Bumpy Road Ahead

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It’s been a year since Bidvest announced that it would no longer represent Budget Car Rental in the South African market, with Avis Southern Africa granted the brand representation. So, the time seemed right to pick the brain of Avis Budget Rent a Car, South Africa CEO Rainer Gottschick on all things car rental-related. For Gottschick, the greatest success of Avis Southern Africa picking up the Budget brand in early 2015 was the alignment with the group’s principal, with the Avis Budget Group operating globally with a suite of brands that also includes Zipcar, Payless and Maggiore. But don’t expect to see those brands in the South African market any time soon. “Car rental is quite a commoditised environment at the moment and any new brand you bring in will disrupt the market,” says Gottschick. “If you look at Bidvest giving away Budget and establishing Bidvest Car Rental and us taking over Budget, effectively we created a new player in the market.” And in quite a tight market as well – one that probably can’t sustain any more new entrants. “Globally, Budget is a value brand and Avis is a premium brand,” says Gottschick. “You can get confused running a multi-brand strategy and you can easily cannibalise yourself and lose complete focus, as well as cause confusion in the market. Globally you’ve seen a lot of consolidation around car rental brands, and that will probably continue in the local market.” That local market is currently enduring some tough times, despite Gottschick expressing his satisfaction with the performance of his brands. “If you look at the last two years, corporates have been negative, from a volume perspective,” he says, and the Avis Budget CEO is warning of even tougher times ahead, particularly for his customers. “The exchange rate is putting pressure on the motor manufacturers and we’ve already seen some of them increase their general retail prices. It’s inevitable that car rental prices have to go up. In the last 12 months rates have gone up 1% only, which is not sustainable.” All of which adds up to a challenging environment in which to operate, never mind turn a decent profit with a couple of different brands and value propositions. “We have to find smarter, more efficient ways of working,” says Gottschick. “But in the long run, you can’t save yourself rich. If you go back 10-15 years, Group B, Group C car rental used to be the same as a 3-star hotel. Today, that hotel is costing you R900 ($57) a night, whereas the car rental is only R300 ($19).” As with everything in the modern age, innovation is key to survival, but that becomes even more critical when some of the world’s leading innovators are operating in your space. Here we are talking about Uber and how they’ve shaken up the taxi and car rental industries. Gottschick has an interesting take. “Yes, there are disrupters,” he says. “But in the long-term, something like Uber is actually going to complement car rental. One thing an Uber-type model is doing globally is moving people away from owning a car.” “On short trips, Uber is cheaper as a transfer service. But when you start using those services for four straight days, it ends up being cheaper to rent a car. We haven’t really seen any losses in the corporate market. Our point-to-point business is more a pre-booked service, whereas Uber is on-demand.” Nonetheless, Gottschick is well aware that Avis Budget needs to keep exploring new markets – never mind innovating – if it wants to stay competitive. With that in mind, I’m interested as to where in the rest of Africa he believes there is potential for his two brands? “With Budget, the next two will probably be Malawi and Zambia since we’ve already got Avis there,” he says. “But again, you’ve got to make sure you’ve identified your customer set and alignment. From a car rental point of view, those countries are a lot smaller than South Africa and some of them are a lot more focused on chauffeur drive.” In-car wi-fi, driverless cars, more and more technology…..all things that occupy the mind of Rainer Gottschick as he plots the way forward for Avis Budget. At the end of the day, though, it comes down to service. “You’ve got to make car pick-up as quick and simple as possible,” he says. “And make sure you adapt to the markets where your customers are.”