Boom time for car rental firms in the UAE There may be a credit crunch and an economic slowdown around the world, but car rental companies in the UAE are doing brisk business with many reporting fully booked fleets for the Eid season.
Leading car rental firms in the city told Emirates Business that immediately after the lean summer period, there is a shortage of cars in the rental market now. Compared to the off-season for tourists at the peak of summer, when visitor inflows into the UAE came down substantially and hotel occupancy rates were low, the present season of festivities has woken up the market.
"The car leasing business here has hit a boom time now. Most of our vehicles were booked in advance for the Eid season. There are both domestic and foreign customers who have booked in advance, and we are not in a position to accommodate more," said K Mohandas, Sales and Marketing Manager at Dollar Rent a Car.
"We are opening our new office in Terminal 3 of Dubai International Airport. There are seasonal ups and downs in the sector but we are bullish about the car rental business in the UAE," he said.
Big car rental companies have counters in leading shopping malls, hotels, the airport and other important locations.
Over at Hertz Middle East, one of the world's largest car rental companies with a presence in over 7, 000 locations, a customer service agent said: "We could not take any new reservations yesterday because all our cars were booked for Eid. Today we have a few cars, but I cannot guarantee a car tomorrow."
Ashok Kumar, Operations Executive, East West Car and Bus Rental, said despite the recent proliferation of rent-a-car companies in Dubai, there is a shortage of cars in the rental business.
"In Karama alone there are 250 car rental companies, compared to just two or three companies about five years ago. This shows the growth and potential of the car rental business in Dubai. There is a big demand during Eid, and even during the rest of the year we are almost fully booked," he said.
According to Ashok, the company has increased the daily lease rate from Dh80-Dh90 per day for a small car to Dh130-Dh150 per day. "Still, we don't face much competition." East West, with a fleet of around 400 vehicles, is getting enquiries from many companies for staff transportation, but it cannot meet all demands.
Ashok said recently many car rental companies have increased their lease rates because the cost of operation has gone up substantially. A new car is used only for three years, by which time the company gets back its investment and makes a profit.
The difficulty in getting driving licences is a major hurdle for rental companies.
"There are many enquiries from companies that need to lease chauffeur driven cars, but we cannot meet this demand as there is a severe shortage of drivers," said another market source.
A few customers, especially those coming for short visits, have either an international licence or a UAE licence. Some car rental companies also arrange international driving licences.
"Every Eid season is good for car rental companies. We get a mix of customers from within and outside the UAE. We also get a lot of business from UAE residents who go abroad for vacation," said a Hertz representative.
There are daily, weekly and monthly rental plans. The lease rate for a Toyota Yaris car is Dh190 per day. "It is cheaper for customers to book for a month because the monthly rate for the same car is only Dh2,310," the Hertz agent added.
Big companies such as Hertz, with a fleet of 70,000 vehicles in 140 countries, have an advantage over smaller players in the market that work with a limited number of vehicles. Customers go to companies with the youngest and most diverse fleet of vehicles. Not only big companies, smaller players are also bullish about the car rental business.
"Whenever I need a car, I go to a big and well-known car rental company because I have had bitter experiences with small companies. Their vehicles are old and sometimes you end up having trouble with the air conditioner or other technical problems. I don't mind spending Dh500 or Dh600 per month extra for using the services of a bigger company," said Mohammed Haneef, an expatriate customer.
Industry sources said the most local customers for car rental firms are foreign tourists, expatriates and local customers. Local customers prefer premium brands and luxury vehicles.
"Most UAE families own two or three cars and don't need to lease a car regularly. The main business is from tourists," said an official from Thrifty Car Rental, another leading car rental firm.
Car rental companies are not affected by the heavy traffic or high oil prices because these impacts are borne directly by the customers. Thrifty claims a fleet size of 12,500 vehicles and a customer base of 800 leading companies, including most of the Fortune 500 companies in the UAE.
A sales agent at Europcar, one of the largest car rental companies in the GCC, said it could not accommodate any new customers because the fleet was fully booked for Eid customers coming through Dubai International Airport. He said there was a good response to Europcar's special Ramadan offer for overseas customers.
"We are offering a chance to celebrate the end of Ramadan in Egypt, Jordan, Bahrain, Lebanon and the UAE by giving seven days' lease for a fee of five days," he said. Many customers also come from the ships anchored in the UAE ports.
"There are several car rental companies at the Dubai International Airport and all of them see a good demand. We accept clients who book their cars in advance through the internet," he said.
Big companies such as Hertz and Europcar, which are present all over the region, receive a sizeable percentage of their bookings from abroad, which includes both individual as well as corporate clients. Many firms prefer leasing cars, instead of buying new vehicles and maintaining their own company fleets.
"Summer is a lean period but we overcome it by offering a number of incentives and deep discounts. In summer there is an oversupply of cars in the market, but the Eid season marks a revival," said the agent at Europcar.
A major problem faced by rental companies is to track customers and payment defaults. Many rent-a-car firms have fitted Global Positioning Systems and other electronic tracking devices in their vehicles to know their whereabouts and to avoid cross-border smuggling of vehicles by errant customers.
"Security is a big issue but with proper attention to it, there won't be any problems. To ensure payment, companies take a credit card imprint in advance and retain the customers' passport," Hertz's agent said.
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