AS THE MOOD of the event industry rises, event rental operators are taking a long look at how long they can hold prices flat. And in most cases, they are beginning to boost the price tag on their products and services.
LINGERING LOW-BALLING
Operators in some markets feel they can't make any adjustments yet.
One Western operator tells Special Events Magazine that the sour economy in his region last year led rental companies in his area into “buying market share with horrendous price cutting. It was clear that the low-ball pricing resulted in many jobs that were just not profitable.” The aftermath is a continued chill in the market: “Customers were conditioned to lower prices, and it may take some time to bring prices back up to an acceptable level.” The only winners, he says: “Event planners who suddenly found themselves with better margins.”
Other operators holding the line on pricing now say they expect an improving market will bear higher prices soon. “As the market firms as we enter the second quarter of the year, many {of our} prices will increase from 2 percent to 5 percent,” says one East Coast rental outlet.
But by far, most operators interviewed by Special Events feel confident that now is time to shore up their own margins.
COVERING COSTS
Some pricing increases are being driven not by the event industry climate but the business climate. A Western operator says he is raising his prices 5 percent across the board, largely because of bruising increases in health insurance costs. However, he doesn't expect much pushback from his clients. “We continue to find that pricing is not a major issue with our customers as long as we deliver a superior product,” he explains. And he firmly believes that his product is superior: “We are continually amazed at the products put out there by the ‘leading’ companies.”
Another Western operator agrees. He says his basics will stay the same; indeed, “some product sourcing prices — such as white resin chairs and chiavari chairs — have come down,” which has put a damper on thoughts of price hikes there. However, he notes that his labor-intensive products and services such as tenting and staging will go up as much as 8 percent this year, largely because of costly workers' compensation insurance.
A Texas operator cites a litany of cost pressures — “the cost of insurance, fuel, local taxes, the need to increase salaries” — as the factor behind the price hikes he is planning this year. He foresees a boost of anywhere from 1 percent to 10 percent, largely based on bringing up the price of items that have not seen an adjustment within the last year, such as stemware, linen and cooking equipment.
The cost of paying for people is so high in California, one operator based there reports, that in November he boosted his rates for direct labor — setup, strike, delivery and on-site crew — by as much as 30 percent in time for his busy December business.
One large urban operator goes so far as to say that raising prices in today's market is virtually a necessity. “If we do not raise our prices, we will ultimately be doing our clients a disservice,” an official says. “This is a principle that we will not compromise on. We may not be the cheapest or the most expensive in our market, but we feel we offer the best value. Value received for dollars charged is what clients should evaluate companies on, not just price.”
DO LESS, MAKE MORE
A Southeastern operator notes that his competitors are dropping prices anywhere from 10 percent to 20 percent in a grab for market share, which he describes as “corporate suicide.” Instead, his firm will raise prices 3 percent across the board this year, which will be built into the company's long-term contracts. “If we do a few less jobs, at least we will make a profit on every job that we do,” he notes.
An East Coast rental operator is not only boosting prices 10 percent across the board, but also making sure that his pricing has integrity. “I cannot continue to pay commissions to agents who also request discounts on our equipment and services,” he says. “Our markup is slim to say the least. An agent who wants extra service, requests several bids and a commission does not support the contractor for the long haul.”
IT'S ALL IN THE MIX
While some operators say they plan to increase prices across the board, the majority adjust prices strategically — holding the line here, boosting there, with an eye toward finding the most profitable mix.
One Eastern rental firm is raising prices on its hot, new items, holding the line on the basics, and then looking at lowering prices on items that were the hot tickets last season but are starting to cool off. The faddish items are the most likely to command the best prices, and this operator notes she plans to build inventory in this area: “These select items make us unique,” she explains.
A New England operator agrees: “We're holding pricing steady on our regular existing stock items, but many of our new products will be priced on the higher side.” He plans to introduce these new items via a color postcard campaign, noting, “Showing the gala effect of these new items is most important.”
While prices will go up on big-ticket items such as dance floors, tents and staging, another East Coast operator will bring down slightly the price tag on items including catering ovens, proofing boxes, tables and chairs “to promote add-ons to existing orders.”
“We are not concerned with the price of any specific item,” says one Midwestern rental operator, “but we are concerned with the overall dollars that we generate from any total order, and will be lower on one item and higher on another. Overall, we will package our jobs, as opposed to line-item pricing them.”
SPREADING THE NEWS
When it comes time to tell clients about a price increase, some operators speak softly.
“As we quote items, we just fax over reservations,” says a Midwestern operator. He does not plan a major price increase announcement: “They are always met with resistance.”
A major urban operator avoids the bad news of major price increases by boosting most prices 3 percent every April, then sharing that information with customers two months ahead of the price change. “Our regular customers make up about 75 percent of our business, and many of them talk to us in February to see what the increase will be,” the company president explains. “The worst thing that can happen to a caterer is not to be informed well enough in advance of price increases.” The company also softens the blow for good customers: “We are also very liberal in grandfathering in caterers' orders that were based on earlier, lower prices.”
A West Coast operator has a similar approach, implementing minor price increases every year “and most of the time the customer never notices.” If a customer complains, “We always stick with our published pricing and guarantee our prices up to three months after an increase,” a company official explains. “This gives our clients ample time to adjust their prices as well.”
An East Coast operator notes that both event rental firms and clients are in the same boat. “We try to help the customer identify with us on the price increases when {the increases} are noticed,” he says. “Everyone has felt the insurance increases and gas-price inflation and can identify with us.”
UNKIND CUTS
Veteran rental operators caution that lower prices don't automatically boost revenue. A rental operator in the Pacific Northwest notes, “One company in town now offers free delivery to established customers, and I've heard their business has actually dropped off. I think the focus on attracting more business rather than keeping the existing {business} happy has caused this trend. There is no doubt that the industry is more competitive, but the focus needs to be on keeping existing customers and finding your niche — not worrying what the guy next door is doing.” He adds, “Although I like competitors who focus on what we're doing and not on their customers!”
Other operators stress that a rental firm's contribution to an event is far more than a list of tables and tents.
One Midwestern operator explains: “We are not in the rental business; we are in the event business, and this is the cost of producing this event. {When} the client is having an event, price is but one concern, and often the smallest of all their overall concerns.”
Indeed, the price list is only one part of the event rental package. “I think there is still room in the market to charge more, at least for higher-end and bigger events,” says a West Coast multi-outlet operator. “Service, dependability and quality all come before price. We have surveyed our customers annually, and price is always the fourth criteria. The most successful companies will be those that can both lower their cost structure and differentiate their service.”
