Glitterati on wheels turns handsome profits

When we visited Executive Limousines & Car Hire Services Limited, the managing director, Mr Thomas Mwangi was on phone. A client had issued a bounced cheque, a crisis to his business.

It is a challenge that he says threatens investors in car hire services and informed the current trend of demanding payment upfront.

“Such cases of bouncing cheques happen in car hire services because customers take the cars having paid in advance and occasionally extend the number of days prompting for such payments after the service,” he said.

But not for the prestigious Limousine hire services. Hiring a limousine is based on the number of hours not days and very strict conditions are attached to this service to keep defaulters away as default would cost the company dearly as the vehicles attract high maintenance costs.

Before venturing into private business in 2006, Mr Mwangi served as a manager at VIP Limousines Limited; a company that leases vehicles for use by Nairobi’s high-end hotel guests.

There he watched the business grow from transfer services to hotels to car hiring services.

The experience opened his eyes to opportunities in hiring executive limousines and prompted him to venture into the business.

Over the years he has observed that although the target market for limousines is not as extensive as that for cheaper cars, it is the leading niche revenue generator in car hire going by the demand for splashy events and bragging rights, a culture that is rapidly growing in Kenya.

“Who does not want to be seen in an expensive and state-of-the-art car? At weddings it is a show of who treats their woman best and that sets the demand for the limousine services,” said Mr Mwangi.
During peak wedding seasons, he hires out up to 15 limousines on a single Saturday, a common day for weddings. Demand goes down to averagely 4 limousines on a single Saturday during off-peak seasons.

The fact that Limousines are costly to acquire and maintain both in regard to fuel costs and routine replacement of spare parts, most people have kept off purchasing them for their personal use meaning less competition to those who have dared venture into the limousine business.

For example, a stretch Chrysler limousine has an engine capacity of 6,000cc while the stretch Lincoln limousine’s capacity is 5,000cc. These are among the popular models of limousines locally.

The Chrysler stretch Limo costs about Sh10 million and is imported from the United Kingdom.

To hire this machine, you will need to pay Sh25,000 per hour and you are only allowed to engage it a minimum of four hours.

This is what justifies the cost for hiring this limousine; the interior has can seat eight people, and is fitted with flat screens and pipe music for ambience as well as a refrigerator and two bottles of champagne for glitterati.

To crown it all, the limo comes with a red carpet, security detail and has a low chassis for comfort and its use is restricted to locations with well maintained roads.

If this is too pricey, you may want to settle for a cheaper make but that means that you forego some comfort. The level of comfort dictates the price tag.

The stretch Lincoln Limo goes for Sh15,000 per hour but excludes champagne and bodyguard and only has a single screen. However, the seating capacity is similar to the Chrysler’s and it is also fitted with a refrigerator.

A Mercedes Limo is the cheapest among the class of limousines that are charged on hourly basis. This model is stretched and assembled in Kenya thus making it completely different and less prestigious from the models imported from the manufacturer.

Every hour spent in a Mercedes limousine will cost at least Sh12,000, while an Opel convertible limo attracts an hourly charge of Sh10,000.

The service provider is expected to fuel the vehicle. To cushion against fluctuating fuel costs, Mr Mwangi and others in the limo business must plan their charges in advance and factor in possible spikes in fuel costs, which is not impossible considering the nature of events these vehicles are hired for.

“A wedding is not something you just think of and embark on it the same day. You must plan and book in advance to help us study the demand against the expected costs,” he said.

To the advantage of car-hire companies, the demand for limousines is not dictated by the registration number rather by the type of service that the vehicle comes with.

Hence, there is never need to constantly replace the fleet with newer versions like in the case of general car hire.

Due to the high costs of acquiring limousines, most car hire companies have entered sub-leasing arrangements where they sign contracts with owners of such vehicles who wish to generate income but do not own car hire outlets.

At Mr Mwangi’s company for example, 60 per cent of the limousines are sub-hired.

Besides boosting the fleet, sub-hiring enables a company to explore new models without the headache of having to buy or resell old models.
But private owners must insure the limo for public transport use in order to qualify for the deal.

Unlike general car hire where one can pay for the service the same day they intend to use the vehicle, limousine hires must give a week’s headsup.

ikarambu@ke.nationmedia.com