A better business climate? Yes. Tougher competition? Yes again. When we polled the event rental industry for our annual New Year's forecast, we heard plenty of optimism tempered with a healthy respect for the challenges of the marketplace.
UNCERTAINTY EBBS
Our survey, with data going back four years, shows that some worrisome pressures from years past seem to be easing for the industry. In a striking improvement, concern over the “uncertain economy” has dropped a whopping 40 percent in the last four years. It was cited a top concern by 72 percent of our survey respondents as a threat to their business in 2003, but by only 33 percent for this year.
A strong economy is the key factor for event rental's success, notes Michael Berman, president and CEO of Milpitas, Calif.-based Stuart Rental Co. “While there are many challenges, the most significant would be whether the economy continues to exhibit the strength it did in 2005,” he says. “A weaker economy makes small problems into big problems, just like a strong economy makes small problems insignificant. If the economy falters, we will again see a growing separation between the mediocre companies and those companies dedicated to excellence.”
“Ever since 9/11, the economy has been by definition uncertain,” notes Jack Luft, president of Niles, Ill.-based Halls Rental. “We are going forward in 2006 planning on another robust year. [But] we have learned to pull back very quickly if something happens to change the business outlook.”
As another bright spot, concern over the cost of insurance has also taken a dip, down 16 percent from 2003 to 2006. But again, Luft cautions that this situation could change: “I expect all aspects of business insurance will increase significantly this year as a result of all the worldwide disasters.”
WHAT'S NEW?
Our survey shows remarkable consistency in some areas. For starters, “adding new inventory” holds the top spot — as it has for the past four years — as the No. 1 Strategy that event rental companies count on to prosper in the marketplace. Indeed, the pressure to “constantly offer new inventory” has jumped 9 percent from 2003 to 2006 on the list of event rental's greatest challenges in the New Year.
“We are planning to add hundreds of new inventory items,” Luft notes. And event rental operators look high and low to find that exciting new inventory. Trade shows such as The Special Event, trade magazines and networking are all high on the list of sources, our event rental pros agree.
And increasingly, they are looking abroad. “We are starting to really see greater quality from overseas manufacturers, whether they are in Europe or the Far East,” notes Berman. “They are also great at listening to what we are after and producing it.”
But no matter how enticing a supplier's display is, what the client wants matters more. “It's hard for a company to create a demand,” notes Michael Berk, head of M&M The Special Event Co., headquartered in Carol Stream, Ill. “It is easier to meet those demands. A special event is a dinner party on a large scale. So, what is being shown and sold in the retail arena?”
GOING UP
The blossoming business climate has emboldened event rental operators to shore up profit margins by raising prices a bit. Some 38 percent of respondents plan to raise prices this year, up from 28 percent in 2003. While 10 percent of respondents said they planned to cut prices in 2004, that percentage has dropped to only 4 percent this year.
The year 2005 “was a phenomenal year,” says Valerie Braun, marketing director of McCook, Ill.-based Chicago Party Rental. “The expansion of corporate business allowed us to be more creative with our clients' increased budgets, and we are looking forward to building on this in 2006.”
Yet some portion of price increases will only offset event rental's increasing costs. “We all face the same challenges in the rental business,” notes James “Smitty” Smith, general manager of Kirby Rental Service in Orlando, Fla. “Labor, insurance, fuel — all always cost more than last year. We adjust our prices accordingly; tents, tables and chairs are perishable items. Just like any other product, if you don't charge enough in your initial cost to cover all your expenses plus add-in for replacing — buying or building — inventory, you're not going to be here next year.”
HELP WANTED
Operators are also looking to bolster their staffing levels, with 45 percent planning to add more staff this year, up from 34 percent in 2004. Yet in a strong economy, finding qualified staff becomes a headache of its own. Concern about a “labor shortage/lack of skilled labor” is creeping up as a worry for the event rental industry — up from 39 percent in 2003 to 47 percent this year.
Quality staff “push the envelope” with their events, notes Berman. And that's vital, because “this year's mundane event was the ‘wow’ event five years ago,” he says.
Michael Miner, marketing vice president of El Segundo, Calif.-based Classic Party Rentals, agrees. “In each of our three areas of event rental — tenting, high-end tabletop and general rental equipment — we have true experts with tremendous experience to help translate what our clients want into our rental inventories,” he says. “Our decisions involve a small product team that can move quickly to respond to the needs of our clients.”
COMPETITON KEEN
Even as the stronger economy bodes well for the event rental industry, competition remains fierce. Event rental companies are operating lean and mean: the number of companies that plan to streamline operations, such as cutting staff hours and other cost-reduction measures, has dropped to only 20 percent this year, down from 35 percent in 2003. With little fat left to cut, the pressure to hold down prices in the face of rising costs has moved to the top of the list of event rental's worries, cited by 56 percent of respondents this year versus 49 percent in 2003.
“Greater competition exposes rental companies to an inability to keep prices consistent with rising costs,” Berman notes, “which is bad for the long-term health of the industry.”
Berk agrees. “People want and expect more, but want to pay less,” he says. This dilemma forces the event rental company to pick what role it wants to serve in the marketplace. “An old marketing professor taught me that you can have low prices, good service or good quality,” Berk says. “Pick two, because you can't have all three.”
“Competition in our business is always going to be there,” Smith notes. “There will always be the low-priced guy. There will always be the expensive guy. We try to be the guy who delivers what the customer asked for, and do it at a profit.”
Chicago Party Rental is a real-time example of one of event rental's hot trends — consolidation. Last month, the company announced that it has acquired competitor Events Chicago, and at press time is busy integrating inventories and labor forces, according to Braun. The acquisition, which follows CPR's purchase of decor company Theme Machine in October 2004, “will allow us greater depth, selection, design and services,” Braun says. She adds that the acquisition “represents a significant step for Chicago Party Rental in our strategy to accelerate growth in the event equipment rental market.”
WHAT'S NEXT?
What will make a great 2006 for event rental? Some event rental pros point to business strategies.
“Listening to our clients and making the right business decisions” are keys to success, Miner says. “Most people involved in selling in any capacity learn that success comes from talking,” he explains. “In our industry, and maybe all industries, the better path to success is careful listening, followed by intelligent and quick actions in the marketplace.”
Others think that outside forces will hold sway. This year will be good for event rental, Berk says, if we see “an end to the [Iraq] war, lower gasoline prices, lower interest rates and a slew of other elements far beyond our control.”
And others think that only time will tell. When asked what steps he is taking to make his event rental operation a success in 2006, Berman says, “Ask me in 2007.”
BUSY NEW YEAR
To order the complete research study for 2006, visit our Research Store by clicking here.
How will the number of special events you handle this year compare with last year?
| We will handle more this year | |
| 2003 | 70% |
| 2004 | 71% |
| 2005 | 70% |
| 2006 | 69% |
| We will handle approximately the same number | |
| 2003 | 18% |
| 2004 | 19% |
| 2005 | 15% |
| 2006 | 20% |
| We will handle fewer this year | |
| 2003 | 3% |
| 2004 | 2% |
| 2005 | 2% |
| 2006 | 2% |
| Unsure/no answer | |
| 2003 | 9% |
| 2004 | 8% |
| 2005 | 13% |
| 2006 | 8% |
PARTY PLANNING
What do you predict in revenue from business/corporate events versus social/private events in 2006 versus 2005?
| Revenue will go up this year over last | |
| From business events | 65% |
| From social/private events | 63% |
| Revenue will stay the same this year as last | |
| From business events | 24% |
| From social/private events | 23% |
| Revenue will go down this year over last | |
| From business events | 2% |
| From social/private events | 5% |
| Unsure/no answer | |
| From business events | 9% |
| From social/private events | 9% |
2006:EVENT RENTAL'S PREDICTIONS
WHO'S PAYING FOR THE PARTY?
How will your event revenue change (increase or decrease) over the next 12 months from business events and from social/private events?
Percentage responding
| Revenues will go up 20% and more | |
|---|---|
| From business events | |
| 2003 | 21% |
| 2004 | 10% |
| 2005 | 29% |
| 2006 | 24% |
| From social/private events | |
| 2003 | 21% |
| 2004 | 16% |
| 2005 | 19% |
| 2006 | 20% |
| Revenues will go up 10% to 19% | |
| From business events | |
| 2003 | 25% |
| 2004 | 29% |
| 2005 | 28% |
| 2006 | 35% |
| From social/private events | |
| 2003 | 24% |
| 2004 | 32% |
| 2005 | 35% |
| 2006 | 35% |
| Revenues will go up 5% to 9% | |
| From business events | |
| 2003 | 8% |
| 2004 | 17% |
| 2005 | 6% |
| 2006 | 6% |
| From social/private events | |
| 2003 | 7% |
| 2004 | 13% |
| 2005 | 9% |
| 2006 | 10% |
| Revenues will go up 1% to 4% | |
| From business events | |
| 2003 | 3% |
| 2004 | 7% |
| 2005 | 1% |
| 2006 | 3% |
| From social/private events | |
| 2003 | 4% |
| 2004 | 5% |
| 2005 | 1% |
| 2006 | 2% |
| No change | |
| From business events | |
| 2003 | 16% |
| 2004 | 27% |
| 2005 | 32% |
| 2006 | 26% |
| From social/private events | |
| 2003 | 16% |
| 2004 | 27% |
| 2005 | 32% |
| 2006 | 26% |
| Revenues will go down 1% to 4% | |
| From business events | |
| 2003 | 0% |
| 2004 | 1% |
| 2005 | 0% |
| 2006 | 0% |
| From social/private events | |
| 2003 | 0% |
| 2004 | 0% |
| 2005 | 0% |
| 2006 | 0% |
| Revenues will go down 5% or more | |
| From business events | |
| 2003 | 5% |
| 2004 | 5% |
| 2005 | 1% |
| 2006 | 2% |
| From social/private events | |
| 2003 | 2% |
| 2004 | 2% |
| 2005 | 1% |
| 2006 | 6% |
| No answer | |
| Business events | |
| 2003 | 22% |
| 2004 | 5% |
| 2005 | 4% |
| 2006 | 3% |
| Social/private events | |
| 2003 | 27% |
| 2004 | 5% |
| 2005 | 2% |
| 2006 | 2% |
| Figures have been rounded off. | |
2006:EVENT RENTAL'S PREDICTIONS
PARTY CRASHERS
What are the greatest challenges facing your rental operation this year?
Percentage responding
| Increasing costs in the face of pressure to hold down prices | |
|---|---|
| 2003 | 49% |
| 2004 | 53% |
| 2005 | 57% |
| 2006 | 56% |
| Increased competition | |
| 2003 | 38% |
| 2004 | 42% |
| 2005 | 43% |
| 2006 | 48% |
| Insurance costs | |
| 2003 | n/a |
| 2004 | 63% |
| 2005 | 62% |
| 2006 | 47% |
| Labor shortage/lack of skilled labor | |
| 2003 | 39% |
| 2004 | 41% |
| 2005 | 42% |
| 2006 | 47% |
| Constantly offering new inventory | |
| 2003 | n/a |
| 2004 | 34% |
| 2005 | 28% |
| 2006 | 43% |
| Shorter lead times | |
| 2003 | 37% |
| 2004 | 39% |
| 2005 | 46% |
| 2006 | 40% |
| An uncertain economy | |
| 2003 | 72% |
| 2004 | 48% |
| 2005 | 53% |
| 2006 | 33% |
| More problems getting permits | |
| 2003-2005 | n/a |
| 2006 | 9% |
| Consolidation of client base | |
| 2003 | 5% |
| 2004 | 7% |
| 2005 | 7% |
| 2006 | 5% |
SALES-BUILDING STRATEGIES
What steps are you taking to adapt to the event rental marketplace this year?
Percentage responding
| We are adding new inventory | |
|---|---|
| 2003 | 80% |
| 2004 | 83% |
| 2005 | 81% |
| 2006 | 80% |
| We are pursuing new clients | |
| 2003 | 74% |
| 2004 | 78% |
| 2005 | 76% |
| 2006 | 74% |
| We are increasing marketing efforts | |
| 2003 | 80% |
| 2004 | 68% |
| 2005 | 69% |
| 2004 | 63% |
| We are adding new services | |
| 2003 | 43% |
| 2004 | 42% |
| 2005 | 40% |
| 2006 | 46% |
| We are adding additional staff | |
| 2003 | n/a |
| 2004 | 34% |
| 2005 | 47% |
| 2006 | 45% |
| We are raising prices | |
| 2003 | 28% |
| 2004 | 27% |
| 2005 | 34% |
| 2006 | 38% |
| We are streamlining operations (e.g., reducing staff hours, etc.) | |
| 2003 | 35% |
| 2004 | 26% |
| 2005 | 29% |
| 2006 | 20% |
| We are adding new locations | |
| 2003 | 11% |
| 2004 | 8% |
| 2005 | 10% |
| 2006 | 10% |
| We are cutting prices | |
| 2003 | 6% |
| 2004 | 10% |
| 2005 | 4% |
| 2006 | 4% |
| Totals exceed 100% because multiple answers are possible. | |
RESOURCES
Chicago Party Rental, 708/485-8010; Classic Party Rentals, 310/535-3660; Halls Rental, 847/929-2222; Kirby Rental Service, 407/422-1001; M&M The Special Events Co., 630/871-9999; Stuart Rental Co., 408/856-3232
