Rental Attitudes Survey: 800 equipment users give their views on rental

More than 800 equipment users responded to International Rental News' first ever ‘Attitudes to Rental' survey. In this, the first of a two-part report, we look at whether equipment end users are planning to rent more in the future, examine the impact of the financial crisis on contractors' attitudes, and ask how they rate their rental suppliers. IRN Editor Murray Pollok reports.

Ask a customer what they want and they will usually tell you. In the case of our first ever ‘Attitudes to Rental' study more than 800 contractors, industrial companies and other equipment users from around the world have done just that, generating a mass of data on exactly how customers view the rental industry and their rental suppliers.

The findings will be reported in this issue and also in our May-June edition. Here, we look at customers' plans for rental in the coming five years; the impact of the financial crisis in changing attitudes towards rental; how contractors rate their rental suppliers; and the vexed question of whether customers will pay higher rental prices for modern equipment meeting the latest emission regulations.

In the May-June issue, we concentrate on the reasons why contractors rent; find out what contractors want from their suppliers and how they could improve (including the issue of rental pricing); reveal the extent to which contractors compete with their rental suppliers; and ask if full outsourcing of fleets is a realistic option.

Plans for rental
Whether or not equipment users are planning to increase their use of rental over the next five years is a key question, and relates closely to the issue of whether the financial crisis and continued economic uncertainty is leading more end users to rent equipment; an argument that is heard frequently in North America.

The survey finds that the proportion of end users in Western Europe and North America expecting to significantly increase their use of rental services is actually quite modest - 12% and 15% respectively, although this increases to 31% and 41% when you include those who say they will "slightly increase" their rental use.

In each case around a half of respondents say they will not increase their business with rental companies. See Graph 1.

However, it is clear that economic uncertainty is playing a major role in determining rental policy. When asked what factors were leading them to rent more, the most important reason in both North America and Western Europe was that it ‘gives flexibility in uncertain economic times'.

The issue of capital constraints - with banks unwilling to lend - was not considered an important factor in either North America or western Europe. In fact in both regions it was rated the least important factor out of six. Considered more important, for example, was the benefit of switching capital expenditure away from equipment to the core business and reduced management time associated with maintaining owned equipment.

Elsewhere in the world, there are quite different views on rental use in the next five years. In South Asia (including India), South America and Australia/New Zealand the majority of respondents are expecting to increase their rental usage and in each case between 20 and 25% will make it a significant increase.

In these regions, the most important factors were operational flexibility, reduced operating costs and management time devoted to rental, and an increased availability of rental (as rental companies have grown in size and number).

In this respect, rental companies in these areas are meeting a demand that was not previously being adequately supplied. (Although that probably does not apply to Australia/New Zealand, where rental is mature.)

Far less sure about increasing rental in the coming years are equipment users in the Middle East and Eastern/Central Europe/CIS, where 45% and 36%, respectively, said it depends on what happens with the economy. In the case of Asia Pacific, many contractors say they will not change their policy on rental, and almost one in five say it depends on the economy.

There is no notable rush to rental among larger organisations. The sample of very big companies - there were more than 40 responses from organisations with annual revenues exceeding US$500 million - showed that 36% planned to increase rental in the coming years, with 17% saying the increase would be significant and 19% saying it would rise a little. This is pretty close to the average figures.

More bullish were large industrial sites (around 20 of whom responded), where 21% will increase the use of rental significantly and a further 26% will increase rental slightly.

Impact of financial crisis
Asked explicitly if the financial crisis had made it much more likely for them to rent, just 11% of Western European users and a more positive 23% of North Americans said it had. A further 28% Western Europeans and 27% of North American's said they were "a little more likely" to rent as a result. See Graph 2.

This finding partially supports the widely held view in North America that rental is growing partly as a result of the economic problems and uncertainty about future conditions. However, it probably stops short of a total vindication of that view - after all, the great majority have either not changed their rental policies or only increased their use of rental a little.

In the rest of the world, a quarter of respondents in the Middle East, Asia Pacific and South Asia were much more likely to rent as a result of the financial crisis. Less impacted by the financial crisis in terms of their rental policies were contractors in Australia/New Zealand and South America, reflecting the fact that these regions were less affected by the crisis than the rest of the world.

Permanent or temporary?
If the crisis has led to some changes in behaviour, then another crucial question is whether these changes are permanent or temporary.

What is striking is that in almost every region - the only exceptions were Asia Pacific and South Asia - the majority said they were not sure if their behaviour change was permanent or temporary.

In Western Europe 62% said they were unsure and the figure was also a high 57% in North America. The same degree of uncertainty was found in Eastern Europe/CIS (58%), Middle East (58%), Australia/New Zealand (64%) Central/South America (53%) and Brazil (62%).

This suggests that the rental industry has a real opportunity in the coming years to permanently convert end users who are ‘undecided' about whether they will use rental more intensively over the long term.

Some were prepared to characterise their changing rental policy as temporary. Around a quarter of North America and Western European said their shift towards rental was temporary.

A similarly small proportion were able to characterise their shift towards rental as permanent: in Western Europe the proportion was 14% and in North America it was 17%.

Equipment users were more likely to have changed their behaviour permanently in South Asia (21%), Australia/New Zealand (36%) and Asia Pacific (21%).

Overall, between 10% and 20% of survey respondents said they had made permanent changes to their policy towards rental as a result of the financial crisis. The question mark is over what happens to the majority who are undecided.

How professional are rental companies?
A delicate question this, and answered diplomatically by most of our respondents, although the clear finding is that there is considerable room for improvement.

In the most developed rental markets - Western Europe, North America and Australia/New Zealand - less than 10% of respondents reported having ‘not very professional' rental suppliers. That positive finding is not unexpected in areas where rental is well established.

Perhaps also unsurprising - because of their relative immaturity as rental markets - are the territories where a significant number complained on unprofessional suppliers, including Eastern Europe/CIS (20%), the Middle East (31%), South Asia (29%) and Central/South America (26%). Brazil is an exception here, with just 14% saying that suppliers were not very professional.

In almost all territories, the majority described their suppliers as ‘quite professional' - 70% in Western Europe, 62% in North America and 67% in Asia Pacific, for example.

With the highest "very professional' rating are companies in Australia/New Zealand (38%), followed by North America (33%), Brazil (25%), Western Europe (23%) and Middle East (23%).
Still, it should be a cause for concern that just a third of North American companies and less than one in four Western Europeans describe their rental suppliers as very professional.

Will they pay more for low emission equipment?
As regulations on engine emissions and other technical issues (vibration, noise) start to have a major impact on equipment in North America and Western Europe, the question of whether contractors would be willing to pay higher rental prices for the latest technology is uppermost in the minds of rental companies.

The survey shows that end users are split on the question, and responses differ widely from region to region. (See Graph 4.) What is interesting is the general agreement in the two markets where price increases are now most making themselves felt, Western Europe and North America.

In Western Europe just 39% of equipment users said they would pay higher prices for the latest machines, while in North America it was 42%, a slightly more relaxed attitude.

Apart from being slightly counter-intuitive - wasn't it supposed to be Europeans who were willing to pay for ‘green' technology? - perhaps it simply reflects that fact that price increases are starting to bite in these regions and the economic backdrop remains troubled. It also reflects the fact that companies in these regions are used to receiving relatively new equipment from their rental suppliers, and perhaps see no need to pay more for even better equipment.

Australian and New Zealand contractors are similarly cautious about price increases, with only 38% saying that they would be willing to pay extra.

Those most willing to pay more for the latest machines can be found in Asia Pacific (71%), South Asia (67%) and Brazil (58%). It is probably easier to say that you are willing to pay more when you are not yet being expected to do so, given that engine emission regulations are not yet so strict in these regions.

The higher figure may also reflect an aspiration for equipment users in these territories to obtain higher quality, newer equipment.

Still, overall, rental companies should be comforted by the fact that the ‘yes' votes are in the 40s and not languishing down at 10 or 20% - that would be genuinely disquieting for rental companies.

In the May-June issue we discover what leads customers to rent and how rental companies could improve their services. As a taster, you might be surprised to learn that contractors want better quality equipment, better on-site service, and - yes - lower prices. Surprise surprise.

Graph 1
Proportion who will significantly grow use of rental in next five years
Brazil 26%
South Asia 24%
Australia/NZ 23%
S America 20%
N America 15%
W Europe 12%
E Europe/CIS 7%
Asia Pacific 5%
Middle East 0%

Graph 2
Proportion who said financial crisis made it more likely to rent
South Asia 68%
Asia Pacific 62%
N America 50%
Middle East 50%
S America 41%
E Europe/CIS 40%
W Europe 39%
Australia/NZ 39%
Brazil 34%

Graph 3
Proportion who said rental suppliers were ‘very professional'
Australia/NZ 38%
N America 33%
Brazil 25%
Asia Pacific 24%
W Europe 23%
Middle East 23%
S America 22%
E Europe/CIS 20%
South Asia 17%

Graph 4
Proportion willing to pay more for latest technology machines
Asia Pacific 71%
South Asia 67%
Brazil 58%
Middle East 50%
S America 50%
E Europe/CIS 43%
N America 42%
W Europe 39%
Australia/NZ 38%

The survey

More than 800 equipment end users around the world responded to International Rentals News' ‘Rental Attitudes' survey between mid-January and late February. We received a particularly good response from Brazil, where we had more than 300 responses.

The survey was distributed to readers of International Construction, Construction Europe and Construction Latin America, and also distributed by a number of associations and rental companies worldwide.

IRN would like to thank the following organisations: Loxam (France), A-Plant (UK), Speedy (UK), Ramirent (Finland), Kennards Hire (Australia), Solaris (Brazil), Mills Rental (Brazil), DLR (French rental association) and HIANZ (New Zealand rental association). We also appreciate the assistance of KHL editorial colleagues Cristian Peters, Chris Sleight and Sandy Guthrie in promoting the survey.

In particular, we would like to acknowledge the efforts of Jose Protko and his colleagues at Caterpillar's rental division for distributing the survey via Cat dealers in the Americas.