Pricing Peril
Pricing Peril: Why Choosing the Right Market Matters So Much in Car Rental
If you’re thinking about entering the car rental business — whether coming from a peer-to-peer platform like Turo or setting up your own fleet — here’s one crucial piece of advice:
don’t enter a market where cars are priced too cheaply.
Low car rental prices in a market usually mean one of two things:
The market is over-fleeted. Too many cars chasing too few renters, leading to price wars, thinner margins, and high risk of losses.
Operators lack the proper pricing systems or strategies. They might underprice because they don’t have the right revenue management tools or expertise, which drags down the entire market.
Sometimes, it’s both — either way, entering such a market is a risky business decision. You’ll likely face what we call “pricing peril,” where profitability is squeezed or even impossible. The best move? Move along and find a healthier market.
Real-World Examples of Pricing Peril
Image 1: Fleet Growth vs. Average Daily Rate (ADR) Comparison
Take the example of Market A (a midsize US city): Over the last two years, the average daily rate (ADR) for compact cars dropped by 15%, while fleet size grew by 20%. Operators who didn’t have dynamic pricing systems in place aggressively discounted cars to keep them rented, pushing prices down further. New entrants who joined hoping to grab market share found themselves in a costly price war, struggling to cover even basic operational costs.
Contrast this with Market B, a similarly sized city but with fewer cars per capita and more operators using automated revenue management tools like RateHighway’s platform. Here, ADR grew steadily by 8% over the same period, and utilization rates remained high. New entrants in Market B found a more sustainable business environment with reasonable pricing power.
Why Pricing Matters More Than You Think
Image 2: Pricing Impact on Revenue & Utilization
Pricing is the lifeblood of your rental business. It influences revenue, utilization, and your ability to sustain operations long-term. Markets with persistently low prices often signal structural issues — excess supply or poor price management — that are dangerous to new operators.
Research across 50 top US markets shows that in over 60% of markets, operators without automated pricing tools lose revenue potential by not adjusting rates frequently enough, which encourages price undercutting and instability. On the other hand, markets with widespread revenue management adoption see healthier price trends and better profitability overall.
How to Spot a Market in Pricing Peril
Image 3: Pricing Peril Warning Signs Checklist
High fleet-to-demand ratios: Oversupply tends to drive prices down and utilization rates suffer.
Frequent discounting: If many operators are constantly offering steep discounts, this is a sign prices are under pressure.
Lack of pricing sophistication: Markets where operators don’t use automation or data-driven pricing tend to have more erratic and lower rates.
Flat or declining price trends: Markets where prices don’t recover or grow over time are often stuck in “pricing peril.”
What You Should Do Instead
Look for markets with balanced fleets and rising prices — signs of healthy demand and competition.
Seek markets where operators leverage smart revenue management tools to optimize pricing.
Be patient and selective. Success often means waiting for the right opportunity in the right market, not rushing into oversupplied or underpriced areas.
The AE & RateHighway Advantage
At Affiliate Experts (AE), we specialize in advising car rental operators on smart market selection and brand affiliation strategies. Powered by RateHighway’s deep data insights and automated pricing tools, we help operators avoid “pricing peril” and focus on markets where they can thrive.
Remember: success isn’t just about having cars — it’s about having cars in the right market, priced right. If you see a market where prices seem too low, it’s a red flag. Don’t risk your investment.
Instead, contact us at AE to get tailored market analysis and guidance to find the right opportunities.
Ready to avoid pricing peril and find your ideal car rental market?
Contact Affiliate Experts today for a no-obligation consultation and take the first step toward profitable growth.