Car rental firms suffer record-low turnover

Ministry’s 50-day discount campaign
to attract tourists finds poor feedback

The car rental sector suffered a steep drop in turnover in 2012, with revenues falling by 70 percent compared to 2011, according to the Syndicate of Car Rental Agencies. Mohamad Dakdouk, head of the syndicate, said around 50 agencies closed down in the past year. Most of the firms that shut down were small-sized agencies, while larger establishments have begun to close down some of their branches, or even reduce the size of their fleets.

Dakdouk said around 60 percent of car rental clients in 2012 were expatriates, followed by local individuals and corporations with 20 percent, and Arabs – mainly from Iraq and Syria – taking up a similar share.

Car rental agencies rely on the number of days during which their cars are rented/operational. “Each rental car has a life span of only three years, after which it should be replaced,” said Dakdouk. He said each car should be leased for at least 180 days a year to achieve the anticipated profitability levels.

The 50-day campaign of promotional discounts launched by the Ministry of Tourism (MoT) has had minimal impact on the business so far. “The MoT campaign might be beneficial but it needs more time and marketing,” Dakdouk said. He said the issue is not about a successful tourism campaign but is rather tied to a prevailing critical security situation.

Car rental agencies have applied a 50 percent discount – sometimes more – on all their prices. For instance, a BMW X6 which is normally leased for around $300/day is now leased for just $150.