Rio Prestige

Supercar Hire Market

The supercar hire industry, born at the beginning of this century, continued to grow throughout 2005/6 to a peak in 2007 and, as a direct result, had seen as many as fifty companies enter the market competing for business in the UK. The general public and business is very aware that supercars are available for hire, and the industry had become accepted as the prestige end of the car market, with an ever growing educated end user.

As a result of the 2008 global economic crash, this market was plagued by falling supercar prices, as highlighted above, which in turn lead to the end of many businesses who started falling by the way side regularly. Most companies had been relying on vehicle finance to obtain their fleets, and this became a very serious issue as they began to see company assets (Lamborghini, Ferrari and Aston Martin) fall by thousands of pounds a month during 2008. When coupled with the fact that lenders were asking these same clients for additional security, due to residual values of assets falling to less than half of that lent, many were simply unable or unwilling to provide additional money or assets to retain vehicles purchased. This led to many more repossessions and more supercars entering the used car market for sale with further downward pressure on values.

The number of competitors in the market had dwindled dramatically to less than twenty by mid 2008, most having given up due to the economic downturn or been forced into insolvency. The changes in the financial climate have had far reaching effects on the supercar market. Even companies previously considered reputable with good access to finance could in some cases no longer obtain funding. Thus they could not replace cars or worse were forced to sell their current vehicles in a poor market at very low prices. I know of several cases were companies were unable to respond to financial obligations, leaving the owners with nothing sadly but bad debt after years of hard work.

Fortunately, RIO Prestige Performance UK Ltd owned their car fleet outright. Had they had finance on the stock, as many others in the supercar hire business did, it would have been far worse, and a negative equity situation, similar to that recently seen in the housing market, would have almost certainly occurred. RIO Prestige’s two main competitors had vehicle finance in position and this was perhaps the main factor in them both being declared bankrupt.

In line with the banking disaster, housing market losses and demand for luxury goods, the super car market has been similarly affected.

This in itself has generated an opportunity in that the demand for super car hire remains very strong for people with access to money required for initial set up and running costs the prestige car hire market looks ripe.

What about RIO Prestige Performance UK Ltd?

RIO, who are considered industry pioneers, being the world’s first manufacturer approved hyper car hire company, were also among the first in the industry and thereby fortunate in that they had already built a sizable client base before the economic crash. Importantly these clients were loyal. Not forgetting that supercar rental is a relatively new industry and even though I had predicted a downturn in vehicle residual values, and took preventative action in sanctioning the sale of five vehicles in the May/June 2008 which in its self was unusual at that time, in that this was pre-summer season the markets high season. That said the market indicators employed at that time showed clearly that super car values continued the free fall. RIO Prestige had already moved bookings from vehicles sold to the remaining fleet in order to optimise their usage, this had obvious benefits. This was expedited in expectation that we would see bookings drop by a forecasted 15% to 20% during summer. Even these relatively significant actions were not sufficient as hire revenue continued to drop further, reaching an all-time low in September 2008 which meant that running costs were far in excess of the income the company required.

By mid-November it was clear that the normal uptake on spring bookings were down by almost 40% on last year’s numbers. My swift action to cut the company’s marketing budget dramatically would mean that the company’s survival had been assured moving forward, these cuts were deep. For example, the offsite marketing budget used for motor shows was reduced by over 65%. The planned TV advertising was almost completely cancelled, with only the Christmas advert left running having negotiated a further 25% discount on this ad. All TV ads were cancelled for the first half of 2009.  The staffs were informed in November that hard copy advertising was also to be cut by 75% for 2009.

A survey carried out on a company contacted at the time showed that clients were expressing concern over the economic situation in the UK. They were in general naturally cautious over spending money. Plagued by the fact that running costs were still too high, I had no option but to consider staff redundancies at the beginning of February 2009. RIO were able to limit redundancies meaning that only one staff member was made redundant with rental sales staff offering to become self-employed rather than face possible redundancy later that year.

Fortunately, RIO Prestige came up with an innovative and ground-breaking solution with meaning that the company could replace vehicles sold without capital cost, in a sense taking advantage of the crisis and making use of the market condition.

The opportunity above came in tandem with the reluctance of both banks and financial institutions to lend money, making it difficult for  those wishing to sell their supercars. Knowing this fact RIO Prestige approached some such people inquiring whether they would wish to limit their capital loss by receiving rental income through hiring their cars in association with RIO. This innovation has been remarkably successful and totally changed the business today. As always this has been adopted by the competition, but as usual RIO was first to find opportunity in an ever-changing rental market ,we had even saved some people from losing their valuable asset, which in turn assisted RIO Prestige to maintain their market share at little capital cost.

To further highlight the current opportunity, the RIO Prestige Performance fleet was valued at £1.7 million. If one was to acquire a similar fleet today, the same fleet would cost as little as £650k. Looking back fortunately the company sold most of it cars avoiding a further loss of over a million pounds due to depreciation brought about by the market crash of 2008. The important factor today is that the rental demand and rental pricing has not changed, meaning that the returns seen from capital investment has increased. The simple reason for this is supply and demand; competitors in the marketplace have gone due to the financial crisis witnessed during 2008/ 2009, although the market demand for rental has remained the same, if not increased this year. 

Another influencing factor on the super car rental market to take into consideration would be the fact that an individual who may have purchased a super car ahead of the market crash of 2008 for private use would have suffered a phenomenal loss. This individual would subsequently not be so keen to suffer such a loss again.  For some this will be enough to drive them to the super car hire market where they know exactly the cost of use, after all most supercar owners rarely use their cars. 

The above highlights the factors that may benefit any potential RIO franchise; in closing I will cite perhaps a very important fact that is not so obvious.  Anyone wishing to enter the super car hire market as a supercar rental company would be faced with the massive barrier “insurance”. There are few companies who will insure such prestige vehicles for the purpose of hire and reward.  These insurance companies are market professionals; they understand exactly the risks involved in such a venture.  Obviously, the insurance companies are highly likely to reject any newcomers to the supercar industry and rightly so due to the risks involved.  These companies are looking for seasoned individuals with a proven track record in supercar hire.

By becoming a RIO Prestige franchise, potential candidates are able to benefit from our 6 years of trading experience in the market place. They will also benefit from RIO’s substantial client base in each region giving them a kick start on the rental ladder. Finally, our experience enables us to assist franchisees in obtaining the all-important insurance which is a prerequisite for legal operation.

Interested in a RIO franchise?

Contact Phill Wardle -