July 2007

SAVRALA reports that the car rental industry continues to show very positive growth with rental days growing at 12% and the number of rental transactions showing a 13,3% growth over last year for the first six months.

According to the General Manager of SAVRALA’s rental section, fleets are continually being increased to meet the growth in demand with an average fleet of 46 000 vehicles currently in place. This shows an increase of 15.8% for the same period over 2006.

Still of considerable concern to the car rental sector, however, is the 51% increase in the number of accidents and the resultant hike in accident repair costs. As a result of the growing number of accidents, fleet vehicle downtime (time spent off-road in repair and panel shops) is having a hugely negative impact on fleet utilization.

Operating costs that continue to soar, new car prices and the frequency of interest rate and fuel hikes (when transferring fleet) are all elements that are putting pressure on margins. Due to tough competition and the very competitive rates offered by some brokers, SAVRALA members are still finding it very difficult to increase their rental rates. In some instances, corporate customers are enjoying rates negotiated as much as three years ago.

Car rental customers are expecting more value-added offerings. While they are only prepared to pay the lowest possible rates, they still expect all the safety features such as ABS brakes and central locking in entry-level rental vehicles.

However, they are only prepared to pay the same price as before – that is, when these categories of vehicles were not equipped with these features. Today, certain safety features that were previously only available on luxury model vehicles are now standard in most entry-level vehicles. But, at a cost to purchase which is putting a lot of strain on SAVRALA’s car rental members who are already finding it very difficult to obtain rate increases.

Car rental customers expect speedy transactions, accuracy and good value for money deals at the rental counters and SAVRALA members constantly find themselves investing in staff training programmes, staff incentives schemes, system upgrades and improved technology. The cost of implementing these programmes does not necessarily mean more business – the investment purely serves to raise the bar in order to remain competitive and to meet customer expectations.

By comparison, ‘lost cost’ airlines are offering low budget rates with strict terms and conditions applicable in order to qualify for the low rates offered. These include online bookings only, upfront payment, limited or even no option to change or to cancel reservations, little or no opportunity to upgrade, no pre-seat allocation and very basic or refreshment services at an additional cost.

While value-added services come at a cost to the rental companies, car rental customers still expect them but at rates that compare with the cost of trailer or carpet cleaning machine hire of R150 – R200 per day!

(2007-07-SAVRALA-rental update)