Q & A: Hertz – Small margins

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It’s been almost two years since Wils Raubenheimer joined Hertz Rent A Car as CEO. He learnt very quickly that what he believed to a fairly simple business was anything but – it’s actually a very complicated and highly competitive environment. He took time out of his busy schedule to give Business Traveller Africa some insight into the world of car rentals.

Q: What are your thoughts on the current state of the South African car rental industry?
A: The industry is under pressure and not growing for a number of reasons. These include local economic conditions, inflation, the latest immigration requirements (the implementation of which have been delayed), unrealistic wage demands – which will inevitably lead to fewer people being employed – as well as the Ebola epidemic which has had a material negative impact on tourist numbers. According to the Southern African Vehicle Rental and Leasing Association (SAVRALA) statistics, total revenue for the industry as a whole has been flat with relatively small growth in government and replacement sectors only.

Q: Are there any global trends you are picking up on that could affect the local industry in the near future?
A: While the weak Rand has attracted more tourists, Ebola and immigration requirements have countered that. The large international tour operators and brokers have created a competitive environment in which rental prices are unrealistically low. The effect of this will, unfortunately, lead to increased pressure on the local car rental industry and an increasingly difficult environment for smaller players to survive in.

Q: What effect has the implementation of e-tolls on Johannesburg’s roads had on business in the past year?
A: A notable portion of renters still do not understand the workings of e-tolls which has resulted in endless queries. From a Hertz perspective, millions have been spent on software development and additional headcount which has increased our cost structures and investment with no possibility of recouping these costs. Car rental is an extremely competitive environment which requires enormous capital investment and e-tolls have just added another cost layer.

Q: Looking at another issue – is vehicle damage still one of your biggest challenges?
A: Vehicle damage and write-offs are by far our biggest challenge. Hertz has introduced several measures and controls but vehicle damage and write-offs remain the second largest cost after fleet holding costs.

Q: What is currently your most popular class of car – with examples – in the South African business travel space?
A: The most popular class of car has shifted from the small and cheap run-around to the small SUV like the VW Tiguan, Toyota RAV and Kia Sportage. My guess is that renters prefer the SUV due a higher ride and the state of our roads.

Q: What are your thoughts on chauffeur drive and its place in the business travel space?
A: We are placing a lot of emphasis on chauffeur drive and this division has grown substantially. We are finding more and more executives making use of this service due to traffic and parking problems. In my view, chauffeur drive has a lot of potential with great growth opportunities.

Q: What are the details and benefits of your Gold Plus Rewards programme?
A: Depending on how many rentals a member takes out in a year, and subject to terms and conditions, they are entitled to priority service at pick-up counters, domestic business lounge access, upgrades to a higher class of vehicle and free Rental Day vouchers after 10 rentals. President Circle members also get dedicated parking bays and guaranteed vehicle availability

Q: Are there plans to grow the Hertz presence in other African countries?
A: Yes, most definitely. Besides South Africa, Namibia and Zimbabwe, we are currently at an advanced stage to start operations in Botswana and Zambia. From a Hertz International perspective, Hertz will also soon be operational in Mozambique, Tanzania and Kenya.

Q: How is technology changing the way Hertz does business?
A: We have to deal with massive volumes, on a global perspective, with a very expensive fleet running into the thousands, pricing that changes on an almost hourly basis while striving to  provide our clients with a seamless experience and as little inconvenience as possible. The car rental counter is almost always the last stop on a journey and where a lot of frustration is vented. As a result, technology is a critical part of the business and the backbone of the environment in which we operate. We are constantly upgrading and modernising our IT platforms to remain competitive and to endeavour to give Hertz, as one of the premium car rental brands, that edge.

Q:  What do you think the South African car rental industry will look like in 10 years’ time?
A: I wish I knew. If I had to gaze into the so-called crystal ball, I would say optimistic.