Full of life

By Murray Pollok17 March 2008

It is easy to misinterpret, or ‘over-interpret', the results of our IRN Confidence Survey. There is lots of data on these pages - reflecting the opinions of almost 300 rental companies and suppliers around the world - and it would be easy to focus on some of the caution and perhaps nervousness that is evidently creeping in from some areas, particularly North America.

However, the key thing to remember in reading the results is that 2007 was fantastic for many rental companies and suppliers, and that any decline in expectations for 2008 has to be seen in this context.

That is clear from our Confidence Index, which hits an all-time high of 72,9 (on a scale from 0 to 100), and the key rental health indicators – such as investment levels and network expansion – that still show an industry positively brimming over with life. For example:

• 58% of renters will invest more in their fleets in 2008, 82% will expand as well as replace their fleets, and 60% plan to add depots;

• Manufacturers remain overwhelmingly optimistic about 2008, with 86% expecting increases in rental sales;

• Just 6% of all respondents this year expect their revenues to fall in 2008.

Still, it is changes in views from last year that are most interesting, and it is clear – and inevitable – that there has been a slight dampening of expectations, and less of a consensus on levels of expenditure.

The overall number of companies that expect their businesses to grow in 2008 is still extremely high at 88%, although drops from 95% last year, and 6% foresee a fall in sales compared to 0% in 2007.

Which regions are expected to decline most of all? Almost 7% of companies from Spain and Portugal forecast a fall in revenues next year, closely followed by the UK and Ireland at 5%, Italy at 4% and North America with 3%. It is worth pointing out that last year, less than 1% of all respondents forecast a fall in 2007 revenues.

What does the survey tells us about opinion in North America? Well, it is clear that many are anticipating a change in the business environment in 2008: just 36% of North American companies expect more than 10% growth next year (it was 57% last year), which places it at the bottom of that particular world league.

And North American's are second least likely to add depots, with 48% expecting to expand their networks compared to highs of over 75% for places like Iceland, the Baltic States, Germany and Eastern Europe. There are clearly some belts being tightened in North America.

We don't distinguish between the US and Canada in the survey, but it is fair to say that the prospects seem a little brighter in Canada at the moment. As one respondent said; “I can see Canada outperforming the US on a per capita basis.” Another said that “business in Canada will moderate, but be slightly better than the US.”

“If there is some uncertainty in the North American air, renters in the Baltic States and Eastern Europe must be breathless: they top the league in the proportions expecting over 10% growth next year (both over 60%).”

If there is some uncertainty in the North American air, renters in the Baltic States and Eastern Europe must be breathless: they top the leagues in the proportions expecting over 10% growth next year (both over 60%) – in contrast to falls in every other country or region – and also in the numbers expecting to increase investment (84% in the Baltic States and 73% in Eastern Europe).

Some 94% of respondents in the Baltic States plan to open new depots (although Iceland tops that, with all four Icelandic rental companies telling us that they will open new locations in 2008).

The expectation that Spain could well see a reaction to the vast investment in recent years is reflected in several figures. For example, Spanish rental companies are the least likely of any to increase investment in 2008 (44% will invest more) and close to the bottom of the league when it comes to growth expectations, with just 43% expecting increases of over 10%. They are also the most likely to forecast a decline in revenues.

The figures on individual rental sectors reveal some variations in fortunes: the party and events sector is expecting some rental price falls and have also adjusted downwards their fleet investment levels. The accommodation rental business is notably buoyant (three quarters expect to see +10% growth and none expect revenue falls), and a note of caution can be detected in powered access, where this year there are 6% forecasting significant falls in revenue (compared to just 1% last year) and almost one in five say they will spend less in 2008.

As one access renter told us; “In the access business be careful about overcapacity, especially in Spain.”

As in previous years respondents are given a chance to have their say on the rental market. Many of you have positive things to say about the development of rental, although as you would expect there are also expressions of concern.

One manufacturer said the continuing consolidation of the rental market was forcing them to “consider our own rental channel”, and another warned rental companies that they should place “more emphasis on profit margins then revenue growth.”

“We have experienced huge price increases from the equipment manufacturers. It will be a major challenge to pass these price increases on to our customers.”

It was also a manufacturer who warned that low equipment prices negotiated with big rental companies “encouraged rental rates to drop and put the smaller rental outfits in trouble. Its the smaller companies that are the future of rental, not the big outfits who are encouraging sales staff to hire machines to sites no matter at what cost!”

One Scandinavian aerial platform rental company clearly isn't getting these low prices; “We have experienced huge price increases from the equipment manufacturers. It will be a major challenge to pass these price increases on to our customers.”

A Greek rental company complained that “in my country the problem is that rental companies like mine never calculate their costs and keep rates very low”, and one major European rental firm said “the focus must continue to be on ‘rental market creation' rather than on pursuing existing rentalbusiness.”

The prize for the most audacious suggestion, however, goes to someone in the powered access rental business who argued that the industry needed an association “to keep a close watch on rental rates and decide about increases/decreases in rental prices.” Nice idea, just don't tell the competition authorities.

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Murray Pollok Managing Editor Tel: +44(0)1505 850 043 E-mail: murray.pollok@khl.com
Simon Kelly Sales Manager Tel: +44 (0) 1892 786 223 E-mail: simon.kelly@khl.com