Description of supply and demand within the US as it relates to the travel industry and auto rental industry post 9/11.

Essay by yzfseanUniversity, Bachelor'sA+, November 2002

download word file, 3 pages 4.7

In the past year the auto rental industry has seen many changes. Fewer customers, increased insurance costs, an overabundance of available rental vehicles and a drastic reduction in vehicle value are just a few. Auto rental companies have tried to modify the way they do business in response to these changes. Nationally, rental companies have reduced rates, fleet sizes and number of employees in an attempt to find equilibrium within the market place. While the attached article was written before the catastrophic events of September 11, 2001, it does make an excellent case of what is happening now, albeit, in reverse. Supply and demand, as it relates to the rental car market, is a constantly changing entity. The demand for rental vehicles will vary depending on many factors: holidays, local events, season and others. Likewise, the supply of vehicles is affected by many factors: manufacturer pricing, company size, season and most importantly, demand.

These two factors, and the relationship between them, have combined to create a volatile market within today's auto rental industry.

Currently, supplying rental vehicles is not a difficult task. Acquiring rental vehicles from manufacturers supply lines is an equally effortless task. Rental companies are experiencing a glut of vehicles parked on their lots. This surplus of vehicles is only partially due to a reduced demand upon the rental companies from their customers. The events on September 11th created a massive market shift within the auto rental community, thereby forcing the auto rental industry to deal with this incredible surplus of vehicles. Auto rental companies hoping to scale back the size of their fleets to match reduced demand have been forced to retain their vehicles due to situations related to the new car market. Auto manufacturers are lowering prices across the board on new vehicles in an...