Car rental firms cut costs to survive industry slump
Get the motor running: Avis Rent A Car at Warsaw's Chopin Airport.
Times are tight for car-rental companies. With the slowing economy, many firms have started introducing cost-cutting measures to make ends meet while adding sweeteners to their services to attract new customers.
The car-rental market is divided between internationally affiliated companies and small, local firms. Companies attached to an international network have a head start over local firms due to available capital, know-how and a reliable customer base. Also rental companies often sign worldwide-binding contracts for their services. Nevertheless, international firms are feeling the pinch in Poland too.
Even giants such as Avis have seen turnover drop in the first months of 2001. Meanwhile, as car-rental demand has fallen off, competition for clients has increased as the number of companies on the market grows, said Beata Maciejewicz, marketing specialist at Jupol-Car, an Avis licensee.
But even if the turnover on the market slackens to just 5-10% this year, it will be less than the average annual growth of 40% in the 1990s, according to Andrzej Witkowski, general manager at Car-Pol Leasing, a franchisee of U.S.-based Budget Rent-A-Car.
Above all, the corporate side of the industry has dropped. In the past, more corporate customers rented cars for longer periods, said Daniel Litwinski, head of Jupol-Car's marketing division.
To regain the customer base, many rental firms are now offering client services such as delivering cars to prearranged spots or renting cars with drivers. But coming up with sweeteners for customers is difficult when these perks are becoming standard policy among competitors.
The last resort, beyond various special services, is to lower rental prices something now happening across the board. Witkowski said prices at Car-Pol Leasing are now negotiable and Avis is increasingly diversifying prices with weekend car rental now 5% lower than last year.
Companies such as Hertz and Polish firm Local Rent a Car-Poland are also introducing a range of cost-cutting measures. Hertz, for example, is considering using cheaper suppliers for car-washing or express carrier services, said Jacek Gornisiewicz, general director at Orbis Transport, Poland's Hertz franchisee. Meanwhile, Zbigniew Ciemuchowski, president of Local Rent a Car-Poland, is trying to increase profit by improving the company's organization and efficiency.
Some firms have also started focusing on niche markets. Witkowski said Car-Pol Leasing is concentrating on renting cars to Polish emigres from the United States. The company estimates it can market itself to American Poles visiting the country, who expect low prices and high quality, Witkowski said.
But if times are tough for the larger companies, many smaller firms are in dire straits. Gornisiewicz said there are 160 car-rental companies around Poland 90% of them are small concerns with less than 10 vehicles. The major car-rental companies, licensees of international chains such as Avis, Europcar, Hertz, Budget Rent-A-Car and National Car Rental, have about 80% of the market. As a result, many smaller companies are finding it almost impossible to grab a share of the market.
In particular, foreign clients have brand loyalty when it comes to renting. Witkowski said some 30-40% of his company's customers have links with the parent company. One way around the brand issue for local firms is to slash prices even further. At Altur, a local car-rental firm based in Warsaw, the weekly rate for an Opel Astra is zl. 1,575: At Avis, the same vehicle costs zl. 1,985 weekly.
