Car rental becalmed

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Car rental, like other sectors of the travel and hospitality industries, has suffered during the pandemic, with little hope of an early recovery on the cards. 

Historically, this sector has relied heavily on international tourists; government bookings; corporate trips; and rentals for ordinary citizens whose cars are being repaired. This is the view of gm of Travel Counsellors South Africa, Mladen Lukic.

Mladen says due to international travel restrictions, South Africa has not seen much of a return of international tourists. He adds that while the government sector has been permitted to travel throughout lockdown, budget constraints and fear of the virus have seen a cutback in bookings from the sector. Corporate domestic travel is also rebounding at a slower rate than domestic travel, due to restricted business operations and duty-of-care concerns. An increase in work-from-home positions has seen a reduction in car rentals when privately owned cars are being repaired. All these factors have impacted the car-rental industry substantially, Mladen points out.

Of the four major car-rental companies that were approached for comment, none responded.

Gm of the Southern African Vehicle Rental and Leasing Association (Savrala), Sandile Ntseoane, spoke to Travel News about the current state of the car-rental industry in the wake of the second wave of the pandemic.

Sandile says car rental has been one of the most severely impacted sectors, and after months on end, with little to no revenue, the sector is going to take some time to recover.

“Approximately 50% of our revenue relies on air travel. As such, start-up timelines and volumes of passengers flying on domestic and international flights are crucial to us. Our business was hardest hit by airlines experiencing a steep fall in traffic well ahead of the lockdown on March 27, as well as travel restrictions, which caused revenue to literally dry up overnight. While fixed costs in our business are incurred regardless of business volumes, our immediate reaction was to cut expenses, shrink operating costs, reduce frills and conserve cash wherever possible,” he told Travel News.

Savrala saw an overall 1% increase in growth over the course of 2019 but this dropped to -43% by the end of 2020. Vehicle utilisation also dropped from an average of 72,8% throughout 2019 to an average of 53,1% throughout 2020.

Sandile adds that international travel regulations have resulted in a 57% reduction in inbound car-rental bookings and corporate sector bookings were down by 35% for 2020. Domestic leisure rentals are also showing negative growth, but due to slow recovery in other sectors, domestic leisure remains the sector on which the industry is pinning its hopes at present.

“Our customer base has shrunk significantly this year and with so much ongoing uncertainty, it is difficult to make predictions for the future. We estimate that, at best, the industry will see around 30% of its 2019 volumes this year,” says Sandile. He says vaccination remains the industry’s only hope to turn the situation around.

Md of EZ Shuttle, Guyck van Heerden, agrees that the demand for both car rental and shuttle services is very bleak. “International inbound travel will probably remain very depressed for the rest of the year, together with domestic corporate travel. However, we have seen a sharp rise in domestic leisure travel to around 60% of pre-COVID levels.

“It is so difficult to predict demand in the coming months. Will there be a third wave, even a fourth, and how long is government going to take to get 67% of the population vaccinated? All of these factors will have a material impact on our sector’s operations and, as such, we need to tread very cautiously this year. A continued focus on running lean and mean and being reactive for now – that is our strategy,” adds Guyck.

Sandile says the car-hire industry desperately requires support, but has seen none from government, aside from TERS.

Guyck voiced the same need, saying: “We are very grateful for TERS, which has supported our staff substantially. That being said, we’ve had no further support from government and don’t expect that to change. Outside of TERS, it seems it’s each man for himself.”

It was revealed in a February Parliamentary Committee meeting on Tourism that the fortunes of the car-rental industry have major impact on other industries. Rental companies have traditionally bought 12,5% of locally manufactured vehicles for car rentals.

Original Article Posted on SA Travel News