The sour economy is forcing nearly two in three event rental operators to discount their rates, according to a recent online survey from Special Events, a vicious game that not only erodes profits today but can depress business down the road.
One operator in a large metropolitan market says he was "forced" into discounting—in the range of 15 percent to 20 percent—because all his competitors are doing the same thing. (Most operators interviewed by Special Events asked to remain anonymous.)
"The price-cutting in our market has gotten out of hand," he says. "There are companies doing jobs at or below cost just to bring in cash. We have walked away from more jobs in the last 18 months than in the last 18 years."
CUT HERE, HOLD THERE
Most respondents who are discounting don’t cut rates across the board; instead, they discount certain items or offer discounts only to certain customers.
A big-city operator offers discounts on chairs "because there are so many 'chair' companies now," she explains. Many decor companies offer chairs as a loss leader, then upcharge decor, she notes. The rate for chairs "will never come back unless we find a 'new' chair that no competitor has," she says.
A third of respondents say they won't discount, presenting themselves instead as quality vendors who can wait while the discounters grind themselves out of business.
"Sometimes it pays to lose a bid to a discounter every once in a while," says Steve Kohn, head of Millers Rentals in Edison, N.J. "The client will eventually come back to you. Quality wins over price in the long run."
Holding the line on rental rates in a sour economy has meant these operators often must cut expenses.
"We have not lowered our prices but we have not had an increase in the last two years," says one large operator. "We used to raise them 3 percent a year." He adds, "We were down 20 percent last year but our bottom line was up because we watched expenses better than ever."
For the full story, see the September-October issue of Special Events.
Photo by iStockphoto.com / © Alex Slobodkin