MSEs in car rentals fare better than tour and travel peers

Micro and small enterprises (MSEs) focussed on car rentals have better financial metrics compared with their peers in the tour and travel business that are focussed on ticketing and hotel bookings, a CRISIL SME Rating analysis of more than 100 rated MSEs in the sector has revealed.

Car rentals-focussed MSEs earned an average operating profit margin (OPM) of 20 per cent in the three years 2016 to 2018, compared with 14 per cent for those focussed on ticketing and hotel bookings. The trend also held for net profit margin (PAT), where these players logged 14 per cent, compared with 11 per cent for those in ticketing and hotel bookings.

The car rentals market is divided into airport and non-airport segments, with the non-airport segment comprising both inter- and intra-city, and retail/corporate rentals. Strong tie-ups, fixed rentals and an increasing number of people preferring cabs for travel could be factors fuelling growth in car rentals.

The rated MSEs considered typically have a diversified line of business, including travel bookings, hotel bookings, car rentals, money changing, and travel documentation. 

According to government data, India saw 10 million foreign tourist arrivals in 2017, up 14 per cent year-on-year, while the number of domestic tourist visits to different states and Union Territories was 1.65 billion, up 2.3 per cent.

CRISIL believes that the increasing domestic visitors and foreign tourist arrivals, together with technological advancements, will aid the growth of MSEs which offer one-stop solutions to customers, particularly of those focussed on car rentals.