January 2005
“A pretty flat year” is how Rental Section, GM, Wayne Duvenage, sums up 2004 saying that real transaction growth was in the lower single digit figures with the industry concluding over 1,6-million rentals by year end.
“With just under five days on average per rental, the total number of rental days was around 8-million. In terms of pricing on a year-on-year basis, the industry managed to obtain a positive rate adjustment of some 7%. This was, however, short of what was necessary to maintain adequate returns for shareholders.”
During 2004, the industry had faced increasing challenges including lower used vehicle residual values, higher than inflation increases in vehicle repairs and maintenance costs as well as spiraling damage and theft expenses.
These factors had produced a typical margin squeeze and the trend of growing expenses ahead of revenues over the past three years had forced the industry, yet again, to tighten its belt explains Duvenage.
While efficiencies had improved with vehicle utilization running at close to 76% on average, he comments that the downside had been that running tight fleets had caused more frequent sellout situations. “The companies that managed their fleet the best in 2004 are the ones that were able to increase market share.”
While the foreign inbound market is expected to remain relatively flat in the short term, Duvenage says that the car rental industry hopes to achieve a 5% increase in its volumes during 2005 reaching approximately 8,5-million rental days. “Rates, however, need to rise between 8% -10% and overall revenues by 15%.”
Current revenue yield trends indicate that the competitive nature of the industry continues to be of benefit to the consumer, something which has continued for several years and which we anticipate will abate to some degree in 2005. Product innovations, value added experiences and improved service levels will emerge as the differentiating factors during 2005.
During the past 12 months, SAVRALA members have given financial support to Business Against Crime and become active proponents in the fight against vehicle and related crime. The installation of microdot technology as a factory standard on vehicle production lines – in preference to after-market fitment – is being firmly encouraged.
“While microdot technology does not offer a total solution to the problem, it is an effective method of vehicle and component identification and will go a long way in deterring the criminal element,” explains Gary Smith, chairman of the association’s rental section. “Its effectiveness, however, lies in critical mass. It’s pointless for border control posts, roadblock and policing personnel to look for micro-dotted vehicles and parts if only a fraction of the vehicles on the road are fitted accordingly.”
SAVRALA is currently compiling a list of car rental industry abusers, information that will be shared with its members. “Our aim is to stop renting to those individuals who quite literally are taking our members for a ride by running up debt and then moving their business from company to company. Or those with unacceptably high accident rates for example,” adds Smith.
The car rental industry, as measured by SAVRALA members who contribute to the statistical database, are responsible for the purchase of around 35 000 new vehicles per year. Responsible for between 90% – 95% of the overall car rental market in South Africa, they account for virtually all business conducted at airports as well 90% of off-airport rental transactions.