamic pricing models for customers, predictive analytics for fleet management and leveraging more thorough car inspections through advanced computer vision and machine learning algorithms. For instance, Sixt’s partner in the Baltics has adopted Drive X, an AI-based digital inspection tool, to speed up car rental damage assessments.
New AI and big data-enabled tools and technologies can have a major impact on car rental operators’ bottom lines, with Geotab, a technology company, suggesting that the return on investment (ROI) in using telematics for rental operators can help save up to USD137 per vehicle per month.
Looking ahead, digital transformation will become more significant with AI expected to continue playing a key role in enhancing commercial processes across the broader car rental value chain.
58% of business leaders believe that AI will have the biggest impact on business in the next five years
Source: Euromonitor’s Voice of the Industry Survey 2024
Car rental brands need to incorporate the above-mentioned trends to stay competitive in the long run. They will assist in identifying new sources of revenue, while also driving down costs through more efficient business processes.
Learn more about car rental in our report, World Market for Car Rental, to better understand the industry dynamics.