Sixt AG: The Art of Moving People

In Germany, the name Sixt is associated with one thing—car rental. The brand is so ingrained in German culture that Germans say “S as in Sixt” when verbally spelling a word, as Americans say “X as in Xerox.”

Sixt AG is the fourth largest vehicle rental company in Europe and by far the largest in Germany and Austria. Sixt’s marketing tagline, “the global provider of high-quality mobility services,” encompasses not only car rental but the company’s other revenue streams: full-service leasing and a limousine service. And it speaks to its global reach. Including its franchisees and partners, Sixt is now represented in more than 85 countries at 3,500 service points.

ARN reached Regine Sixt, senior vice president, marketing and sales, and wife of CEO Erich Sixt, at the company headquarters to understand Sixt’s business model, the European car rental market and Sixt’s goals for the future.

A Global Provider

The venerable car rental agency is in the midst of a growth spurt.

Founded in 1912 by Martin Sixt with seven vehicles in downtown Munich, the Sixt Group generated revenue of EUR 1.4 billion in 2006. In the first half of 2007, operating revenue was up 10.1 percent, and profits before taxes grew even faster, at 13.3 percent. In Europe, Sixt has managed to grow faster than the overall market.

Yet the biggest growth has been through franchise agreements off the continent. In the last few years, Sixt has launched franchise operations in Algeria, Argentina, Australia, Bahrain, Chile, China, Costa Rica, India, Mongolia, Moldova, Pakistan and Singapore.

One might wonder what an established brand is doing in locations as exotic and far-flung as Moldova and Mongolia.

“I cannot call myself a global provider if I’m not global,” says Regine Sixt. “It’s becoming hard to grow further in Germany. We have a market share at the airport as great as 40 percent, so to grow we have to be in other countries.”

Last year Sixt opened four offices in India with a domestic partner and this year began franchise operations in China after overcoming considerable regulatory hurdles. Sixt China already has contracts with international companies such as Siemens and Hitachi. Sixt is looking to grow its Chinese fleet to 10,000 vehicles within five years.

Managing the myriad of laws and regulations within Europe is one thing, but how does Sixt do it globally?

“One of the reasons why we work with a very tight network of franchise partners is that it enables us to be closer to the market place, utilize the local know-how and follow regional laws,” Sixt says.

The Internet has made the business world easier to manage, though the company maintains regular face-to-face communication with franchise partners through summit meetings in a global region. [PAGEBREAK] Serving the Business Traveler

The corporate market is Sixt’s bread-and-butter. Close to 60 percent of Sixt’s revenue comes from business travelers, compared to about 44 percent of the general European market, according to Euromonitor.

The Sixt fleet serves that market with premium, late model units, primarily German makes. The company claims to have the largest BMW fleet and one of the largest Mercedes fleets in the world. Those include smaller, entry-level models such as the BMW One Series sedans and Mercedes A and B Classes, not yet available in North America. Premium vehicles comprise more than 50 percent of the fleet on a value basis.

Average holding period is a short six months. Unlike the trend toward risk fleets in the U.S., most of Sixt’s rental vehicles are returned to manufacturers and dealers at fixed prices.

Paralleling the European market, more than 50 percent of Sixt cars have diesel engines. The company has jumped on the green fleet bandwagon recently with the purchase of 1,000 VW Touran minivans powered by natural gas.

Sixt rentals are generally better equipped than manufacturer’s base models. For instance, more than half of all Sixt rentals, and all of its premium cars, have factory-installed navigation systems, included in the rate.

Renting portable units, says Regine Sixt, presents just another hassle that could hamper the objective of getting the customer through the transaction as quickly as possible. For Sixt, navigation units are a value added for the customer, not a driver of ancillary profits as in America.

On Holiday

Some 29 percent of Sixt’s business is made up of private clients and the leisure market. Sixt has a full complement of economy and intermediate models from a variety of manufacturers. Sixt “Holiday Cars” offers prepaid rates, and the quote includes miles, taxes and insurance.

SIXTI, its standalone discount rental chain, keeps rates low with fixed conditions and lower cost vehicles such as the micro SmartCar and compact Ford Focus.

Insurance replacement constitutes 6 percent of Sixt’s business, which equals the percentage in that segment of the overall European market, according to Euromonitor.

Make It Simple, Quick and Easy

Number one on the list of Erich Sixt’s list of 10 Sixt commandments is to “deliver fast service to our customers at the counter.” With the business traveler in mind, many of the company’s IT initiatives are geared toward streamlining the rental transaction and return process.

Internet bookings or short-hop European flights through regional carriers now present an XML solution to reserve a Sixt car with rental location, length, car type and fees pre-populated.

At the rental counter, Sixt Club cardholders need only show a driver’s license. Sixt relies on the customer’s information and preferences already in the database to alleviate having to sign and initial multiple forms. Cardholders sign once and are issued two small receipts.

For rental returns, Sixt is testing a new system in which customers can opt for an emailed receipt.

Sixt has had an automated safebox system, CarExpress, for club cardholders since 1994. Clients can rent a vehicle either online or directly at an airport kiosk, then swipe the club card to release the key and stall location.

Unlike Hertz’s new SimplyWheelz system for the leisure market, CarExpress is geared toward the business traveler on the run. In Sixt’s experience, explains Regine Sixt, the leisure customer often needs extra service from a counter agent in terms of explaining the car, giving directions and recommending local destinations.

Some Sixt airport locations have monitors installed at the counter to allow renters to see the vehicle on the lot before renting it, which is especially helpful to judge an unfamiliar model’s size and type, Sixt says. [PAGEBREAK] Fleet Leasing and Management

Sixt is one of the largest vendor-neutral, non-bank, full-service leasing companies in Germany, supplying fleet vehicles to major corporations such as McDonald’s and EADS, Europe’s largest aerospace company.

Sixt’s fleet leasing and management products are a complement to the rental division, taking the “high-quality mobility services” concept from a single day to a four-year lease contract.

In addition to pure finance leasing, the company offers fleet management services (vehicle selection, procurement, maintenance, tax and titling and fuel card services) similar to other major fleet management providers such as PHH Arval, GE Capital and Enterprise Fleet Services.

Sixt opened new leasing operations in Eastern Europe in 2006. Full-service fleet management is a relatively new but growing concept in developing countries such as China and India–markets Sixt is targeting for expansion.

Including sales of off-fleet vehicles, 40 percent of Sixt Group’s revenues came from leasing in 2006. Sixt lease programs are available in more than 40 countries. “We see a huge potential in car leasing,” Regine Sixt says.

Limousine Service & e-Commerce

The company’s limousine service uses high-end Sixt vehicles and licensed chauffeurs to transport executives to and from the airport, hotel and board meetings. The service is more popular with traveling American executives, Sixt says, than with Europeans.

Chauffeurs act as concierges as well. The drivers are costly and profit margins on the service are slim, generating only a small fraction of the overall revenue pie. Yet the service fits with the company’s high-class mobility.

“It’s a service to our clientele,” says Sixt.

Sixt is also getting into the Web 2.0 game with Sixt e-ventures, an independent, newly established subsidiary that will develop autonomous Internet-based business models. This year the company launched a car enthusiast portal, carmondo.de. The Web site is manufacturer-neutral and offers a vehicle configurator similar to Edmunds or Intellichoice, though the focus is on the forums and building a community to discuss anything car related. [PAGEBREAK] Looking for a U.S. Partner

Sixt is partnered with most major global airlines and hotel chains as well as reservation services, marketing associations and other mobility service providers such as the German motorists’ association and German Railways.

Sixt does not have any rental locations in the U.S. or Canada. Yet Americans traveling abroad, and Sixt’s client base traveling to America, traditionally have had access to each other’s respective markets through exchange agreements with American RACs.

Sixt maintained a 20-year license partner agreement with Budget Rent A Car in an exchange of reservations for their respective areas. In 1997 Budget opted to terminate the license agreement after Sixt began expanding its own operations internationally.

Sixt reached a rental reservations alliance with Dollar Rent A Car in 1999. After Sixt decided not to renew its agreement with Dollar in 2003, Sixt partnered with Payless Rent A Car in a rental reservations alliance.

Regarding the status of the Payless agreement, Regine Sixt says, “We’ve terminated the cooperation in good faith and wish Payless good luck.”

What, then, are Sixt’s plans for new business across the pond? “We’re looking for a new partner in the U.S. at the moment,” Sixt says.

No announcements or deals are eminent, though Sixt will continue to analyze the U.S. market for opportunities, Sixt says. “Careful is the word. It must be something solid, because this is really a very difficult market,” Sixt says.