Tourists are flocking back to Hawaii in rising numbers this year as key segments of the visitor industry — airlines, hotels, restaurants, resort shops and attractions — come back to life.
One important segment, however, is showing no signs of resurrection: rental cars.
A jumble of interrelated issues has hobbled the rental car industry from rebounding in Hawaii and other large leisure travel destinations, and there appears to be no meaningful recovery on the horizon.
“There’s such a disruption,” said Mike Taylor, head of travel industry research for J.D. Power, an analytics firm largely focused on the automotive industry. “It’s a perfect storm. I don’t know when the end is in sight.”
Simply put, the nation’s largest car rental corporations sold a ton of cars last year to cushion the financial blows amid widespread COVID-19 travel restrictions, and now they can’t buy sufficient replacements largely due to car manufacturing delays.
As a result, many tourists in Hawaii are shelling out obscene sums to rent the relatively few cars that are available from legitimate rental firms, which link prices to supply and demand. Some visitors instead have turned to public transportation, ride-sharing and unconventional rentals that include moving vans and privately owned vehicles. And in other instances, would-be visitors have opted not to come.
“It’s all out of whack,” said Taylor, who is based in Connecticut and recounted that the two extreme stories he has heard about the most are Kias renting for $300 a day in Orlando, Fla., and tourists renting U-Haul trucks in Hawaii.
One day last week, a few rental cars from a company near Honolulu’s Daniel K. Inouye International Airport were available this week for $10,000 a day. The company, yesaway, was not able to clarify if this was an actual price or a mistake.
Several other rental car firms were sold out at their airport and satellite locations around Honolulu, though others had vehicles starting at $145 a day.
Tourism officials have said Hawaii’s shortage is worst on Maui and Kauai. As of last week on Maui, the lowest-priced cars at the airport from major rental firms this week was $391 on most days. On Kauai, the same firms were sold out.
It’s hard to measure the rental car shortage’s impact on the state’s main economic engine and employer.
In a May report, the University of Hawaii Economic Research Organization called the shortage a “near-term supply constraint” for tourism based on its estimate of nearly a quarter of the statewide rental car inventory, or about 10,000 vehicles, being cut as of July.
The Hawaii Tourism Authority estimated the inventory decrease since COVID-19 began at 40% but said it doesn’t appear the reduction is deterring many visitors.
Still, HTA in late May began advising would-be Hawaii visitors to book rental cars before making the rest of their travel arrangements. The agency also is helping Kauai and Maui start airport-resort shuttle services, and last week updated its website to explain the rental car situation and provide alternative ground transportation information that includes listings for public bus service, taxis, shuttles and bike rentals.
These options are picking up some slack in the market, as are smaller rental car firms and a platform called Turo that operates like Airbnb but with vehicles.
One day last week, there were only three vehicles available this week through Turo on Maui, one for $274 a day and two for $599 a day.
Turo hosts on Oahu had about 200 cars available during the same period for as little as $56 a day. Many hosts have collections of cars that they rent, which has led to complaints about parking in residential neighborhoods.
More traditional but smaller rental car operations also exist around the state. On Kauai, 7-year-old Alii Rental Cars closed last year with 42 cars and reopened in early April amid the market’s supply-and-demand imbalance.
Co-owner Kawika Cooper said Alii was able to buy 25 new cars to expand its fleet to 67 vehicles, which are all booked solid through August.
“It’s amazing,” he said.
Cooper added that he and his partner hired three employees to help handle the increased business that he said is commanding higher prices to offset some losses last year.
Numerous small local rental car firms exist in the state, while a couple of expanding global firms — China-based yesaway and Germany-based Sixt — opened on Oahu in recent years. Sixt also has a location on Maui.
Yet these smaller players in the market, according to Taylor, aren’t big enough to significantly ease the existing shortage, even if they are expanding or drawing more business. Instead, Taylor said major relief largely depends on the three industry giants, which are stuck in a quandary.
These firms — Enterprise Holdings, Hertz Corp. and Avis Budget Group — all have arrangements with manufacturers to continually replenish their supply of new cars that they use for relatively short periods before selling.
All three companies sold much of their fleets last year to raise cash and haven’t sufficiently replenished their inventory as travel demand rebounded this year.
One big reason for this is a shortage of semiconductors holding back new car production. Also, car rental companies can’t easily move inventory between nearby cities or states to cure a shortage in Hawaii.
“It has been a wild ride,” Chrissy Taylor, president and CEO of Enterprise, said on a Daily Drive podcast produced by Automotive News last month.
Taylor, whose grandfather started a business in 1957 that has grown into the largest car rental firm in the world with brands that also include National and Alamo, said the last 14 months have been the most challenging in the company’s history.
“Our team is totally committed to helping customers with their transportation needs,” she said on the podcast.
Enterprise did not respond to a request to comment on its rental car supply and demand in Hawaii.
No cars from the Enterprise brands were available at Maui’s Kahului Airport for the last week of July, according to a recent search.
At Avis Budget, a spokesperson declined to comment on Hawaii operations.
Avis Budget reported disposing of 250,000 vehicles globally last year while cutting purchases by 56%. The company said in May that it is getting new car deliveries every day but can’t predict volatility associated with the industry where fleets are tighter given travel demand and vehicle availability.
“Due to these continued macro uncertainties, we are not providing guidance at this time,” the company said.
Avis Budget had no cars available at Kahului Airport during the last week of July.
Hertz, which owns Dollar and Thrifty brands, filed bankruptcy last year but has continued operations and arranged $4 billion in financing to rebuild its fleet after cuts last year.
In November, Hertz announced that it expected new cars would begin arriving by March, but in May the company noted the semiconductor shortage may delay or impact its ability to obtain a sufficient supply of new vehicles to align with customer demand through March 2022.
A Hertz representative did not respond to a request for comment about Hawaii operations. At Maui’s airport, the company recently did have midsize cars available to rent during the last week of July at $229 a day.