Changing face

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The car rental industry remains a dynamic sector of the travel industry, with major brands realigning, innovative new products on offer, and an increased focus on chauffeur and transfer services. Richard Holmes took a ride and came back with these findings.

While the past few years have been kind to corporate travellers as stagnant demand and a glut of supply kept prices stable, the industry has turned a corner and rental rates are on the rise. Good news for the health of the industry, but bad news for those holding the purse strings.

The steady increase in rental costs is “primarily because of increased vehicle costs, as well as maintenance costs,” explains Rainer Gottschick, Chief Executive of Avis Rent a Car Southern Africa. “The volatility of the exchange rates in the emerging markets also influence the pricing.”

With the South African Rand touching record lows in March, it’s not hard to see why the purchasing, service and brand licensing costs that are sensitive to exchange rate fluctuations have hit the bottom line of the major rental brands.

In addition to increased input costs, the industry has absorbed low annual increases over the past five years adds Gaynor Von Loggenburg, Sales and Marketing Director for Bidvest Car Rental: “Since 2010, industry average car rental rates have remained low, only increasing marginally over this period by five percent cumulatively. This is not sustainable or responsible, and customers can expect to see higher than inflationary increases driven by external factors such as vehicle price increases, interest rates, fuel and shareholder expectations.”

For the industry to remain sustainable, rates increases are unavoidable, adds Martin Lydall, Chief Commercial Officer at Europcar: “The depreciation of the rand has put considerable pressure on new car prices, and this, combined with general inflation, means that all businesses will have considerable additional costs that they will have to absorb. Inevitably, some of this will have to be passed on to the customer.”

To buffer against the rise in rates, corporate renters are largely sticking to modest vehicle groups and curtailing the length of trips to save on car rental and travel costs.

“The market remains very competitive and companies are examining their travel costs very carefully,” adds Sherl Camera, General Manager: Business Development, Hertz Rent A Car. “Increasingly, companies are putting their car rental business out to tender.”

“Customers are being more mindful of the vehicle groups selected, as well as scheduling fewer business trips,” says Lydall, adding that “the rapid adoption of internet communication technology has facilitated the reduction in business trips.”

Despite the rising rates, there is definite growth in the industry and the steady flow of investment into Africa is trickling down the travel industry to benefit rental and transfer agencies.

The likes of Zambia, Angola, Kenya, Nigeria and Mozambique are all showing strong demand, and “the growth points generally follow territories where we see investment in infrastructure and mining, as well as growing tourism,” adds Gottschick.

An excellent bellwether of the strong growth is the expansion of Hertz Rent A Car in southern Africa.

“Hertz in South Africa is an international franchisee, with Namibia, and more recently, Zimbabwe, falling under our southern African umbrella,” explains Camera. Hertz South Africa also recently signed a deal to purchase an existing car rental company in Botswana, which will be rebranded and open as Hertz Botswana in April. Hertz Botswana will have rental offices in Gaborone, Maun and Francistown.

The company is also catering for the growth in long-term workers on contract who require their own transport, but don’t want the hassle of purchase and maintenance. Hertz’s ‘30 Day Plus’ rolling rental plan offers long-term vehicle hire at discounted prices. Monthly rates start from R4590 ($372) per month (Kia Picanto or similar) and includes three additional drivers on the rental agreement, as well as delivery/collection within 50 kilometres of the closest branch.

“This offering is particularly well-suited to contract workers, expats home for an extended holiday, employees with car allowances, long-term visitors and tourists to South Africa, and small business owners, as well as individuals not wanting to go the long-term finance route,” says Camera.

While car rental agencies continue to enjoy strong demand despite rising rates, it’s the shuttle and chauffeur-drive side of the industry that is seeing particularly strong growth. Driven by a trinity of cost, convenience and concern for personal safety, escorted transfers are booming, as corporate travellers see the benefits of letting an experienced local take care of getting you from A to B.

“With the pressures of modern business, more and more companies are looking to optimise their employee’s time, and a transfer provides just that,” advises Guyck van Heerden, Managing Director of EZ Shuttle, which has offices in major centres from Cape Town to Nelspruit.

“There has been an overall increase in corporate transfers year-on-year, especially with business travellers who would rather use the time spent in the vehicle on the phone or replying to emails, rather than driving themselves,” says Sofia Stez, VIP Bookings Operator at DSC Transport, which operates in Johannesburg, Durban and Cape Town, but has plans to expand to Mauritius and Botswana in the near future. “We also see an increase in transfers from businesswomen who travel in the early hours of the morning and late at night, and don’t want to travel by themselves for safety reasons.”

Exorbitant airport parking charges are cited as another push-factor underpinning growth in the transfer sector. Put simply, “airport transfers are the backbone of the industry,” says Van Heerden.

While dedicated transfer companies offer a bespoke service tailoring both luxury and price to all sectors of the market, established rental agencies are equally active in the chauffeur and transfer sector. Most major players offer single-trip transfer bookings, as well as chauffeur services with car and driver hired out for pre-booked blocks of time.

Europcar offers point-to-point transfers and daily chauffeur services in cities across Africa, “offering convenience and comfort as well as the security of being met at the airport,” says Lydall. “Europcar’s chauffeur service is competitively priced against taxi-cab prices, beating rand-for-rand fares in some areas. Chauffeur set rates paid upfront also make it easier to handle budgets. This has also made it a popular option for groups travelling to conferences, and savvy business people away from their home town.”

Similarly, Bidvest Car Rental offers door-to-door transfers as well as chauffeur-drive services, while Hertz’s ‘We Drive You’ chauffeur product provides for both short journeys and multi-day long-distance chauffeur services. Tempest Car Hire offers a pared-down value-for-money airport transfer service within South Africa. Rates are calculated on distance per vehicle, and with both economy hatchbacks and larger multi-purpose vehicles on offer, it can be a cost-effective option for colleagues travelling together.

In South Africa, airport transfers are often sought-after for connecting with late-night and early-morning flights, while the use of chauffeur-drive and ‘Point 2 Point’ shuttle services for everyday commuting are “more popular in countries like Angola and Mozambique where driving conditions are often extremely demanding,” says Gottschick. “We also see a growing demand where the risk profile of the specific country or city is deemed to be high.”

A case in point are the busy streets of Lagos, Abuja and Port Harcourt. Nigeria’s roads are not for the faint-hearted, so perhaps no surprise that in the country’s major commercial centres self-drive rentals are limited to local companies… and clients with nerves of steel.

The “majority of business travellers actually opt for the chauffeur-drive option, which is the service provided by most car rental companies in Nigeria,” says Funmi Ogunmola, Customer Service Manager for Avis Nigeria, which has offices in seven major cities across the economic heart of West Africa. “This saves them the hassle of finding the right address for their meetings and the hectic driving experience in cities like Lagos and Port Harcourt.”

Armed transfer services are another niche particular to Nigeria. While rental and specialist agencies across Africa offer the option of armed bodyguards acting as chauffeurs, Avis Nigeria offers heightened levels of personal security for both airport and intra-city transfers. The agency also recently partnered with a local company to provide armour-plated vehicles on request, with luxury Land Cruiser and Mercedes Benz options on offer.

While armed transfers and multi-day chauffeur services can prove expensive, there are a number of ways corporate travel managers can keep costs down.

In Johannesburg, for instance, shared shuttle services to central Gautrain stations are proving a winner for corporate travellers.

“Any individual using this option would cut down travel costs in a big way, as the service is shared and the same applies to costs,” suggests Mandla Mkhwanazi of TTE Shuttle, which operates in and around the province of Gauteng. “There is definitely an increase in demand, as most international customers prefer not to drive themselves when in South Africa for business.”

For Mkhwanazi there are other benefits to operating a shuttle service.

“It is more popular than point-to-point, because we deal with the same customers most of the time, which allows us to build a long-term relationship,” he says.

For local companies managing staff movements, most transfer companies charge per vehicle, not per person, so grouping colleagues in a single transfer can quickly bring the per-head cost down.

“DSC offers all their clients negotiated rates on certain key routes – for example, from the company’s office to the airport, or hotel to airport. This saves the client money on the most frequently-used routes,” says Stez.

“By consolidating spend with as few suppliers as possible, companies can certainly push back at their providers for better rates. In addition, grouping people together can help bring the cost per head down,” agrees Van Heerden. “A key driver in our industry has been the need for employers to control spend and manage liability.”

Saving costs on an unregistered operator can prove to be a false economy, exposing your company to liability when unlicensed drivers and sub-standard vehicles are used. Corporate customers should ensure that their chosen transfer service provider has sufficient passenger liability insurance, uses drivers with the correct permits – and ideally advanced driving certifications – and operates a modern fleet of roadworthy vehicles.

“Since there are relatively low barriers to entry in our industry, there are many fly-by-night services which cut regulatory corners,” says Van Heerden. “Always insist on valid tax certificates, appropriate vehicle permits, up-to-date workman’s compensation, and a full fleet list. If the vehicles are older than 24 months, they probably need replacing!”

With no shortage of transfer companies and big-brand rental agencies servicing demand for transfers, companies are increasingly looking for innovative ways to set themselves apart.

With its focus on corporate business, DSC Transport does a particularly good job of adding value, providing complimentary mints, water and newspapers in all executive transfers.

 “We have a large fleet, ranging from Hyundai for our economy transfers to Mercedes C-Class for executive. And for the traveller who wants to travel in extra-VIP style, we have a luxury division with E-Class, S-Class and ML SUV options, as well as an armed guard division for travellers who want that extra bit of security,” says Stez.

Although few clients may notice it, the installation of Samsung Virus Doctor air purifiers in all DSC Transport’s vehicles is a welcome touch. With dozens of clients transiting through a single vehicle in a day, the potential for transmission of germs is high, and this innovative way of helping travellers stay healthy on their travels is a clever way to quietly add value.

The company also accepts credit card payments in all vehicles, and provides free Wi-Fi in executive and luxury chauffeur-driven transfers.

On-board Wi-Fi may be fast taking off on global airlines, but the transfer industry has been slow on the uptake. Citing the likelihood of travellers having data connectivity via smartphone, most companies contacted by Business Traveller Africa responded that it is not a priority for them at this stage, and that their current focus is more on providing competitive rates. However, this is likely to change, and before long executive transfer companies will likely be forced to install internet connectivity to keep up with the competition.

From connectivity to seamless booking, the crux of the matter is that the industry has become more competitive.

“Arriving on time in a clean car is simply not enough anymore,” says Van Heerden.

Similarly, Europcar last year launched its BusinessConnect product for small and medium-sized businesses, to complement existing B2B booking tools.

“Customers are able to book rentals for South Africa, Botswana, Namibia, Swaziland and Lesotho via BusinessConnect and their B2B Booking tool,” explains Lydall. “Europcar will be launching an updated version of BusinessConnect in April that streamlines the online application process and enables use of the facility within two business days.”

While some rental and transfer companies differentiate themselves behind the scenes, others make the experience memorable with everything from free mints to rental vehicles with that much-loved ‘new car’ smell. Although corporate travellers will need to adjust their budgets to accommodate rising rates, there’s still good value to be had, particularly in southern Africa where the rental landscape recently became a whole lot more competitive (see sidebar). By putting the right partnerships in place and streamlining your travel buying, you’ll be on the road in no time.

Choose your wheels

Vehicles in category ‘B’, ‘U’ and ‘C’ are the most popular choices for corporate travellers. Here’s what you can expect to be driving at a few of the major rental agencies:

Bidvest Car Rental
Group:
B

Vehicle: Toyota Corolla Impact
Features:
air bags, power steering, air-con, ABS, electric windows

Avis Rent a Car
Group:
B – Compact
Vehicle:
VW Polo Hatch
Features:
Manual gearbox, air-con, radio/CD, power steering, airbags, central locking, ABS brakes

Hertz Southern Africa
Group:
U
Vehicle:
Chev Cruze 1.6
Features: ABS brakes, manual gearbox, air-con, radio/CD, power steering, airbags

Europcar
Group:
C

Vehicle: Toyota Corolla 1.3
Features: manual gearbox, air-con, radio/CD, power steering, airbags

Bidvest drops Budget, snapped up by Avis
Don’t be surprised if you find yourself collecting your Budget-branded rental car from an Avis Rent a Car desk at an airport near you. As of 1 March 2015, Barloworld is operating both the Avis and Budget rental brands in southern Africa, after Bidvest Car Rental chose not to renew its license to operate the Budget brand.

Under the license agreement, Barloworld will operate the Budget brand in Botswana, Lesotho, Malawi, Mozambique, Namibia, Swaziland, Zambia and Zimbabwe, as well as South Africa. Barloworld already operates the Avis brand in Angola, Botswana, Lesotho, Malawi, Mozambique, Namibia, South Africa, Swaziland, Zambia and Zimbabwe.

It is expected that Barloworld will slowly differentiate the Avis and Budget brands in the marketplace, with Avis catering for high-end full-service customers and Budget servicing budget-conscious clients.

Bidvest is by no means bowing out of the car rental space though. The company has simply rebranded to operate as Bidvest Car Rental, with 110 rental locations across South Africa, Namibia and Botswana.

“We are looking at expanding our footprint into Africa, leveraging off the Bidvest Group of companies,” says Gaynor Von Loggenburg, Sales and Marketing Director for Bidvest Car Rental.

Any existing bookings made for Budget Car Rental before 1 March 2015  – either online, direct or via the travel trade – will be serviced by Bidvest Car Rental. Car rental groups and agreed rates remain the same.

“When the change was announced we immediately made contact with corporate customers, and particularly international inbound customers, to let them know to proceed directly to the Bidvest Car Rental office on arrival,” says Von Loggenburg. “It’s really just a name change. For the customer, everything else remains the same.”