Moving with the times

The car rental industry is having to re-invent itself, as consumers change the way they see transport and traditional models are thrown out of the window. Kate Kennedy looks at this changing environment.

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Cars remain a vital component of land travel for much of Africa. Whether you rent a vehicle, drive yourself around in a private car, catch a lift with a friend, flag down a taxi or book an Uber, the humble and hardworking automobile is the vehicle that gets you from A to B.

And car rental is at the forefront of this movement.

According to The Car Rental Industry in South Africa 2018 report by Research and Markets, “the South African car rental industry grew revenue by 3.6% in 2017, reaching an estimated total of R5.2bn ($370m). The industry continued to be driven by business car rental, which accounted for 53% of the value of all sales.”

That’s not to say that the car rental industry doesn’t have its challenges.

According to Lance Smith, Executive Director: Sales at Avis Budget Southern Africa, the corporate car rental market has been in decline for the past three years.

“The lack of growth in the South African economy is the most pressing issue facing our industry,” he says. “In the past number of years all key customer segments – corporate, government, local leisure and insurance replacement – have seen volume contracting. The only segment that has shown growth has been international visitors, although in the last year this growth has been significantly lower.”

Every car rental player has been affected by the economy, but according to Essa Ebrahim Suleman, Director at Woodford Car Hire, there’s a broader issue at play in the South African market – that of a lack of choice.

“Traditionally, a few agencies have dominated the market with a ‘one-size-fits-all’ approach that doesn’t allow for flexibility or agility when it comes to the client,” he says.

Woodford was founded in 1991 with a small fleet of just two vehicles in Durban. In the last 18 years, the company has grown into a multi-locational car hire provider with over 1,500 vehicles.

“The South African car rental market is headed toward a stage where volumes are increasing rapidly, leading to an oversupply with cost-cutting as the differentiating measure,” says Suleman. “We believe that service is the true differentiator, with factors such as expediency and waiting time critical to the experience.”

TECHNOLOGY

Those factors cited by Suleman are greatly affected by technology, which is now playing a huge role in the service offering of all car rental brands, helping streamline the rental process and making it as easy as possible for customers to book, pay for, collect and drop off a hired car.

These brands are mindful of the fact that they need this area of the business to be as seamless as possible, in order for them to remain relevant and competitive, in the face of new technologies and offerings creeping into the car rental space.

Avis, a stalwart of the car rental industry, has developed its global preferred service which enables customers to sign one master rental agreement and then simply present their drivers licence on picking up their vehicle. This service is being enhanced with mobile apps, key lockers and connected vehicles to enable its customers to bypass the queues and to go straight to their rental vehicle.

The company has also introduced Avis SafeDrive, a smartphone app that allows users to access their trip data, see their driving scores and get suggestions on how to improve these. The app will also use the customer’s phone and the Avis SafeDrive Sensor to alert the company of any severe impacts.

“It turns your phone into a panic button for in-vehicle emergencies and gives you access to the 24-hour emergency centre,” says Smith.

In the United States, Avis has launched a voice-powered car reservation capability with Amazon Alexa and announced Google Home integration with artificial intelligence capabilities. With new features on its Avis mobile app – a larger variety of vehicles, fuel and parking options, courtesy bus tracking, rental recipients, and a ‘find my car’ feature – customers can manage their entire rental from their smartphone, choose the exact car they want, change or upgrade their vehicle while at or near the lot with a simple swipe, view their more.

Secure Drive, a security chauffeur provider and part of the international Arcfyre Group, has developed the ArcWatch app, which allows clients and staff to activate the ‘Help Me’ and ‘Check-In’ services, which immediately notify Secure Drive’s 24/7 Security Research & Communicate Centre of your location, as well as the support required. Given that much of the company’s clientele consists of people who require lower levels of security during their travels, these services are important to ensure high levels of safety.

According to Essa Ebrahim Suleman, Woodford Car Hire has made significant investments into its management, support, and technology systems to ensure greater efficiency in the entire car rental process.

“From creating a smooth marketing and communication flow to ensuring coherent user design and experience on the website and online booking system, to paperless pick-up and drop-off at branches, Woodford is at the cutting-edge of technology that supports a seamless customer experience,” he says. “On the back-end, Woodford has a fully-fledged control room, tracking facilities, and management systems that ensure that everything runs as it should.”

Hertz, another longstanding industry player, is also using technology to go completely paperless, with all documentation moving online. Both Hertz and Firefly have a Mobile Assist app (as a nominally priced, add-on option to the rental agreement) with services that include roadside, medical and legal assistance. And the Vehicle Events app is streamlining the process involved in damage to rental vehicles.

RIDE HAILING

The sharing economy has waded into the car rental space – with regards providing an alternative to existing and prospective car rental customers – and technological advancement has resulted in the emergence of services such as Uber and Lyft, which are the prominent brands in the space.

The Car Rental Industry in South Africa 2018 report found that, “although the growth of ridesharing and car-sharing has begun to affect the international car rental market, local car rental companies believe that South Africa has not followed this trend. However, major players in the industry have acknowledged that with technology playing an increased role in travellers’ lives, the car rental industry has had to improve its services and respond to the impact that Uber and other technologies are having on the market and traveller behaviour.”

“The sharing economy is no longer a concept, but a reality with rapidly accelerating adoption,” says Martin Lydall, Chief Commercial Officer of Europcar in South Africa. “Young people do not view ownership in the same way as previous generations did, and for very good reason. This is unlikely to change.”

And some of the stats out there are quite revealing.

A report published by Certify, a provider of expense management software – which analysed US business travel and expense spending trends for 2017 – found that “ride hailing accounted for 68% of the overall transaction volume in the ground transportation category last year (2017), led by Uber and rival Lyft.” It went on to say that the car rental market accounted for 25% of transactions, while taxis accounted for 7%.

That being said, some of the players in the local car rental market believe the likes of Uber are only affecting one area of their business, and, as it stands, are not a threat.

“Traditional car rental is an average length of rental of approximately four to five days, depending on the segment of customer,” says Rebone Motsatsi, Executive Commercial at Avis, suggesting that one shouldn’t compare the Ubers of this world with traditional car rental. Instead, the threat, if there is one at all, if one reads between the lines, is only to the point-to-point services offered by those in the car rental space. That would be a ‘like-for-like’ comparison.

The Woodford view is slightly different.

“We believe that the technology revolutions associated with such initiatives ensure that the industry is not only kept on its toes, but is also forced to adapt and improve its offering,” says Suleman.

Lance Smith at Avis has a similar view.

“The shared economy in transportation has created new customers in people that would never have used the service before,” he says. “This has been good for the car rental market as it gives consumers more of a reason not to own a vehicle and to rather rent, lease, rideshare, hail a taxi or call for an Uber when they have a need for mobility.”

That being said, Avis, globally, has been taking steps to ensure that it is fully-equipped to ride whatever change takes place to the industry, and in 2013 acquired leading car-sharing company Zipcar to broaden its offering.

CONCLUSION

There is no doubt that the face of car rental is changing, but the major players seem to be moving with that change, as models are being re-looked, technology is being embraced, and the entire process of hiring a vehicle is being streamlined.

But, despite the protestations of some of the major players, the likes of Uber have changed the way consumers view transportation, and whilst the sharing economy might not be currently having a big impact on the car rental industry, that could change, as technology plays a bigger and bigger role in consumers’ lives.

SELF-DRIVING CARS

They might not be viable right now, but self-driving cars are the way of the future, and car rental companies are getting in early, in order to stay well-positioned to meet this new reality.

Just two examples are Avis Budget Group’s partnership with Alphabet’s (Google) Waymo and Hertz’s partnership with Apple.

These companies have identified an important role within this developing market that needs to be filled, one that they are uniquely qualified to fill.

“Autonomous vehicles will still need to be managed – fleeted, de-fleeted, maintained and moved – and car rental companies are poised to do that, as they already run the largest fleets in [the] US and even the world,” says Chris Brown, Executive Editor at Auto Rental News.

“In the car rental industry, what we do have are great fleet management capabilities that are very difficult to replicate… nobody has that kind of chain from life to grave of managing a car,” Tom Kennedy, Hertz’s Chief Financial Officer, said during a talk at a Friends of Finance luncheon at The University of Tulsa.

(Source: 2018 State of the Car Rental Industry report by Perficient)

TELEMATICS

Telematics, the long-distance transmission of computerized information, presents a huge opportunity to the car rental industry.

The Internet of Things has provided companies with the ability to leverage new technology for better fleet management and allows them to closely monitor vehicle performance and safety.

Connected cars maximise operational efficiency and increase customer satisfaction. Idle vehicles are easy to track and monitoring fuel levels becomes transparent, as telematics can tell companies and customers how much fuel was in the tank at the time of collection and drop off – a win-win situation.

So, greater operational efficiency and happier customers? It’s no wonder that companies remain keen on testing new technology.

In February 2018, Avis Budget Group announced that it would convert 50,000 vehicles into connected cars by installing telematics.

“The integration of telematics will accelerate our ability to meet our goal of a fully connected fleet by 2020,” says Arthur Orduña, Executive Vice-President and Chief Innovation Officer at Avis Budget Group. “Connected cars offer us unparalleled potential to dramatically improve the customer experience while also streamlining operations and reducing costs, which is why we’re taking aggressive steps to fully connect our fleet as quickly as possible.”

Premium models within Woodford Car Hire’s fleet feature some telematic technology, including the ability to communicate with clients via onboard systems, driver aids and collision warnings.

“However, the South African market’s move toward embracing these ‘in-car’ technologies is relatively curtailed by bandwidth issues and the lack of infrastructure,” says Essa Ebrahim Suleman, Director at Woodford.

(Source: 2018 State of the Car Rental Industry report by Perficient)

SECURE DRIVE

Whilst not a traditional car hire company nor point-to-point service, Secure Drive is offering business travellers on the African continent an alternative, particularly if their focus is on security and peace of mind.

It offers cost-effective, secure travel with chauffeur-driven vehicles, and currently has dedicated offices in Cape Town, Johannesburg, Lagos and Abuja (Nigeria), and Nairobi (Kenya). Through long-term, strategic partnerships it also offers Secure Drive services in over 40 countries around the world, not only Africa.

Secure Drive’s drivers are specially trained with a skill set that is not offered by any other company in the market. Mandatory training for all staff includes ‘street wise’ driver training, hijack prevention, first aid, advanced driving, basic motor mechanics, and counter surveillance. Each client is assigned a dedicated journey facilitator who is actively involved from the first request until after the trip has been completed. Customers have access to the ArcWatch App, a geolocation app that allows customers to check in along the way, as well as a distress function which pin-drops their location.

Secure Drive’s service offering includes armed transportation in some locations and crime or risk-related updates.

Its fleet includes a variety of vehicles from entry level sedans to Mercedes Benz Vianos, various SUVs and luxury sedans.