TOURISM experts have all agreed that this year is going to be tough, that the industry faces a dismal year, and that leisure tourism in the Middle East looks set to decline. Hotels in the Middle East and North Africa region are experiencing lower occupancy rates – Dubai reported a decline of 5.6 per cent in November 2008 over the same period the previous year, according to the Smith Travel Research (STR) global report.
It therefore looks likely that car rental businesses, many of which had enjoyed rapid growth last year, will take a dive too. However, all is not completely bleak. Thierry Domballe regional director Avis Europe, Mediterranean, Middle East & Ireland, believes that despite the global downturn the region was still benefiting from a level of development that should be built upon.
“Energy projects, infrastructure and other industrial related development will continue to fuel business demand, and we also see continued leisure opportunities, based upon the very dynamic approach and ambition from all countries,” he said.
“Staying close to the market and our customers will enable offering the best solutions for them, and ensure a continued level of development.”
Duncan Peat, managing director, transportation division, Liberty Investment Company (overseeing both Budget Rent A Car and Prime Limousine), said that 2008 had been a good year until the last two months when companies and individuals started to review their spending patterns in response to the global downturn.
“Despite this the company grew above its forecast levels with revenues increasing by 29 per cent, and profitability improving in line with revenue growth,” he said.
Elements of the slowdown had been felt by the company at the end of 2008, but this was at relatively low level. Peat surmised this was probably because their customers were already committed to their travel plans. “For 2009 it is already clear that overall demand will reduce. For short term rental the main sources of income are from inbound business and leisure tourists, from available statistics we can see there is a reduction in those numbers.”
“It is inevitable that the car rental market will experience a parallel reduction in demand as with other businesses involved in tourism. In addition with redundancies announced in various industries and a slowdown in the numbers of new residents arriving in the UAE, the locally based long term rental market will not see the growth of previous years, “ added Peat. (Budget Rent A Car is a member of the UAE based Liberty Investment Company, which is the holding company of the Group.)
Sam ElTibi, regional director, Dollar Thrifty Automotive Group (DTAG), said that 2008 for the group was “excellent in terms of growth and expansion”.
“We started seeing a bit of calming in activity in the month of December 2008 and we expect 2009 to be a challenging year. However, we are optimistic for the future of the MENA region and think growth will remain in varying degree. DTAG plans to stay strong and continue to grow,” he said.
“However, it should not escape our minds that most of the infrastructure projects in MENA were built in the 1970s, 1980s and 1990s when the barrel of oil was trading at between $10 and $50. What we are seeing is a correction for the inflation that hit everyone lately.”
He agreed that their business was dependant on tourism and corporate trade and any drop or growth due to the global downturn would certainly be reflected in these two segments.
According to a report in The Gulf News, Nigel Johnson, general manager of Hertz found that car rentals rose sharply in Dubai during much of last year due to the difficulty faced by expatriates and holidaymakers in flagging down taxis and using public transport.
“This can be challenging as there is limited public transport at present and taxis can be hard to come by during peak periods,” he was quoted as saying in the report. The company had witnessed a rise in car rentals but this was more to with the on-going traffic problems in Dubai, and that more people had turned to car rental as was a “hassle free and affordable option”.