How Hawaii's rental car crisis became so dire tourists are renting U-Hauls instead

• Hawaii is currently stuck in a glaring rental-car nightmare as Americans start to travel again.
• Rental vehicle prices are skyrocketing, and some tourists have turned to booking U-Hauls instead.
• Take a look at how the Aloha State found itself in such a dire situation, and how you can avoid it.
• See more stories on Insider's business page.

Take a look at Hawaii's rental car industry right now and you might see something quite peculiar.

Booked out rental cars. Vehicles renting for $700 a day. Tourists driving fleets of U-Haul vans instead. The state asking tourists to book rental cars before making any other vacation plans.

Hawaii's islands are in the middle of a glaring rental-car nightmare. And now, renting a vehicle – in the Aloha State and other parts of the US – could consume the bulk of tourists' vacation costs.

"People are quickly realizing that they need to take the cost of the rental car into account because it's no longer just an add-on," Jonathan Weinberg, the founder and CEO of AutoSlash, told Insider in April. "It literally could be the majority cost of your trip, so folks who are planning things last minute are unpleasantly surprised by it."

So how did the Aloha State get here? The answer lies within computer chips, COVID-19, auctions, and "revenge vacations."

How it started

To understand how the national rental car shortage has impacted Hawaii, let's go back in time to mid-2020.

As we all now know, the COVID-19 pandemic devastated the majority of the travel industry, including the rental car companies.

In the midst of the pandemic, companies like Hertz – which later filed for Chapter 11 bankruptcy protection – and Avis sold off chunks of their rental-car fleets. At the time, this decision may have helped save cash, but it's now, unsurprisingly, at the root of this massive rental vehicle shortage.

On top of this, companies are now struggling to regrow fleet sizes as a result of shockingly high used car prices and a lack of new cars due to the global computer chip shortage. Companies like Hertz have evn to turned to "supplementing fleets by purchasing low-mileage, pre-owned vehicles from a variety of channels including auctions, online auctions, dealerships, and cars coming off lease programs," a spokesperson told Insider in May.

But while rental car companies are scrambling to rebuild fleets, travel is beginning to skyrocket again.

"When we look at our travel numbers, travel bookings in May were 95% of where they were in May of 2019," Steve Squeri, American Express CEO, told CNBC's Jim Cramer on "Mad Money" on Monday.

Hawaii specifically has seen a massive rebound in travel, and more people are now traveling to the state than before COVID-19, KITV, an ABC affiliate in Hawaii, reported on June 14. In the week preceding the report, 36,000 people on average traveled in and around the islands every day, according to KITV. To compare, in June 2019, the average was 34,000 people.

And as you can probably tell, this skyrocketing number of travelers is now compounding the rental-car shortage.

A look at Hawaii's dire shortage, and how you can avoid it

Hawaii's fleet of rental cars dropped by over 40% during COVID-19, the Hawaii Tourism Authority wrote under the "rental car shortage" section of its website.

The average car rental in Hawaii sat at about $50 daily before COVID-19. Now, some vehicles are renting at highs of $700 a day, or over two-times 2019's prices, Chris Woronka, a senior hotel-and-leisure analyst at Deutsche Bank, told Insider in April.

As a result, some tourists have turned to renting U-Haul moving pickup trucks and cargo vans instead.

"We have seen a considerable uptick in U-Haul rentals from customers who are visiting the islands now," Kaleo Alau, U-Haul Company in Hawaii's president, told Insider in an email statement in April. "We realize this demand is occurring when tourists are unable to secure a rental car, or they learn that our rental fleet options are more affordable."

Renting moving vehicles may be a quick fix for tourists, but this unusual and outside demand for U-Hauls has left some offices with less equipment for locals who may need the vehicles for actual moving purposes.

"We are working every day with our primary customer base – the islands' residential movers – to ensure we can still meet their transportation needs," Alau said.

Relying on U-Hauls instead of car-rental companies has become so popular, the state's tourism agency has now had to address the issue on its website.

"The Hawaii Tourism Authority does not condone visitors renting moving trucks and vans for leisure purposes," the agency wrote.

If you want a rental car for your upcoming "revenge vacation" in the tropical state, but don't want to pay a few hundred dollars per day, follow the state and experts' advice: plan in advance.

"Rental cars are in high demand, so please plan ahead to secure a reservation first before making the rest of your travel arrangements," the agency wrote.