Industry opinion is mixed as to how successfully travel agents are selling car rental products, but there are certainly some positive signs that things are looking up.
Car hire remains one of the few remaining sources of commission for agents and certain companies are offering added bonuses for agents that can up-sell car hire throughout the summer.
The main thrust of the advice car rental companies dish out to agents is to offer customers the option to rent a car whenever they book a holiday and not to settle for the cheapest vehicle, but to asses the customers’ needs and recommend an appropriate car, thereby improving the quality of their own service offering and increasing their chances of earning a better commission rate.
Europe remains the leading outbound destination for car hire for Arab nationals travelling on holiday, but Australia, New Zealand and the US are beginning to catch up.
In terms of intra-regional traffic, most customers shop at car rental kiosks at the airport when they arrive in their destination, rather than pre booking through a travel agent or booking online, according to some car rental companies.
Customers coming from further a field to the UAE now face the added complication of having to produce an international driving license on arrival if they wish to hire a car.
Following is a roundup of some of the leading players that are driving growth in the region.
Holiday autos
Holiday Autos Middle East has spent the last 12 months working on a series of trade and consumer promotions that have made the brand a household name. Holiday Autos has attempted to put the love back into driving with its Summer of Love Campaign, with special incentives for agents.
Naz Musa, MD, Holiday Autos Middle East:
Inbound trends:
With the imminent arrival of road tolls in the UAE, it’s a question of letting people know and giving them the information. It’s the same as in London when the congestion charge was enforced. Suppliers told you they would charge you any fines that you did not pay.
Outbound trends
: Popular outbound destinations are the UK, South Africa, Australia, France, and Germany. There is much more growth in the US, but from a small base. People are realising that cars are easy to pre-book and agents are realising they can earn up to 15% commission. On a $500 rental that’s $75, which is more than they might get for their airline seat.
Agents:
Sales through agents are increasing, driven by the fact that airline commissions are diminishing. Some of our consumer promotions have driven business through agents, which helps.
Tips:
• Sell the Holiday Autos’ ‘Summer of Love’ special offer. For every day’s car rental agents earn AED 5 (US $1.4), and the money goes direct to the counter staff. If they rent an average car out for 10 days, that adds AED 50 ($14) to their pocket. If they make a booking per day – that’s AED 250 ($68) a week, which is AED 1000 ($272) per month. That could be 25% of their salary again every month.
Industry evolution:
Pre-booked, inter-company affiliations and onlinebookings.
Avis
Avis is present in 10 countries in the region through licensees, primarily in Saudi Arabia, the UAE, Qatar and Bahrain. In the UAE and Saudi Arabia, the company’s main focus is corporate business, while in Qatar it is mainly corporate driven. The company reported year-on-year growth of 30% in the region last year. Intra-regional bookings growth hit 90% last year.
Thierry Domballe, regional director – Mediterranean & the Middle East, Avis:
Trends:
We pay a lot of attention to inbound business, but now I want to make sure we focus on intra-regional and outbound growth. Outbound [growth] was about 20% last year and the key countries for outbound sales were France and the United States. About 20-25% of business comes in through the travel trade, depending on the country.
Agents:
It’s the responsibility of the licensee in each country to train the travel trade and my challenge is to make sure they can talk to each and every one of our partners to make sure we are getting penetration in the industry.
Regional expansion plans:
Avis opens an office in Yemen on July 10 where business will be corporate driven and there are big prospects in terms of the gas industry. We are looking at controlled growth and alliances are very important to us.
New initiatives:
We are considering specific packages for ex-pats travelling back to their home countries for three or four weeks in the summer. Tactical campaigns are a way to differentiate ourselves, but they won’t necessarily be on price.
Dollar Thrifty Automotive Group (DTAG)
Dollar Thrifty Automotive Group boasts a 12,000-vehicle strong fleet in the United Arab Emirates and has 14 sales outlets, making it the largest car hire firm in the UAE in terms of presence. The company can be clearly separated into its two major businesses; Dollar Rent A Car and Thrifty. Dollar is a 50/50 mix of leisure and corporate, with franchises throughout the Middle East. Its UAE fleet is set to reach 3000 vehicles by the end of 2007 – a 40% growth for the year. Thrifty is focused, more on the corporate customer, particularly in the UAE, but does some leisure business.
Sam Eltibi, regional director, Dollar Thrifty:
Trends:
Most inbound sales are made when customers arrive and many people like to hire a car and driver. They like to shop around at the airport or they go to the hotel. Customers are sharp; they often book with me and three other people and they arrive and shop around. At hotels, if you book and don’t turn up there is a no-show fee, but car rental companies have no cancellation charge.
Agents:
In this region people still like paper rates and they still like to visit the travel agent. They like to go away with a voucher in their hand, even though we have an online booking facility. However, third party internet aggregators and corporate web sites are offering the customer an attractive alternative, which means business once channelled through agents is now booked online, through Expedia, Travelocity or Thrifty.com for example. We are the last of the food chain where they can make commission.
Industry evolution:
Our services are becoming increasingly sophisticated. This is a service region and no matter what fees we ask, people will keep renting. Many people say the Metro will take away business from taxis, but I don’t think it will. We are in a growing city and everyone will have his share of the transportation pie.
Regional expansion:
The Thrifty business has grown and established itself and we are now trying to grow Dollar Rent A Car to a more sizeable organisation. In the UAE, new Dollar outlets are set to open in the new Four Points Sheraton in Bur Dubai and in the Arenco Tower on Sheikh Zayed Road. Dollar also intends to appoint new franchises in Qatar, Kuwait, Oman, Saudi Arabia, Lebanon and Jordan in before the end of the year.
Hertz UAE
Hertz UAE tends to focus on the top end of the market but remains a universal brand with something for everyone in its fleet of more than 6000 vehicles. The company reported 23% year-on-year revenue growth in 2006 and recently opened its 13th UAE outlet in the Radisson SAS Hotel in Dubai Media City. Regionally the company has 11 Hertz franchises: Bahrain, Egypt, Qatar, Kuwait, Oman, Saudi Arabia, Lebanon, Jordan, Syria, Yemen and the UAE.
Bob Farrow, general manager, Hertz UAE:
Inbound trends:
The UAE the car rental industry is very much led by leasing with the ex-pat population renting cars. Short-term holiday leasing is a tiny portion of our business.
Outbound trends:
Germany is growing significantly and Switzerland, Austria, the UK, and Australia are popular. We don’t get much business to Asia because people don’t tend to self drive there; they want chauffeur drive.
Agents:
About 60% of all our bookings out of the UAE are direct because we’ve pushed direct sales. But Hertz UAE has just taken over the responsibility of outbound travel trade sales from its GSA in Bahrain and we will push agent sales now. Around 30% of business is travel trade and 10% internet.
Industry evolution:
In the next five years we expect more short-term tourism rental. There will be a reason and a need for people to rent cars. If you are going to go out to Dubailand or Al Bawadi, you are not going to get taxis to do that. This place could get like Florida. It will happen in other countries following the same growth pattern, like Qatar and Oman.
I think the trend will shift from 4WD to saloon vehicles. It’s going to be a question of cost and there are already signs of the green lobby beginning to take hold here.
Regional expansion:
Hertz plans to open new branches in Dubai Marina, Dubai Festival City, Sheikh Zayed Road and the new Terminal 3 at Dubai International Airport by the end of the year. An additional branch is planned for Dubai Investment Park in 2008.
National Alamo
National Car Rental and Alamo Car Rental are well-defined brands, with Alamo focused on leisure sales National Rent A Car focusing on corporate business. The latter handles Alamo’s outbound requests in countries where it not have a presence, although National’s strength is within the region. The company reported 480% revenue growth in 2006 over 2005.
Peter Blott, managing director, Vanguard Marketing Services Middle East Ltd. for National Car Rental and Alamo Rent A Car:
Inbound trends:
UAE laws dictating that all visitors must carry an international driving licence are impacting all self-drive rentals for visitors at airport point-of-sale, but local domestic business continues to develop. Self-drive restrictions are due in part to an attempt to alleviate general traffic congestion and to improve road safety. Direct self-drive development continues apace in other GCC territories where these restrictions are not imposed though. There is also a growing market for ‘car and driver’ transactions. Most self-drive rentals are to regional business travellers who have consistent transient travel patterns in the region.
Outbound trends:
Perceived price problems where the final bill is more than the original quote, as well as reticence in driving in foreign environments [might put people off]. With the advance of technology and the willingness of the car rental industry to make rental pricing and processes easy to use, the result is far more ‘car rental pro rata’ than five years ago.
Agents:
Travel agents still view car rental as a ‘necessary evil’ and a secondary service for customers. They need to consider it a significant revenue earning opportunity, particularly when their core business channel of airline ticketing is shrinking and their margins are being accordingly squeezed.
Tips:
• Most agents accept car rental bookings from customers based on the customer asking for a particular vehicle. More attention should be paid to establishing the customer’s needs and then making a recommendation. For example, it is no good accepting a booking for a small car when the family has far more luggage than a small car can handle.
• Agents always ask for the cheapest price with no real regard for standard of service that will be provided to their customers. The cheapest price will also give them the lowest commission yield.
• All that is required is training at counter level and companies such as Alamo Rent A Car provide this service to agents across the Middle East, free of charge.
Regional expansion plans:
Alamo currently operates out of the UAE and Jordan in the Middle East, but plans to open offices in Bahrain, Egypt, Kuwait, Lebanon, Libya, Oman, Qatar and Saudi Arabia by the end of the year.
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