Hertz wants to get Australia moving again. Eoin Macneill, Vice President, Hertz Asia Pacific, today called on Australian governments to start opening borders and encouraging travel, revealing a lack of demand has forced the car rental giant to cut its Australian rental fleet by 40 per cent, from 35,000 vehicles to an estimated 20,000 sedans, utes, trucks and hatchbacks by Christmas.
Jobs have been lost, lives impacted. Ask Macneill how he’s feeling and he probably won’t tell you the truth, initially at least. An understatement to say the it’s been a challenging operating environment for Hertz, which has launched #backontheroad, a marketing campaign supported by car rental deals to stimulate dormant domestic demand.
He estimates industry car rental industry revenues are down between 70 and 90 per cent depending on the level of exposure to travel and tourism.
“The international border closures obviously effects a lot of our business. The Hertz Corporation and most of the big players operate through the airports, obviously that business has completely stopped.”
Domestic car for Hertz Australia has fallen by around 80 per cent, international 90 per cent. “It’s unbelievable and, I hate to say it, unprecedented.”
Closures hurt and some are hard to understand
State border closures are doing most of the damage, says Macneill.
Like other travel industry leaders, Macneill also wonders why Western Australia, South Australia, Tasmania and the Northern Territory are closed at all. Hardly anyone there has coronavirus, so what’s the problem?
“It’s pretty confronting,” says Macneill. “The whole industry has been really impacted by the COVID pandemic.
“We’ve been through bushfires, we’ve been through floods, we had massacres and events all around the world but the fact that it’s everybody at the same time and everything stopped is hard to actually factor.”
Border openings key to rebound
For the industry to rebound borders need to reopen – simple as that.
“The challenge going into this was a good balance sheet to be able to survive through it but it does really need to see people moving again.
“I think the Australian economy domestically can support the industry and we can weather the (downturn) until international comes back but we have to get Australia moving again.”
Better Targetting
Macneill would like to see more targetted quarantine measures.
“The tourism economy is severely impacted as soon as a border goes down. I do understand we have to have quarantine areas and lockdowns but if they could be much more specific to the areas affected and the rest of the country is free to move about until it’s under control, we would definitely welcome that approach.
“I understand the politicians need to protect their citizens and that’s who votes for them but we also need to keep people’s livelihoods in place.”
He says the rebound in certain drive markets such as destinations surrounding Sydney is encouraging, a sign of what could happen elsewhere is restrictions are lifted.
#backontheroad
“The #backontheroad campaign really is about saying if you can’t travel internationally then we can we give you a way to move around and see this great country, so get on the road, go the bush fire effected areas and buy a coffee and spend money in those rural areas.
“Australians are gregarious travellers and adventurous overseas so if we can re-point that $87 billion worth of expenditure back into Australia we’ve got a chance but we need to get the borders open and invigorate people and publicise it.
“We’re Australians, we should be able to move freely around our country. I’d like to see us take an Australian approach to this, not a state-based approach.”
People will travel if given the chance
“When we did get to almost no restrictions we saw quite a good bump in activity domestically and I think the near destination driving and touring is what will come back first,” says Macneill.
“People I think will be a bit reticent about mass transit. We enable people to get in and out of those communities in vehicles and it’s a safe way to re-emerge into tourism and it’s definitely something we are encouraging.”
“Our industry will get uplift from people who want a safe new vehicle, maybe their vehicle isn’t great for a two to three hour drive.
“We also think that short-haul domestic flights will start to become safe again and popular and we’ll be able to feed people off those arrivals into Dubbo Airport, for example, to go out and tour around.
“I think the industry is well placed to help tourism bodies get people back out into the communities and start spending dollars regionally to help boost those economies, particularly places that have been effected by droughts, floods and bush fires.”
Fleet reductions
“As you can imagine with those sorts of revenue degradations we have to then take out our cost base and that’s basically our fleet so we’ve been defleeting quite dramatically at the moment. So we’ve had to defleet around 40 per cent of our fleet by year end.”
“We run about 35,000 vehicles across our corporate and franchise locations.” Across the Hertz network of approximately 200 locations, its owns 75 and the rest are corporate.”
Ripple effect
Macneill adds that the flow on effects beyond its network and those of competitors is massive. “One of the things I’d point out is that traditionally the car rental industry buys around 75,000 vehicles per annum, which is about $2 billion, and that’s gone out of the economy.
“Those vehicles won’t be purchased in 2020. We’re defleeting as an industry to get fleet levels down to what the revenue base is.”
The positive news on this front is that “the used car market in Australia is quite strong at the moment which is allowing the industry to defleet in a sensible fashion.”
However that doesn’t hep the panel beaters, mechanics and other support services. Then there’s fuel spend. “We buy about a billion litres of fuel annually and that would be halved at the moment.
“The flow-on effects of the COVID impact on our industry are quite dramatic and a lot the regional places where our franchises operate they’re obviously part of that eco-system as well.”