An audience with Lance Smith, Avis Budget’s Executive: Sales is always an hour or two well-spent, as one of the South African car rental industry’s most respected executives is a stickler for detail and numbers, always willing to provide a revealing snapshot into the state of his industry and the ‘road ahead’, as editor Dylan Rogers found, once again.
It’s a tough business, this car rental business. Times are tough, margins are small, and perception is that it’s an industry on the wane, under threat from technology in the form of ride-hailing services such as Uber. And that’s not all, says Avis South Africa’s Executive: Sales, Lance Smith. He cites additional challenges in the form of a low average daily rental rate, car damages, exchange rate fluctuation, seasonality around the country’s inbound market, and the geographical spread of South Africa’s car rental industry.
But it’s not all doom and gloom, and before you write off the car rental market, just take note – in 2017 this industry in South Africa was worth R5.6b ($453m) in revenue, which is not an insignificant number, and Smith is optimistic that this number will grow, given the right set of conditions and the right amount of innovation on the part of the industry’s major players. But it all starts at home. “If this economy starts to tick and go in the right direction, creating jobs, the local tourism segment will be the real banker for the travel industry,” says Smith. “If this country goes in the right direction, we see two significant opportunities, in terms of travel groups. Internationally, Asia, and in particularly the Chinese, and then domestically, the black emerging market.” Speaking of those numbers, according to Smith, 2018’s figures are so far ‘flat’, in terms of rentals and revenue hasn’t moved, compared with these months last year. Significantly, though, the inbound market remains “the star of the show”, up 13% in 2016, up 17% in 2017, and already showing high single digit growth in 2018.
“You’ll hear a lot in the media about this market being down, but I think the formal industry is losing a lot to online business, and that’s not being measured or reflected anywhere,” says Smith. “Our international forward order book suggests otherwise and I’m not seeing what others are seeing.”
And what about the Cape Town water crisis?
“We haven’t seen an impact,” says Smith. “The impact is on our business, in terms of not washing cars, but even the announcement of ‘Day Zero’ did not result in a host of cancellations. The numbers we are seeing back that up.”
According to Smith, the South African corporate market is not as buoyant.
“The good news off the back of President Ramaphosa coming to power is not filtering through just yet,” he says, “although the sentiment is there.”
If one looks at the South African car rental market, it’s pretty competitive, with Avis Budget up against Europcar and its sister brand Tempest, Bidvest Car Rental, First and Hertz, as the industry’s main players, and whilst Avis and Europcar are the dominant players, in terms of market share, Smith is under no illusions as to what turns a customer’s head.
“The only place to compete is on price, and that’s what’s kept the pricing very low in this country,” he says. “So, you have to differentiate yourself around service, although going forward, it’s going to be around technology.”
With this in mind, Avis is exploring a number of tech-driven concepts, including the trialling in South Africa of a product for people who don’t want to own a car.
“You pay us a monthly fee up front, and wherever you are, you can pick up a car,” says Smith.
Avis is also in the trial phase of a service that takes the customer away from the rental kiosk and allows him or her to pick up their keys from a self-service ‘post box’.
In terms of the other topical ‘tech’ issues in the car rental industry, Smith believes driver-less cars won’t be seen in South Africa in the next 5-10 years, whilst Uber is “not having a big impact on our business. In fact, it’s created a completely new market that was never there in the first place. I’m sure there are customers of ours that have gone there, but I can’t say it’s keeping us awake at night.”
In fact, if you ever meet Lance Smith, I’m sure you’ll agree that he sleeps rather soundly.