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The summer, the car rentals and the economic crisis

The summer, the car rentals and the economic crisis

Another summer season is over and it’s time to draw the line for most of the car rental companies in Bulgaria, who think of it as one of the most successful seasons for the past 4-5 years. As we all know the car rental services count as luxury services, but we also can’t forget that we are still suffering the negatives of the worldwide economic crisis. I’m talking about the same crisis, that reduced the 250-300 car rentals in Bulgaria from 5 years ago down to about 100 today. At the same time most of the surviving car hire companies work at full capacity especially in the summer season, when the demand is much higher than the available rental car quantities at their disposal. Most of them even have to resort to re-renting cars among each other and from the major car dealers, while trying to satisfy the high demand at least partially.

What’s the cause for this contradiction? Most of the car rentals used to depend heavily on the paying international traveler, while setting very high price levels and generous profit margins as they see fit. These price settings allowed them to procure lease cars for renting and still save enough for the low winter seasons. Because this profitable scheme was working for some time, it got popular and many young enterpreneurs started doing business with loaned capital and high prices. Then came the worldwide economic crisis, causing the travel rates to go down, as well as the trip lengths to grow shorter. As if this was not enough, the remaining travelers started renting only economy and compact class cars, while choosing the best price they could possibly find. That’s how the big competition, the low prices and profit margins, supported by the low demand, forced most of the car rentals in Bulgaria into bankruptcy during the first winter season. The survivors were those hire car companies with market oriented price policy and well calculated, relatively low expenses, who managed to reorganize their marketing strategies by including the bulgarian customers, who for their part turned out to be a small, but profitable enough market share. This natural selection left the market with relatively few small to middle sized car rentals, supporting relatively few hire cars of their own in order to cut the losses and keep the expenses low during the low winter season. This survival policy is actually to blame for preventing the companies from meeting the high demand during the high summer seasons.

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