It's party rental's job to deliver the goods, but the cost of delivery has jumped in the past year due to spikes in oil prices.
According to an informal survey by Special Events Magazine in late March, party rental operators report on average a 26 percent increase in fuel prices since Jan. 1. They say that the cost of operating their truck fleet has gone up 20 percent in the last year, a spike fueled not only by rising fuel prices, but also by such inescapable costs as higher insurance premiums and employee benefits.
PAY OR PASS ON?
When it comes to dealing with the pain of rising fuel prices, party rental operators have widely different approaches.
Roughly half in our informal survey believe that the price spike is only temporary and must be absorbed as a cost of doing business.
“We will absorb the increased costs so that we continue to provide service to our out-of-state customers,” reports Mary Moss, national sales director of Oak Creek, Wis.-based Karl's Party Rental. “However, we will simultaneously continue to focus on specific niche markets where we can leverage our existing skills.”
“Right now we're holding our delivery fees constant and absorbing the cost of any fuel increase,” notes Jack Campbell, area manager for HSS RentX Special Event Rental in Knoxville, Tenn. “Our hope is that prices will come back down after the military action is resolved in Iraq, as they did after the last Gulf War.”
“We cannot pass on these increases because of the state of the economy and our competition,” notes Randy Gillespie, general manager of St. Helena, Calif.-based Napa Valley Party Services. But the company is watchful: “If it becomes a standard in most delivery-type businesses, we could then reexamine a gas surcharge.”
In contrast, many other party rental companies believe that swallowing the higher fuel prices is impossible.
COST OF SURVIVAL
“We simply cannot absorb any more costs,” says Bob Traxel, president of Best of the Best Event Productions in Fountain Valley, Calif. “Our competitors have tried to do this for the past several years, and a number of them have either gone out of business or are in the process of doing so.”
Best of the Best, which operates a fleet of eight diesel delivery trucks and three smaller vans, has refigured all its delivery charges, shifting from a flat fee to a charge that reflects specifics such as actual miles driven per job.
Toronto-based Chair-Man Mills, which operates a fleet of 18 delivery vehicles, plans to add a $10 fuel surcharge as a separate item on its invoices starting May 1. “We think this will be perceived better than raising our delivery charges,” explains president Mary Crothers.
Austin, Texas-based Austin RentAll Party is in the midst of revising its delivery fee structure for its fleet of seven trucks. The company has been routing to cut mileage for the past several years and is now boosting its base delivery fee from $35 to $40. “In 1991 during the Iraq confrontation, we increased our base delivery price from $15 to $20,” reports president Damon Holditch, CSEP. The company uses a concentric ring system, which gradually increases delivery fees to $75 per delivery and pickup in the outermost ring. Beyond that, the charge is $1 per loaded mile. Also, specific venues may incur additional charges based on difficulty of access or other factors that complicate delivery and pickup, Holditch says.
Whether they are boosting delivery fees or not, all party rental operators interviewed for this article are fighting hard to operate their fleets as efficiently as possible.
Karl's uses GPS (Global Positioning System) technology to save time and operate its 40-truck fleet economically. The company also has formed “cross-functional process improvement teams” focused on improving customer satisfaction and reducing employee error, Moss reports.
Torrance, Calif.-based Aztec Tents & Events buys fuel for its 15-vehicle fleet through a bulk-purchasing program. “All drivers have a credit card that routes all fuel costs to one billing that is paid by one source,” explains vice president Jim Sala. “We are also calling customers with orders that have a lot of possible add-ons and deletions before we go; this will eliminate extra trips.”
Countryside, Ill.-based Chicago Party Rental has been stressing efficiency with the drivers of its 46-truck fleet. “We remind them to turn off their trucks at deliveries rather than leave them running,” notes president Ben Shipper IV, CERP. “We have very few go-backs on deliveries, but even one is too many, so we continue to train to reduce those situations.”
Mike Berk, president of M&M The Special Events Co., with outlets in Illinois and Texas, urges party rental operators to be realistic in the current economic climate.
“If rental companies are reluctant to pass along these very real cost increases and further erode their margins with lower prices just to generate dollars, they will work themselves into the poorhouse very quickly,” he says. “Sure, no one likes to raise prices, but it is a real cost. We all work much too hard in this business not to earn a fair and reasonable return on our investment.”
Austin RentAll Party, 512/491-7368; Aztec Tents & Events, 310/328-5060; Best of the Best Event Productions, 714/953-2121; Chair-Man Mills; 416/391-0400; Chicago Party Rental, 708/352-7007; HSS RentX Special Event Rental, 865/584-8331; Karl's Party Rental, 414/831-7000; M&M The Special Events Co., 630/871-9999; Napa Valley Party Services, 707/963-8001; National Propane Gas Association, 202/466-7200; Pro Flex Vinyl, 903/783-1100
Along with hiking the cost of the fuel that runs delivery trucks, rising oil prices are pushing up the cost of such oil-based party rental staples as Velon and propane.
“It's a real crisis now,” says Ofelia Harrington, owner of Paris, Texas-based Pro Flex Vinyl, which distributes Velon, also known as convention taffeta. “It's not unusual to see three price increases a year, but then it levels out” and prices drop back down. “But we saw three increases in February, and were hit with a fourth on March 1.”
As a result, a 50-lb. roll of vinyl has risen from $71.50 to $75, “with another increase coming April 1,” Harrington warns. “Everyone is panicked, and is ordering like crazy. We don't know the effect later in the year.”
But price relief could be on the way. “Crude oil prices lately have been down from February's highs, so those dependent upon products from crude should see lower prices hopefully by late spring,” reports Robert Baylor, communications director with the National Propane Gas Association in Washington. “Propane also historically becomes much cheaper in spring and summer because of a large drop in its demand.”