Image credits: Ruffa Jane Reyes
News Article

Car Rentals Support Tourism Recovery: AMAVe

By Alejandro Enríquez | Wed, 08/25/2021 - 13:20

With the support of AVIS, National Car Rental, Enterprise Rent-A-Car and Alamo, AMAVe presented a report on how car rentals are contributing to the recovery of the tourism sector. "A good sign of recovery is the high demand rental car companies are having, which has surpassed the 'defleet' made a few months ago," stated the association.

In 2020, Mexico saw US$13.6 billion in revenue from foreign tourism evaporate, when compared to 2019. Revenue for the year was 55.3 percent smaller than in 2019. Foreign arrivals, according to hotel figures, shrank 55 percent in Mexican hotels. In 2021, the sector saw a 24.1 percent jump compared to 2020 but revenue is still 44.5 percent below 2019, according to the association’s estimates.

Car rental companies were also affected sharply by the pandemic, with some reporting a 60 percent fall in 2020 compared to the previous year, which put the sector in survival mode. "We looked for mechanisms to preserve jobs until economic recovery is reached," said Emilio Hernández, CEO of Alamo. One survival strategy among car rental companies was the 'defleet' approach, which meant selling their existing vehicle fleet. In some cases, companies sold up to 40 percent of their cars. Liliana Anaya, Director General of AMAVe, shared that early in the pandemic companies were selling their fleets to gain capital while still having the units available. “In times of uncertainty, we believe leasing promotes entrepreneurship while supporting SMEs and helping them to avoid losing capital and to focus on their business,” she said at the time.

In the US the defleet strategy reached 60 percent in some cases. After selling their existing units, rates increased because the fleets were smaller. However, the sector is turning around. "Despite the increase in rates, today car rental companies offer a better rental rate than in 2019," states AMAVe.

Car rental companies reported moderate improvement in the sector starting from June 2020, as Mexico did not stop welcoming foreigners. Virtual offices also helped to drive the recovery of Mexico's touristic routes, as employees could now work from anywhere. "Some destinations such as Playa del Carmen which were not long-term, experienced a sudden increase from between 15 to 30 days, to even a year," states AMAVe. Moreover, tourists did not want to use public transportation.

For 2H2021, AMAVe expects the sector will return to its 2019 levels. Companies expect seasonality to be reflected sharply on the numbers, but others consider that it will depend on the vaccination rate. Moreover, due the ongoing inventory constraints the sector is facing because of the chip shortages, car rental companies are adding unusual brands to their stock.

Photo by:   Ruffa Jane Reyes
Alejandro Enríquez Alejandro Enríquez Journalist and Industry Analyst