The skyline of Dubai, one of the seven emirates that make up the United Arab Emirates. Photo courtesy of iStockphoto/DeeJpilot

The skyline of Dubai, one of the seven emirates that make up the United Arab Emirates. Photo courtesy of iStockphoto/DeeJpilot

You could call the United Arab Emirates (UAE) a boomtown, or “boom country.” Since starting oil exports in the 1960s, UAE has become the marketplace center for commerce and trade throughout the Gulf.

With a population of more than 8 million, compared to fewer than 100,000 just 50 years ago, the country has opted to pour its oil revenues into infrastructure, schools, hospitals and the like. And that growth has fueled the country’s car rental industry.

Interviews with franchise operators, independents and an industry consultant make one thing clear: With expatriates taking up a majority of the population, rental companies must accommodate longer-term rentals and they must be prepared for challenges that arise from the country’s demographics.

So how do these companies manage a rapidly growing market while keeping service and fleet management, well, manageable?

Long-Term Services Are A Must

Because of the transient nature of the mostly foreign workforce, long-term rentals are popular options. Take the city of Dubai, for example. Of the more than 2.1 million people living there, only 17% of the population is from the UAE. The rest are from elsewhere, primarily India.

“Many don’t want to buy a car and many don’t even want to lease a car,” says Bob Farrow, a Middle East car rental consultant, who first traveled to the region East 20 years ago to help Hertz UAE set up its network there. He went back in 2002 and continues to consult various companies in the UAE, as well as in Saudi Arabia and surrounding countries.

Farrow says that many people rent month to month, sometimes up to four or five months at a time, with the option of a hired driver.

Hertz UAE, with 12,000 vehicles across the country, has 17 locations with two more on the way. Nigel Johnson, Hertz UAE’s general manager, says that 45% of its business revenues are generated from residents renting on a monthly basis. Leasing is also a Hertz option.

“Many UAE customers find that fixed-cost driving can provide peace of mind with all maintenance, servicing, repairs, vehicle registration and administration managed on their behalf,” Johnson says. He adds that Hertz also provides fleet management to more than 600 corporate accounts.

Of the companies interviewed, Budget UAE follows Hertz in fleet size, with up to 6,000 vehicles during its peak season. Salim Damji, Budget UAE senior general manager, says there are currently 25 corporate-owned locations, as well as “hotline links” in various hotels. He says that UAE residents primarily book cars at monthly rates or lease, while tourists make up a majority of the company’s daily and weekly rentals.


SuperPrice Rent A Car, a traditional corporate fleet company offering commercial vehicle rentals such as buses and delivery vans, started providing individual and non-commercial rentals in 2011. The company has a fleet of about 1,500 vehicles at just five main branches. Mariam Ibrahim, the digital marketing officer for SuperPrice, says that the company has been working to even the ratio of corporate and individual rentals.

Ibrahim says that SuperPrice’s primary customers are the country’s expatriates and corporate accounts, some of which even rent on yearly contracts. Most of the renters are male. The company gets tourist rentals as well, particularly during holidays and the Dubai Shopping Festival.

Independent company Carlease Rent A Car, based out of Dubai, boasts a fleet of 650 vehicles after only three years in business. The company focuses on “medium-term” rentals — reservations that last more than a few days — and its corporate clientele. Carlease Managing Director Aswini Borkotoky says the company gets some tourist reservations but the number is small.

Staffing For Service

Another factor is finding English-speaking staff. Farrow says that, in the UAE, most employees are on contract — typically a three-year agreement — since companies often pay for new employees’ work visas and transportation to the country. Some companies even provide staff housing.

Farrow advises clients to make the employee environment as enjoyable as possible. “Some of these people have never been out of their own country, so we want to make sure they’re living in decent standards,” he says. Unlike other countries in the region, employees do have access to a government grievance process, but this can still be difficult and time consuming.

If employees decide to end employment early, they have to pay back the costs of the visa. The opposite is also true: if a company decides to terminate a contract early, the company must buy out the employee’s contract.

Damji says that, as an established operator, Budget can offer competitive remuneration packages for new recruits and retention incentives for existing staff.

Salim Damji, Budget UAE senior general manager.

Salim Damji, Budget UAE senior general manager.

Farrow reminds companies that if they treat employees well, then the employees will likely treat the customers well. He also has introduced customer service training to companies. “It really works — you can see the change immediately,” he says.

Both Budget and Hertz provide training, for example. Johnson says that Hertz practices a “rigorous” selection process, and this allows the company to bring in a wide array of experience and diversity. The Hertz UAE franchise system includes employees from 38 nationalities.


For a smaller company such as Carlease, “finding the right set of motivators to attract qualified staff is always a challenge,” Borkotoky says. And in this market, excellent customer service is a differentiator.

Aswini Borkotoky, managing director for Carlease, which boasts a fleet of 650 vehicles after only three years in business.

Aswini Borkotoky, managing director for Carlease, which boasts a fleet of 650 vehicles after only three years in business.

As an independent, Borkotoky says keeping new cars in fleet is a must to make customers happy, while keeping vehicles maintained by a well-trained mechanic using genuine parts is another challenge.

A Favorable Used Car Market

The wholesale market is doing extremely well, Farrow says. Many de-fleeted cars are sent to West Africa, while “post-war countries” such as Iraq demonstrate a strong demand for quality vehicles since they’re in short supply.

Farrow says new car prices are relatively high, so you’re looking at around 10-20% depreciation over a couple years. Pickup trucks hold their value even better, selling for close to initial cost. This favorable market, however, depends on the area.

Vehicle pricing is a bit subjective without guidebooks such as Kelley Blue Book and with used car price standards just beginning to enter the Middle East. Without these traditional checks and balances, corruption is prevalent.

Johnson says that managing used car prices is a challenge for everyone in the industry. “Resale prices can fluctuate greatly in the UAE, with the most significant factors impacted by used vehicle demand from the Middle East region and the political and economic factors at play,” he says, adding that actual selling experience is tantamount.

For Hertz, the vast majority of its buyers are wholesalers who target the retail market and have export operations. Johnson says that Hertz UAE typically holds vehicles in fleet for 18 months, though higher-mileage vehicles are de-fleeted earlier.

SuperPrice utilizes a third-party used car lot and also resells cars to companies that buy in bulk to export to surrounding countries, such as Bahrain, Saudi Arabia and Kuwait, where there’s a large number of low-income expatriates, Ibrahim says. She adds that when the economy crashed, the second-hand market began to boom in UAE.

But, Ibrahim says, because the major car rental companies have teamed with the major auto dealers that provide the “Certified Pre-Owned” stamp of approval, competing in the used car market can raise credibility questions. “As with any startup, if you are not known, you will need to work twice as hard,” she says.


Easy Entry And Few Regulations

Probably the brightest side of the UAE market is that companies face few taxes and zero discriminatory taxes — something that’s unheard of in the U.S.

Farrow says there’s a 4% duty tax when importing cars and a small “road license” for each vehicle. Police and rental companies have already automated parking fines and toll payments, so they’re actually ahead of the curve compared to more mature markets. “The infrastructure is so new, that was easy to do,” he says.

Carlease requires a small deposit for 15 days in case the renter accrues any fines, Borkotoky says. The Road and Transport Authority has generally accommodated rental companies trying to recoup their fees from renters.

Nigel Johnson, Hertz UAE general manager.

Nigel Johnson, Hertz UAE general manager.

However, Johnson notes, the relatively low cost to enter the market results in a continuous stream of new players that may offer a competitive price but lack the proper manpower, infrastructure and service. Johnson says he wouldn’t mind some regulations put in place to protect consumers from unsafe practices within the market.

On the customer side, Ibrahim says that SuperPrice has set a policy to prohibit renting to those less than 25 years old or to those with a driver’s license that was issued less than a year prior to the rental date.

One tool Borkotoky would like to have: A centralized means to check customers’ credit ratings before renting them a car. “It would allow us to hedge our risks,” he says. Another item on his wish list is more financing options for car-related businesses.

Ready To Grow

Overall, everyone agrees that the market is only going to grow. “Our plan now is to accelerate our growth and reach a fleet size of 2,500 vehicles by 2015,” Borkotoky says.

Damji has seen similar growth patterns for Budget UAE. He says the company has grown more than 25% in the last three years, and expects the growth to continue.

SuperPrice expects its fleet to expand to 3,500 vehicles by the end of this year. “The car rental market will most likely continue to see growth, as Dubai and the UAE in general experience a massive influx in tourism,” Ibrahim says. “Also, not a lot of people ride the public transport. [They] would prefer the flexibility of driving a car without the financial burden of owning it."

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Joanne Tucker

Joanne Tucker

Former Custom Media Manager

Joanne is a former custom media manager for Bobit Business Media.

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