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A Lesson in Rate Dynamics

In Great Britain, the rental rate structure is generally lower than in the United States — often dramatically so — leading some analysts to estimate that equipment (plant) time utilization in the U.K. needs to be at 80 to 90 percent in order to cover costs. This is a challenging metric, even when you take into account rental saturation. Approximately 80 percent of U.K. construction equipment is sold to the rental sector, a higher assignment than in any country in Europe.

In North America, where rental penetration is currently estimated to be below 50 percent, low rate/high utilization is not a viable game plan for profitability. It creates a lopsided dynamic that places unrealistic expectations on market behavior.

Lucy Peterson is president of Springfield, Mass.-based Balboni Associates and a frequent contributor to RER on overseas rental market trends.

TAGS: Ar Mag
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