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Rental Market: Riding The Economic Waves
Another positive in the economic picture is the presence of several large projects that are still going strong, particularly in the energy sector.
"Going into the spring," said McDonnell, "our branch operations – general rentals, aerial, trench safety, pump and power – began to see a seasonal uptick, although at a lower level than last year."
Fleet management in any environment is a delicate balance between managing rates and utilization, McDonnell observes.
"This becomes even more difficult in a downturn when there is added pressure on rates," he said. "United Rentals is doing everything possible to arm our branch teams with tools that facilitate fleet management through daily decision making. For example, our company expects to have price optimization software in place in all branches later this year.
"The rate environment for construction rentals is challenging, including most underground construction equipment. Rates are clearly very important, but we are equally focused on increasing penetration by making the best possible equipment solutions readily available to our markets. Given the challenging operating environment, our customers are looking for competitive pricing, but they are also seeking more productivity. Productivity is a huge deal for contractors not just to earn incentives, but to position ahead of the pack for the next bid."
McDonnell believes United Rentals' size and scope of operations is helping the company weather the current recession and will be an advantage when the economy improves.
"One of the advantages of having a footprint our size is that we can move equipment from weaker markets to markets where demand may be stronger," he explained. "Our company has been very aggressive about transferring equipment among branches to tap into pockets of demand; transfers are another way to manage rates and elevate revenues. In the first quarter, we transferred $1.3 billion of equipment among our branches, based on original equipment cost. Size is definitely an advantage, now and in a recovery."