(Editor’s Note: As U.S. forces push closer to Baghdad, industry executives share their views on the war’s impact on the rental industry. They, along with other Americans, focus first on the safety of our troops and innocent civilians. They also long for a swift conclusion to the conflict. We at RentalPulse share their thoughts and even hope that when you read this, fighting will have ended or be near its conclusion.)
Even as the war rages on in Iraq and Americans feel the disturbing tangle of hope, fear and uncertainty, a spirit of resilience knits the nation and also defines the rental industry, in a rifle-shell. A bulletproof bulldog that has the uncanny ability to thrive in adversity, the rental concept is not, by all indications, going to be one of war’s casualties.
In fact, according to seven industry executives interviewed by RentalPulse, the war is, at this early juncture, having little impact on the rental business overall. Some even expect that rental could fare well if the economy droops from war’s burden.
RentalPulse asked one fundamental question: What effect is the war likely to have on the industry and the economy? The following executives gave brief telephone responses:- Rod Beeler, department manager, rental and used equipment services, Caterpillar
- John Crabbe, owner of Vermont Tent Co. and ARA Special Interest Group chairman for the party and events segment
- Bob DeBusk, owner of American Equipment Rentals in Phoenix and ARA Special Interest Group chairman for the general tool segment
- Mike Farley, president, Volvo Rents
- Fred Hageman, industry consultant, Hageman, Stansberry and Associates
- John Milne, president, United Rentals
- Charles Neffle, owner of All Occasions Event Rental in Cincinnati and immediate past chairman of the ARA board of directors
Linking the rental business with a discussion about war does not come naturally for the respondents. Each is initially hesitant to bring rental near the mike if war is the real subject, stating their discomfort about analyzing business effects while soldiers’ and civilians’ lives are being claimed or endangered daily. Money and business, DeBusk summarizes, are secondary. They emphasize hopes and prayers for a swift conclusion to the conflict as their focus, as well as that of the nation.
All are cautious, as well, about asserting strong predictions about the war’s possible effects on the industry and economy, some leaving sentences to trail uncompleted as they consider potential consequences of a prolonged military engagement. The seven are mindful of the irrelevance of rental in the context of an enormous international event of far-reaching political and social importance.
Nevertheless, each shares their observations, concerns and opinions with candor. The dominant, recurring theme is that a short war will mean growth for the economy and stability for the industry overall, but a long war could put stress on both the construction and events sides of rental. No one ventures to define the meaning of short or long. But when most pause to contemplate the effect of a war extending beyond what most Americans expect, they stopped short of identifying many concrete effects, instead often ending with, “Who knows what will happen?”
War can be good for the economy, some confess. Government spending goes up, and, as long as resolution is swift and “clean,” all believe the American economy will experience a climb. On the flip side, if the war should drag painfully into many months, banks may tighten their hold on money. Commercial building could suffer somewhat, too. Milne, Hageman and DeBusk agree that retailers and other corporations would likely postpone expansions and defer projects in times of uncertainty.
But these conjectures are offset with one immovable truth: rental is resilient.
“One mitigating factor to all this is that rental tends to be anti-cyclical. If the overall market and economy goes down, rental could go up,” says Hageman. “Rental is becoming more and more of an option and it’s a smarter, cheaper option; it gives contractors and homeowners more flexibility, and it’s not as capital intensive. Yes, there have been blips and dips on the screen over the last two decades, but we’ve persevered, and the rental concept has continued to grow. We’ve got many more things in our favor in this industry than a lot of other industries do.”
The nonconformity of rental, its unique traits that almost defy comparison to other businesses, is evident in three pulse-check assessments of broad rental categories: construction, do-it-yourself, and party.Construction – Steady As She Goes
Beeler at Cat, Farley at Volvo, independent general tool guy DeBusk and United Rental’s Milne concur that at present there is no significant, war-related change to the construction industry and the rental stores that serve it. Beeler expects a similar or slightly better year. Milne says United forecasts that its primary business in non-residential construction will be flat to slightly down. The war has not altered that perspective, he adds.
“The war has not seemed to have had a material impact on us or on the construction industry,” Milne reports. “It certainly hasn’t created an additional drag above and beyond the [non-residential building] slowness we were already experiencing.”
Milne adds that one stabilizing factor for construction rental is its distance from consumer sentiment. Public mood is slow to touch this industry segment, he observes, noting that the construction rental industry is far less volatile than those tied directly to consumer purchasing decisions.
And while commenting more broadly on the buying and selling trends of the entire rental industry, consultant and deal-facilitator Hageman interjects that merger and acquisition patterns are not being swayed by the war.
“If it made good business sense prior to the onset of war, it continues to make good business sense now,” he remarks. He remains optimistic that the economy will remain chiefly unscathed by the Iraqi war, though like the other six executives, hinges his optimism on the condition of a short war. DIY – Therapy During Difficult Times
Do-it yourself rental will remain strong and may gain despite the war’s length, the industry leaders say. The consensus is that war or no war, life goes on, home and landscape projects still beckon. There may even be something therapeutic for the American homeowner fixing, washing, improving her environment, shoring up his sense of security with a comforting busyness.
And should buying drop, rental will still pop. America’s war effort is not expected to adversely impact the DIY market. Event/Party – Celebrations Stay Closer To Home
But what about the DIYPP? That’s the newly coined RentalPulse phrase that emerges from Hageman, meaning Do-it-Yourself Party Planner. Despite special event rental’s susceptibility to public mood, he believes that segment will withstand any gloom that seeps into the American attitude. Independent party rental entrepreneurs Crabbe and Neffle join Hageman in his assessment that events that rely heavily on travel will be curtailed. Airport hassle plus concerns about flying and leaving home will keep parties centered locally. Rather than taking out-of-state sprees, many may throw close-to-home celebrations instead. Hageman says local party rentals will “do fine” during wartime.
Large weddings and corporate events are another matter, however, according to Crabbe. He contacted 10 events rental peers before his RentalPulse interview. He reports that all, including his own business, have received at least one cancellation since the war’s beginning over two weeks ago. He says the party rental industry can rise and fall to a certain extent with the ups-and- downs of public mood. A prolonged war could put a wet blanket on celebrations. He fears most for the upcoming summer’s fairs and festivals where attendance may plummet. He also expects corporations to scale back or cancel parties, especially if the war is long.
“We’re not down yet, but the hospitality business, hotels and restaurants, are all down,” Crabbe says. “That will hurt trade shows and eventually will trickle down to hurt all of us. In the future I see more cancellations—there will be a huge downturn in parties if more body bags start coming home.
“But I don’t think anybody can predict right now what’s going to happen. If things go really well and the war ends quickly, it could be great,” Crabbe adds. Terrorism – War’s Wild Card
What these executives from construction and party rentals fear most for their industry and for the nation is the renewed potential for acts of terrorism in America. Representatives from both rental segments cite terrorism as the No.1 source for concern.
“Retaliatory action in this country by Iraqis could have some very significant impact on people’s emotions and enthusiasm. It has a paralyzing effect on business as well, which we saw after Sept. 11,” Milne reflects. “It would be a terrible thing, and I hope and pray it doesn’t occur, but it would be a temporary thing. Whatever paralyzing effect if might have, we are an amazing country. We have an ability to move beyond tragedy, to get better and to keep growing.”
Hageman points to terrorism’s impact on parties and events rental when the dance floor dropped out from under the industry after 9/11. A similar dip would happen again if terrorism revisits America. But a resurgence would surely come again, he notes. Personnel – The Personal Part Of War
Called up from the Reserves to serve in Iraq, the departure of employees, or their family members, has had a more direct impact on day-to-day business. United Rentals, which employs thousands across the country, continues to deal with the large-scale departure of staff members. But poor morale or suffering workloads are far from problematic, Milne says. Instead, he tells of a prevailing pride and support, an eagerness among employees to step up to fill the void and share the workload left by fellow workers now serving their country.
While service technicians represent a large percentage of these reservists, United Rentals is not yet hurting from their exodus, Milne notes.
Only time will tell how this and other war-ripples will impact rental in the long-term. While all seven executives remain resolute in the war’s successful outcome, how long is anybody’s guess.
“That’s the real key here,” Beeler says. “Nobody knows.” |