Some expect it to be an A. Others don't expect the grade to change, and many just don't know. It's like awaiting the outcome of a final exam. Despite taking all the necessary steps to ensure a positive result, there's still a level of uncertainty that impedes a solid stance. An overly optimistic view can result in disappointment if the outcome is poor, whereas too much pessimism throws one's self into a whirlwind of negativity. Therefore, many remain cautious and wait. Rental centers throughout the Northeast experience these feelings and more while anticipating the economic state of the coming year.
David Harris, president of American Rentall Center, Abington, Mass., expects “moderate growth” in 2002. Larry Moreau, general manager, Rent-It Auburn, Maine, is “cautiously optimistic” that business will remain the same. “We certainly hope that it stays the same,” he says. “It's still early to tell right now. We'll be in fine shape for at least staying level on revenues.”
Bruce Grabert, rental manager, J.J. Gregory & Son, East Providence, R.I., expects to remain level also. “We haven't seen a downturn in this area,” he states. “It's remained pretty much status quo.” His rental house already has jobs booked for the first half of the year. “The work is out there, which is surprising when you consider the present state of the economy,” he says. “It doesn't seem to be affecting the construction industry around here. We're looking forward to probably another good year.”
An aspect unique to the Northeast is the trickle down effect the Sept. 11 attacks have had on the industry. The bigger rental companies have so much inventory at Ground Zero that customers are going to smaller rental companies. Andrew McMahon, president of Abbey-Rent-All, New York says, “My business personally hasn't faltered at all. We're still going strong. I would assume it's going to stay that way.”
McMahon's company generated an influx of business because of the attacks. Not only has McMahon gained more business from larger companies' customers, but he's also renting a lot of his equipment to the cleanup effort. Plus, he's renting to his everyday customers. “I don't think we're going to have a downturn,” he says. “We still have a lot of guys coming in pricing through the spring, so I'm expecting a good season.”
The forecast is less clear for others. Lawrence Keeley, chief financial officer for Admar Supply, Rochester, N.Y. expects a general downturn. “The uncertainty of the coming year is the most disturbing part going into 2002,” he says. “There's an uncertainty as to how much business there's going to be in New York state.” Mike Disser, director of sales and marketing at Albany Ladder, Albany, N.Y., says, “I think the economy is definitely having an impact on business. I think it's caused some paralysis in people, and they're not taking risks they would normally take.” He expects there to be less construction starts in 2002.
“The New York state budget is always an issue — that is going to tighten up,” he says. “I think our customers are going to have a slow down.”
How do we rate?
As far as rates go, most rental centers have not had to make drastic changes. Harris wants to increase on the contractor side with weekly and monthly rates but not the daily rates. McMahon and Grabert say their rates will stay the same. “Because of the amount of business there seems to be enough customers to go around for everyone,” Grabert says. “We've had very good demand for the equipment we rent.”
“Our concern is always what the rate structure is going to be for the coming year,” Moreau says. “I think it would be foolhardy to just expect everything to go the way you want it to go.”
Keeley says competition keeps rates the same or a little bit lower than normal. Others affected by competition include Sharon Bohlender, marketing manager for Washington Air Compressor Rental, Hyattsville, Md. “Our current situation is dismal,” she says. “The weakening economy has caused the national rental chains to lower pricing in an effort to increase utilization, which has created irreparable damage in what was once a strong rate market.”
The aging process
Having built up a younger fleet in the past few years, many rental centers plan to spend less on new equipment this year. McMahon already spent his 2002 budget on new equipment mainly for the Ground Zero cleanup. “I don't see any more surges,” he says. “The stuff we would have bought this spring we bought at the end of last year. It looks like our cash flow will carry us through to the summer when we get busy again.”
“We're not in a cycle where we need to be replacing equipment, so we don't see any large purchases in 2002,” Moreau articulates.
The current trend of aging a fleet creates a sticky situation for manufacturers who have to deal with shrinking demand while forecasting demand. Manufacturers must find the strategic balance. A bold move could create an overabundance of equipment, but a timid stance could prove fatal in case things do pickup. “I wouldn't want to be in their position to have to judge inventory over the next six to 12 months,” Harris says.
“They're kind of getting hit from all ends,” Keeley says. “The lack of demand for the product is hurting them.”
Moreau thinks manufacturers can do better business by going out of their way to help rental centers. “More manufacturers are realizing a rental house is an ally and not an enemy,” he states.
“The ones who are going to succeed are the ones who will be active and will move the product through the channel,” Disser says. “That's what's going to differentiate them over the next couple of years. Those that are successful with that will remain successful.”
At this point customers in the region range from hesitantly upbeat to cautious, rental owners say. Most rental centers are finding consistent traffic walking through the door. “No one's thrown in the shovel yet and gone out of business,” McMahon says. “I haven't seen anyone crying the blues about a cash flow problem.”
“We're in Southeastern Massachusetts, and it's one of the fastest growing areas in the state,” Harris reports. This tends to be the case in New Hampshire also. “We have not seen much of a reduction in demand for housing, so the demand for the contractors is still very high,” says Michael Parkin, president of Exeter Rent-All, Exeter, N.H.
Although location does have an impact on the amount of business a rental center sees, all locations agree customers are leaning more toward renting than buying. Rental centers nurture this trend with the crucial component called efficient, reliable personnel — a significant issue for everyone. “I think our biggest problem is going to be to find qualified help,” McMahon says.
“The biggest problem is always finding and keeping good employees,” Harris says. “That's a big asset.” Parkin too recognizes “controlling and managing the ever increasing cost of personnel and staffing,” as an important issue. “One of my concerns is how to motivate and reward our employees during a recession,” Disser says. “That will be a challenge.”
In the coming year many plan to enhance service with upgraded technology. J.J. Gregory & Son, Exeter Rent-All and Rent-It have upgrades in the works. “We will probably be updating as far as our internal technology system goes,” Moreau says. “We have the need for something newer.” Albany Ladder recently implemented a new system, “We're part of National Equipment Services,” Disser states. “We do have pretty intensive IT support. It's been stepped up quite a bit.”
Rebecca Bridson can be reached at [email protected].