160308 Rateshaker-zika-pricing-impact

Should “Zika” buzz impact car rental prices?

By Emmanuel
In mars 8, 2016
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As usual, the media buzz has been concentrating over the new Zika disease to inform about risks (that are real) creating collateral impact on tourism. Our partner Forwardkeys released its Market insights last February and commented as follow:

The slowdown began to emerge following a travel warning from the US government Centres for Disease Control and Prevention (CDC) on 15th January. On 1st February, the World Health Organization (WHO) declared Zika a global health emergency, and the 3.4% slow-down worsened to 10%. Olivier Jager, CEO of Forwardkeys, reported.

« Specifically focusing on Martinique air bookings, Forwardkeys highlights that the reservation pick-ups turned from +10% before the warning to -24% after the warning. What the study does not show is the travel period hit but only the impact on the reservation time. » continued Forwardkeys.

With Rateshaker, the rateshop analyzer dedicated to car rental, WeYield team analyzed the concrete sales impact on market pricing. Looking at the rate evolution, it appreared that local operators waited couple of weeks after French Health Minitry or UN WHO announcements to update their prices. Certainly because the trend of pre-books during the carribean high season was strong enough to support this negative buzz. Early February 2016  (week 6) was also a very busy period of leisure activity with the Carnival.

Looking at car rental prices for Easter vacations booking from France (see above illustration), we can notice that the competitor prices started to be reduced begining of February, impacting the total market by -11% while the trend was slightly posivite during the same period last year.

Thanks to historical data collected by Rateshaker, it is possible to monitor how the market continued to behave over March and April for the Easter vacations. Market price showed an increase of +4% between early this the begining of this major schoool term. What will happen for 2016? Let’s see if the market will generate any additional demand and if the Media will switch a “better” headline !

As yield management expert, we have already measured that an exceptional event should not trigger a pricing reduction, especially when it refers to medical disease. The reasons are simple : first, the clients that have to travel for business reason will be able to modify their stay but they are not the largest proportion of clients ; second, the one who can not changed their travel plan (or are not able to do so) will not be affected by any car rental price decrease! Eventually, if one local operator starts to pull the prices down, all the other will follow…stated Emmanuel Scuto, CEO of WeYield