Asian Car Rental Firms Feel The Economic Pinch

<B> Asian Car Rental Firms Feel The Economic Pinch</B>

By Lynn Woods

Repercussions from the Asian economic crisis have caused a slowdown in the development of the region's fledgling car rental business. A shakeout of smaller, independent firms is expected in Japan, the region's most developed car rental market, according to Soon-Hwa Wong, director of marketing and franchising for Asia Pacific at The Hertz Corp.

Devalued currencies, a drop off in travelers and business shutdowns are pummeling the region's car rental firms, which typically pay more for cars than their counterparts in the United States, and hold onto vehicles for as long as three years. John Johnson, vice president of sales at Hertz, said there had been a slight fall off in volume at a couple of U.S. corporate accounts early in the year due to the crisis. "They're doing more teleconferencing," he noted.

According to Wong, rates in Asia decreased overall between 10 and 30 percent in 1997. An article on the Japanese car rental industry posted on the Internet by Japanese publisher Nihon Keizai Shimbun noted that Toyota Rental & Leasing Co., the country's car rental market leader, reduced retail rates by an average of 21 percent beginning last April. Competitors were expected to follow suit. In the previous five years, there had been no change in rates in Japan, noted Kaiji Kiriya, managing director of Abrams Consulting International, affiliated with Purchase, N.Y.-based car rental consultancy Neil Abrams Associates.

"It's almost impossible to hold pricing, even though we are more resilient than most companies," Wong said.

Besides Japan, Hertz also maintains franchised locations in South Korea--its largest market in Asia--Brunei, India, Malaysia, Singapore and Thailand. The crisis has not dampened its plans to open additional locations in Bangladesh, the Philippines and Indonesia in upcoming months, said Wong.

Avis Europe, which has a long-term agreement with Avis Inc. to use the WizCom reservation system and lease the Avis name, maintains locations in 12 Asian countries, of which the most dominant are Thailand, Korea and the Philippines. Most of these are franchised. Corporate accounts are recognized by locations in the major markets, although Avis' Preferred express service is not yet available in the region. According to Joe McNicholas, Avis' general manager of Asia, customers are pretty evenly divided between domestic and international, business and leisure.

Budget's Asian operations are mainly franchised, although in Thailand it maintains a joint venture with two partners. Peter Giamalva, Budget's vice president of international business development, said that Budget was attempting to build brand loyalty in the region. It has introduced a corporate card, valid at all locations in Japan, with the Budget logo that entitles users to free upgrades and negotiated rates. Giamalva said that a similar program might be rolled out in Thailand, where Budget operators recently have agreed to recognize corporate accounts. However, he said the economic crisis had slowed down Budget's efforts to drum up more business in the region. "We're being more careful," he said. "We're not making the same investments."

National Car Rental maintains a partnership with Nippon Rent-A-Car in Japan and operates franchises in other Asia countries. Throughout the region, "we're belt tightening and resorting to rate manipulation," said National spokesman Dan Callahan, who declined to specify further.

The majority of the U.S. car rental companies' business in Asia--90 percent, in the case of Hertz--is geared to local corporate renters. Generally, corporate travelers from the United States who rent cars in the region hire drivers, due to language and other cultural differences.

Japan's dominance in Asia--it has a fleet of 250,000 rental vehicles, the region's largest--stems from its strong auto industry. The dominant car rental firms are owned by auto manufacturers, Kiriya said.

The crisis is spurring Japanese companies to offer new services in an effort to shore up their business, according to the Nihon Keizai Shimbun item. For example, Nippon Rent-A-Car has launched self-service kiosks, which automatically dispense the rental contract and the key, for corporate customers at its Tokyo locations. Another rental firm, Japaren Co., began leasing vehicles from its rental fleet in April, while a third Japanese company, Orix Rent-A-Car, offers passes for one month, three months or six months, allowing customers to rent cars for an unlimited number of times on weekends and national holidays.

All of the major U.S. car rental firms maintain corporate-owned locations in Australia and New Zealand, where, contrary to the situation in the Far East, they dominate the market. Hwa Wong said the impact of the crisis on these markets was small, although Jon LeSage, vice president and director of research for Abrams Travel Data Services in Long Beach, Calif., noted that there were repercussions stemming from these countries' dependency on exports to Asia and the reduction in Asian travelers.

Traditionally, though, rates have been high in Australia and New Zealand, due to hefty government taxes on the purchase of vehicles and the privatization of major airports, resulting in higher airport access fees, among other factors, according to LeSage.