IT'S Clear: The event rental industry is bullish on business in 2007. A total of 76 percent of respondents to this year's Special Events Magazine event rental survey predict they will handle more events this year than in 2006 — the most optimistic forecast in the five-year history of our survey.
As long as the economy stays strong, so will event rental. “On a macro level, the concerns of the party rental industry echo those of the entire economy,” notes Michael Berman, president and CEO of Milpitas, Calif.-based Stuart Rental Co. “Our corporate clients still show signs of strength with record earnings and increased hiring, but geopolitical risks and a sluggish housing market could slow everything down quickly.”
COOL WITH COMPETITION
In a climate where consolidation is the topic of the day, the event rental industry seems to be taking it in stride. Only 9 percent of respondents say that “consolidation of the party rental industry” is a big challenge for them. In fact, concern over “increased competition” in event rental dropped from No. 2 last year to No. 5 this year on our list of business worries.
Most operators say that having strong competitors makes them stronger. “Competition is getting fiercer as big guys gobble up other big guys and customers expect more, which makes all of us sharper,” says Mike Berk, president of Carol Stream, Ill.-based M&M The Special Events Co.
Philip Silverman, head of San Diego-based Raphael's Party Rentals, agrees. “Consolidation of event rental businesses has been good for us,” he says. “It's less competition, and customers still like the family, locally owned businesses.” He is making it a point, however, to keep his clients all in the family. “I as owner have started to aggressively go out and meet customers, talk to them and get their feedback on what we can do better,” he says.
One caveat about consolidation: Investors must commit to the business, and not cut and run, rental professionals say. “As long as good people continue to run these businesses as enterprises, not purely as balance sheets, this scenario can and will work,” Berk explains.
But even a robust rental market brings its headaches. A big one: finding the workers to make events happen. In this year's survey, respondents say that the challenge of finding suitable workers is their No. 2 concern, a challenge they listed at only No. 4 last year. A total of 55 percent of respondents say they are adding additional staff to adapt to today's event rental marketplace — a striking jump from the 34 percent who said so when we first asked the question in 2004.
“Having expert knowledge of the equipment and tools has always been critical,” explains Valerie Braun, marketing director with McCook, Ill.-based Chicago Party Rental. “As our events get more sophisticated, so does the demand for experienced personnel and proper training.”
Milwaukee-based Karl's Event Rental is tackling the problem by investing in education for its human resources team with the goal of hiring better employees, says company president John Schlueter. Strong employees will “take ownership of job installations and deliver the best customer service to all of our customers,” he says.
Los Angeles-based Classic Party Rentals, which has made headlines with its consolidation push, is at work integrating the varied talents of its growing management team. “Brought together by The Special Event show [in January], we had several ‘best practices’ meetings among our location managers,” explains Michael Miner, vice president of marketing and strategic accounts, “trading innovative ideas on everything from equipment care and delivery practices to unique event touches to share with our clients.”
The No. 1 headache for rental operators has remained the same since the Special Events rental forecast kicked off five years ago: the problem of increasing costs in the face of pressure to hold down prices.
Mark Clawson, head of Salt Lake City-based Diamond Rental, says that delivering a high level of service at a reasonable price will be his No. 1 challenge this year, “when most of the ‘not apparent to a customer’ costs such as insurance, fuel, labor rates, etc., continue to skyrocket.”
For Chicago Party Rental, rising insurance costs have put the bite on business, Braun says. To cope, “We are looking at implementing even stricter training and safety measures to avoid accidents both in the warehouse and on job sites,” she says.
“Every product we have is perishable — nothing looks good forever,” notes James “Smitty” Smith, general manager with Orlando, Fla.-based Kirby Rental Service. “Once you have rented an item a few times, it needs to be replaced. If you don't charge enough to replace that item, you'll never grow your business.”
Much pricing pressure comes from within the event rental industry itself, in the form of newcomer competitors who lowball prices. “Rental operators who are in business to make quick money threaten the business prospects of themselves and their clients,” Berman says. “Our customers are producing these events to celebrate their life's achievements and milestones. The minute a rental company starts to treat these events as just another job is exactly the moment it creates a dissatisfied customer.”
Another constant in our annual survey — what steps rental pros are taking to adapt to the marketplace — remains “adding new inventory.” For the fifth year in a row, this strategy holds the top spot, cited by 86 percent of respondents this year versus 80 percent last year.
Classic Party Rentals is beefing up its line of offerings across the board. “In addition to new and exciting tabletop product lines, we will aggressively grow our range of colors and styles of specialty linens and cutting-edge lounge furniture and increase our decorative swagging capabilities to really customize our events and bring our clients' vision to life,” Miner says.
Besides scouring trade shows geared to party rental, operators look beyond their industry to get a jump on the next trend in fashion. “Our purchasing people do a great job of sourcing new inventory from vendors that don't typically sell to the rental or special event industry,” Clawson says. “This takes some legwork — for example, attending markets that are more typically focused on interior design — but it is worth the effort.”
In a clear example of good news/bad news, even a strong rental market brings its share of challenges. “We have found that managing through growth is probably more difficult than managing through a downturn,” Clawson says. “It's also a whole lot more fun, which makes all the difference.”
Chicago Party Rental, 708/485-8010; Classic Party Rentals, 310/535-3660; Diamond Rental, 801/262-2080; Karl's Event Rental, 414/831-7069; Kirby Rental Service, 407/422-1001; M&M The Special Events Co., 630/871-9999; Raphael's Party Rentals, 858/689-7368; Stuart Rental Co., 408/856-3232
What are the greatest challenges facing your rental operation this year?
|Increasing costs in the face of pressure to hold down prices|
|Labor shortage/lack of skilled labor|
|Shorter lead times|
|Constantly offering new inventory|
|An uncertain economy|
|More problems getting permits|
|Consolidation of client base|
What steps are you taking to adapt to the event rental marketplace this year?
|We are adding new inventory|
|We are pursuing new clients|
|We are increasing marketing efforts|
|We are adding additional staff|
|We are adding new services|
|We are raising prices|
|We are streamlining operations (e.g., reducing staff hours, etc.)|
|We are adding new locations|
|We are cutting prices|
Totals exceed 100% because multiple answers are possible. © Prism Business Media
What do you predict in revenue from business/corporate events versus social/private events in 2007 versus 2006?
|Revenue will go up this year over lasta|
|From business events||68%|
|From social/private events||64%|
|Revenue will stay the same this year as last|
|From business events||21%|
|From social/private events||30%|
|Revenue will go down this year over last|
|From business events||1%|
|From social/private events||1%|
|From business events||9%|
|From social/private events||6%|
BUSY NEW YEAR
How will the number of special events you handle this year compare with last year?
|We will handle more this year|
|We will handle approximately the same number|
|We will handle fewer this year|