BRT, Gautrain pose threat to Avis

Posted On Tuesday, 03 November 2009 02:00 Published by eProp Commercial Property News
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Avis Rent A Car has admitted that the government’s multi billion-rand public transport projects, the Gautrain and bus rapid transit system, pose a competitive threat to the company.

Gautrain ProjectAvis Rent A Car, the country’s largest car rental company by market share, has admitted that the government’s multi billion- rand public transport projects, the Gautrain and bus rapid transit (BRT) system, pose a competitive threat to the company.

CEO Wayne Duvenage said at a media briefing last week the group expected to lose 15%-20% market share to the Gautrain, the rapid rail project expected to be launched next year, and the BRT, which is being rolled out in major cities including Johannesburg, Cape Town and Durban.

Avis’s projection sends an early warning signal to the local R2,4bn car hire industry, which is already reeling from the economic downturn, cut throat competition and cost pressures.

Duvenage said local business people, who normally hired cars, might opt for the Gautrain when travelling from OR Tambo International Airport to Sandton when their stay was shorter.

Avis, he said, saw new business opportunities emanating from 10 new stations — located between OR Tambo International Airport and Sandton — that would open when Gautrain opened its doors.

Unlike competitors such as Imperial Holdings, which is seeking acquisitions, Duvenage said that Avis, a Barloworld subsidiary, focused on organic growth.

He said Avis, which holds a 37% market share in the local car rental industry, had almost finished its three-year expansion plan, which had seen the company invest R250m in various outlets around the country.

On difficulties facing the industry Lance Smith, another Avis executive, said the domestic corporate market, which includes the government, was down 10% 12%. Inbound and domestic leisure markets were also down.

Smith said the competition was fierce in an industry dominated by two major players — Avis and Europcar — and other rivals such as Hertz. Despite these traditional rivals, other competitors involved brokers such as Auto Europe and online travel portals such as Expedia.

Car rental prices were “artificially low”, Smith said, adding that increases in new vehicle prices, accident expenses and high interest rates also increased costs.

While costs in the industry had increased 86% in the past five years, car rental prices had only risen by a cumulative 22% over the same period.

Avis sales and marketing executive Thulani Nzima said that of all the challenges that the travel industry had faced, including the September 11 attacks, none had affected it more than the economic meltdown.

Nzima said there were signs of recovery in the car rental industry, pointing to inbound forward bookings that looked positive.

He said corporate entities were beginning to “release” their travel budget and indicated that there was a flurry of activity in the run up to next year’s Soccer World Cup, which would have a positive effect on the industry.

Duvenage said he expected the World Cup to boost Avis’s revenue 35% or more, and projected the same for the industry.

SA would see the rejuvenation of tourism after the soccer event, Duvenage said. “If we get it right, positive spin-offs will amount to billions of rand.”

 

Last modified on Thursday, 31 October 2013 10:14

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