The Right Price

Saudi Arabia is the largest car rental market in the Middle East, and Budget Saudi Arabia is the largest firm in this market. How do you compare to others in the region?

Budget Saudi Arabia is the largest franchisee in the world for Avis Budget Group. Moreover, we are one of the largest car rental and leasing companies in the Middle East. We have about 25-28% market share in the Saudi Arabian car rental industry. Budget Saudi is the only car rental and leasing company listed in Tadawul, the stock exchange in Saudi Arabia, and our shares are publicly traded on the market. This was one of the strategic moves that allowed us to scale up business to its current level.

Such dominance is rare in any sector in the Middle East, much less in the highly competitive rental car market. What in your history has resulted in your leading position?

Budget Saudi was established in 1978. We have built a wealth of experience in nearly four decades. By experience, I mean that our key employees have decades of professional practice. Our visionary founder is the Executive Chairman of the group. Our formidable team with their expertise and commitment have excelled in every area of our operations. The average tenure of our top management team is nearly two decades. This shows the depth of experience in our team and the consistency of its management practices. There are also other factors that have contributed to our position. We have invested heavily in our infrastructure as well. We understand that we do not produce a tangible product: our product is our service. When renting a car, it is necessary to trust that it will function well and that it is safe. We create customer experience each time they drive a Budget vehicle. Though it seems like a simple task, when it comes to thousands of vehicles across the largest country in the Gulf it becomes a complex matter. Moreover we need to ensure consistency across all our retail locations and customer service points. Maintenance centers and mobile workshops are our fundamental infrastructure, and we have dedicated substantial resources to establish a nationwide network of these service centers. Our customers know that our cars are perfectly maintained, and that they can always count on us. When dealing with multinationals, they expect the highest quality, reliability, and consistency. We ensure these expectations are achieved and that makes us unique.

Is there a new push for you to be present in smaller, secondary cities, and what recent investments have you made to your maintenance and retail infrastructure?

As long as there is an airport, we are present. Budget Saudi Arabia has been present in all the major airports in The Kingdom for several decades. Recently, we have been expanding our operations into smaller cities to cater to the needs of our customers. With 105 retail locations, we are present in every province of this country. So our network covers Saudi Arabia from north to south and east to west. This is a major advantage for us because our clients, corporate or retail, can find us everywhere they travel. They can use the same provider with the same quality throughout the Kingdom. Once an airport opens in a city we build our infrastructure, which is our workshops and branches, and we recruit and train our team. We set up a complete transportation solution for our clients. It is not just about buying cars and renting them out, we build a complete solution inclusive of 24-hour emergency road assistance services. For example, we opened our newest facility in Jubail and invested there to support the government’s new oil and gas projects in the east of the country, which have resulted in increased economic activity in Jubail and the eastern region in general. We have also invested and have been doing business in Ras Al-Khair, the minerals port in the Eastern Province, for the past four to five years, serving corporate clients involved in the mining industry there. We follow economic development in the Kingdom.

What are your other streams of revenue besides corporate, and where will there be growth in 2017?

Budget Saudi Arabia has two lines of business, short term and long term. Our long-term business is definitely 100% corporate, we do not provide long term leasing for individuals. In the Eastern Province most of our business is with the oil and gas sector because that is an oil and gas hub for Saudi Arabia. In the Western Region most of the business is in retail and the fast moving consumer goods (FMCG) segment, connected with Hajj and Umrah. In the Central Region it is a mix of sectors and a lot of retail business as well. When it comes to short-term rentals 65% are corporate, and the remainder is retail or leisure customers. Saudi citizens travel a lot between cities. Many people travel for the religious pilgrimage to Mecca and Medina every year and then in the summer they move to the Southern Region to enjoy the hill station. Some 98% of our retail business depends on local customer traffic, not international travelers. Budget Saudi Arabia grows with the economy, and despite macroeconomic issues, the industries that we cater to are strong and sustainable.

Have you seen a boost in your used car sale business as the new car market has declined?

Selling our rental cars after two years is an important line of business for us. It represents 75% of our profitability and has a high margin. When people buy our cars they know these cars have been well maintained. The investment we make in our workshops and maintenance centers for our rental and lease cars pays us back almost twofold when we sell off a car at the end. We deliver a well-maintained product to the used car market, which no other re-seller from our industry can claim, be they dealers or individuals. Furthermore, we are the only car rental company that has our own car showrooms to sell to the public. We have not seen any decline in demand for used cars, while some dealers of new cars have experienced a YoY reduction of 50-60% in 2016. That is an indication of how robust our resale business is, and could be interpreted as growth given the economic circumstances.

Is a year of change like 2017 about chasing efficiency or looking for new opportunities for Budget? How do you adjust to the macroeconomic situation?

Actually, in 2017, opportunities will be excellent for Budget Saudi Arabia when compared to our competitors. When we buy in a difficult time, we dictate the price. Most of our competitors are family-owned businesses that are less willing and potentially less inclined to invest in times of poor economic conditions. We intentionally invest more during downturns. We know that we will gain more market share in an economy where our competitors are not willing to invest. We are still keen in investing because we believe we can gain a higher market share of the existing pie even though it is stagnant at the moment.

Do you see scope for growth at Budget Saudi Arabia due to the reforms that being implemented in line with Vision 2030?

The government’s Vision 2030 will bring a lot of business to us. With the private sector on the rise, companies will employ more people because Vision 2030 is all about employing more Saudi citizens. We have approximately 200,000 students abroad and when they return to the Kingdom they need to work, and the country needs to create jobs for them. Job creation will definitely add to our economy because we depend on domestic travel. When people have jobs they have higher spending power and will travel either for business or leisure within Saudi Arabia. We are enthusiastic about the reforms and are ready for them. More private sector activity means employing more people, which creates higher demand for our services.