In the world of event rental over the last five years, “consolidation” has been the lead story. Several companies have built a regional presence, with Los Angeles-based Classic Party Rentals far out in front, growing from a six-unit company with $45 million in revenue in the 2003 edition of Special Events' “30 Top Event Rental Companies” to a multi-state powerhouse with 35 locations and revenues of more than $400 million last year. So how has consolidation played out?
The consolidators' drive to gain market share — and their willingness to discount prices to do so — is the biggest headache in event rental today, according to Marshall Bauer, president of Sonoma, Calif.-based Wine Country Party & Events. “We try to be the local high-end rental company; the dilemma is how to justify a price premium in a discounted and depressed market,” he says. “You typically can't, but the problem of the depressed market is temporary, [while] the discounting is something that is polluting the whole segment and will stay with us for years after the economy has recovered.”
Because it brought new awareness of the event rental industry, consolidation at first was a benefit, says Michael Berman, president and CEO of Milpitas, Calif.-based Stuart Rental Co., with four outlets. But he says that thanks to the consolidators' attempts to snag exclusive arrangements with caterers and venues, consolidation will eventually limit choices for clients while driving up the price they pay. While competition among a field of players brings choice to the consumer, “Oligopolies lead to the exact opposite,” he says. “Just ask anyone who was frustrated with their cable television company a few years before the advent of satellite and FiOS [fiber-optic] TV.”
But other operators say the threat to event rental isn't the big guys — it's the little ones.
SMALL AND SCRAPPY
“We now have just over 50 rental companies operating in the Atlanta metro area,” says Dan Nolan III, general manager and managing partner of Marietta, Ga.-based Tents Unlimited. “Many of these companies are tool-and-party stores, but they are a cheap alternative to some of us who have a greater overhead and are strictly party rental operators.”
Indeed, some operators think that big companies bring big-business discipline to event rental.
“Having larger players in the market to set the bar on prices, equipment lines and policies helps give the market structure,” says Jim Lisi, owner of Ventura, Calif.-based EventRents, with three locations. “Consolidation provides ‘rational pricing,' especially in southern California, where a myriad of small companies don't know their costs, and just run out and bid at a price to win the job to pay this week's bills.”
Tight credit brought on by last year's financial meltdown means Lisi can't invest in new product lines that may need time to pay off. As a result, “Our selection suffers in comparison to the big guys,” he says. But on the flip side, the big companies “help commoditize” lines of equipment, he says, bringing costs down. “Chiavari chairs were a specialty item 10 years ago, and now they are a staple,” Lisi explains. “We may miss the leading edge of a new item, but we also don't risk wasting our money, and we can get in when costs are more reasonable.”
To some operators, the recession is the true headline worry for the rental industry.
ECONOMY EATS EVENTS
“Without a doubt, the toughest problem has been the economy,” says Michael Berk, president of M&M The Special Events Co., with operations in Chicago and Dallas. “Events are highly discretionary and usually the first thing to be trimmed, if not eliminated.”
He isn't afraid of competitors — big or small. “Competition is a good thing. It makes everyone better, more creative, and sometimes we can learn to be more efficient and proficient and hopefully more profitable as conditions improve,” he says.
M&M The Special Events Co.
Marquee Event Group
Stuart Rental Co.
Wine Country Party & Events
“We are now traveling much more than we ever had to before. It has allowed us to weather the economic storm and keep moving towards achieving our long-term goals.” — Dan Nolan
“We have improved our equipment quality with better maintenance, leased a building with 50 percent more space at an exceptional long-term rate, built a new laundry in our new space, continued marketing through ISES, NACE and ARA, and work with all our nonprofits to assist them to market and raise funds. We have not let this slowdown affect us.”
— Damon Holditch, CSEP, CERP, Marquee Event Group, Austin, Texas
“We have had to reduce our team, and everyone has been cross-trained to be more productive. We have also added a director of social events (with corporate being hardest hit, we are reemphasizing social) and an event production manager specializing in lighting and fabric treatments, as we are continuing to offer additional products and services to differentiate ourselves.”
— Michael Berk