Lap or luxury

The local luxury coach market has been eerily quiet of late. FOCUS speaks to the industry’s chassis and body builders, as well as its operators, to find out the reasons for the slowdown.

As with so many other sectors of the South African economy, the 2010 Soccer World Cup sparked a flurry of activity in the sale of luxury coaches and buses before the event in anticipation of a flood of overseas visitors. But what factors have been playing a role since?

Sales figures for coaches are not reported separately as a segment and it is therefore difficult to arrive at an exact figure. However, there appears to be consensus that there has been an enormous slowdown in fleet expansion and fleet replacement since 2010.

“The luxury coach sector overexposed itself in the build-up to the 2010 Soccer World Cup,” says Izak Coetzee, MD of Future Coaches and Tours, “and supply and demand plays a role. During the 2010 Soccer World Cup, a huge demand for luxury touring coaches ruled and South African operators supplied. Demand then dropped drastically and luxury charter companies are now faced with an over-supply of vehicles.”

The obvious area to examine is the tourist industry. Published statistics give the impression that this industry is booming. Perhaps, but the coach industry thinks differently.

There is a question mark against the official figures according to Ryan Levendale, sales manager, Irizar Southern Africa. “There is a belief among original equipment manufacturers (OEMs) and tourism operators that a significant number of those entrants to the country being classed as ‘tourists’ could be more accurately described as ‘migrant workers’ from neighbouring states.”

Dirk Ansorge, bus and coach brand manager, Mercedes-Benz SA, agrees: “There are tourists coming into South Africa (SA) but, as most people from other countries have to fly in; they arrive in small groups, as couples or as individual travellers. Affordability is the determining factor and it’s very convenient to use hire cars or minibuses for the transport of small groups, families and individuals.

“Hence, the focus for coaches is on tour groups in areas with sightseeing facilities – like Cape Town or on the Kruger Park route. As a result, this segment is not growing at the moment,” he says.

From an operational viewpoint, this change in group numbers plays a significant role in the businesses of tour operators.

According to Coetzee, “The booking agencies – catering for tourists from the United Kingdom, Europe and the eastern countries – are still seeking luxury 32- to 52-seater coaches, but this sector has slowed drastically. Bear in mind that the tourists from those areas currently have their own financial restrictions. Tourism from Africa is growing, but these visitors generally don’t make use of the luxury coach industry.”

So, what now? “There are other different driving factors currently,” says Ansorge. “Long-distance travel is required for transporting people for business purposes, or weekend travellers from one place in the country to another. This segment is stable and has potential for growth. Other applications are for moving staff in groups and for scholar transport.”

As other countries have experienced an economic downturn, has the weakening of the rand influenced the slump in sales volumes?

“All the major players in the coach market import their units in complete or partial knock-down form,” says Levendale. “In either configuration this attracts duty and the base price of these models is set in a foreign currency, usually the United States dollar. The weakened local currency has inflated the rand price of coaches and, for many operators, has pushed the price beyond the allocated budget for vehicle replacement. This reduces the number of vehicles being purchased, or prevents the purchase of new vehicles altogether.”

From an operator’s view, Coetzee points out: “The rand was very strong over the past few years; it is only weakening now and, because tourists make bookings well in advance, the effect of the weaker rand will only make itself felt in years to come.”

What, then, is the medium-term future of the luxury coach market?

“New models and new brands increase the competitiveness of the luxury coach market to the benefit of the operator,” says Levendale. “Overall Irizar does not envisage any dramatic growth or shrinkage of the market. However, the lack of significant fleet replacement since 2010 implies that a strengthening of the sales figures can be expected.”

Ansorge points out: “The segment has potential, because of growing tourism and the need for renewing of fleets, but it will remain a small segment in SA.”

“If growth occurs,” adds Coetzee, “it will probably be for smaller vehicles with 22 to 32 seats, which could become very popular.”

Technology will play a big role in the future of coach travel. “Coaches continue to evolve with the market and all manufacturers have introduced new models since 2010, be it on the chassis or body side,” says Levendale. “Safety considerations remain paramount with improved efficiencies always a consideration. The coach industry remains well ahead of the legislation governing road safety.”

Ansorge adds: “There are new coaches that provide more comfort for passengers, for example more comfortable seats and advanced air-conditioning, and better ergonomics for the driver. Chassis are equipped with many safety features like anti-lock brakes (ABS).”

So it seems that the world economic downturn, the effect of the rise in fuel price on running costs and a general over-supply of vehicles have all contributed to the quiet luxury coach market.

But the good news is that commentators do see improved prospects in the near future.