Global shortage hits rentals

A critical part of tourism infrastructure will take more than two years to rebuild to pre-Covid levels.

That’s the warning sounded by Dan Alpe, chief executive officer of Jucy.

He says global shortages of new cars and industry rationalisation will leave the country’s rental inventory at around 30-40 per cent of what it was before the pandemic and will see rental prices rise in the short term.

Alpe, pictured, says the rental business was hit hard during Covid with revenues dropping by more than 95 per cent overnight.

Many rental operators sold off the majority of their fleets at a time when supply-chain shortages increased the resale value of second-hand vehicles.

“The asset rationalisation we’ve seen in the vehicle rental industry provided a lifeline for some of the larger players,” adds Alpe. “However, some of the second and third-tier companies have exited an unsustainable market.

“As a result, when we open our doors to international tourists next month, New Zealand will be missing a critical part of our infrastructure.

“Replenishing this fleet will take us at least two years and, in the interim, we can expect prices to rise.”

While some large industry players also sold their campervans into the domestic market, Jucy’s inventory remains unaffected with most of its fleet placed into temporary storage.

Alpe says the company’s experience operating in the Australian market when it reopened for tourists last month has also provided several insights.

“Our Australian operation had around three weeks’ notice before the borders reopened in February – similar to what New Zealand businesses have had.

“What we’ve seen was a significant government investment to incentivise aviation and bring capacity back in time for the tail-end of their summer season.

“In addition, the Australian government was well-organised and able to roll out aggressive tactical tourism campaigns targeting, in the first instance, the working-holiday market with great effect.

“This meant there was no gradual build and leisure travel has bounced back straight away.

“The immediate response from the market was much quicker than expected. We have taken that learning on-board and begun to scale up our New Zealand call centre already.

“Our bookings in Australia are showing strong demand for April and May, and it is our expectation that New Zealand will have a similar response, assuming airline capacity can match demand.”

Alpe says the average daily rate for vehicle hire in Australia has increased by 95 per cent, which reflects the shortage of car-hire supply and bookings for March are at 115 per cent of 2019 volumes for the same month.

With the Australian school holidays coming, he adds self-drive tourism numbers are set to be strong in the South Island.

“Tourism operators around the country will be taking a leap of faith at the moment by investing in staffing and equipment resources when their cashflow has been strained to the limit. The challenge at this point is revenue won’t hit their accounts until the visitors arrive.”

Alpe says around 25 per cent of its current bookings have been speculative, with international tourists planning trips to New Zealand even prior to any border announcements.

He says New Zealand needs a balanced tourist market, including those on a working holiday which provides relief for the tight labour market.

“What we are expecting to see is a number of working holiday visitors among the first arrivals here when the border reopens, many of whom will enter seasonal working environments.

“Our European distributors tell us interest in New Zealand remains strong, however we don't expect to get high volumes of long-haul Northern Hemisphere travellers arriving until October onwards,” he says.