Master challenges and embrace growth in the equipment rental industry. Gain expert insights and data-driven advice for thriving in 2024.
As we move into 2024, the equipment rental industry continues to adapt and evolve in the face of ongoing global changes. This industry, pivotal in sectors like construction, landscaping, and manufacturing, is experiencing shifts influenced by economic trends, technological advancements, and changes in consumer behavior. With prices and interest rates on the rise, maintaining profitability needs to be at the forefront of every decision.
Despite facing a downward sentiment in recent quarters, there's a silver lining in the form of consistent revenue. The industry must strike a balance – while revenue is on an upward trajectory since the start of 2023, profitability remains stagnant or declining. Rate increases must align with increasing costs, but with every industry tightening purse strings, will demand be able to support that? The alternative is to tackle costs and inefficiencies head-on. Remaining competitive with pricing and avoiding going into the red.
The Equipment Rental Industry has been historically resilient. While 2024 will see challenges, past downturns have resulted in growth for those who navigate them well.
In the ‘08 financial crisis, we saw the rental market take a hit; and again in 2020. In the following years (09-19), we saw an average growth rate of 1.31% per year entering the rental market and a total of 14% during this time. With continued demand for development, we anticipate a fairly similar upward trend in the industry in the aftermath of our current tough times.
High-interest periods, though posing challenges, favor the rental industry. In times of economic uncertainty, the circular economy of renting gains traction as individuals and businesses become more inclined to opt for rental solutions, showcasing the industry's ability to capitalize during this period.
The landscape of 2024 presents a stark contrast to both 2021 and the pre-Covid era. The pandemic accelerated certain trends, such as digital adoption and unprecedented demand. While 2021 was a year of cautious recovery and adaptation, 2024 is poised to be a year of strategic actions and potentially significant growth for those who navigate these new challenges effectively.
The past 3 years have seen rapid growth in the rental industry. Low interest rates and record economic highs lead to an increase in development. Driven further by government initiatives to meet demand like Ontario’s “Building Faster Fund” ($1.2 Billion to incentivize municipalities to hit housing targets).
Growing a successful rental company during this time was not without challenges. However, there were many paths to success. Companies that niched down as well as those that broadened their fleet both saw success.
With demand still at record highs, and supply chain issues lessening, 2024 has potential to see continued growth for those who tackle it head on. Companies had to change “how it’s always been done” in 2020, the same is true for 2024.
The forecasted economic uncertainty of 2024 leads to more contractors looking for rentals to provide stability in their fleet. 99% plan to rent equipment with 45% expecting to increase their reliance on rental (ARA Rentalytics). What piece of the increased demand rental companies capture comes down to how they approach 2024.
2024 is poised to be a year where maximizing efficiency will be key to success. Companies that:
Prioritizing and investing in asset categories that drive growth will be crucial. As well as strategic selling of assets that incur more costs than benefits. An in-depth understanding of asset utilization, lifetime cost of ownership, and depreciation will enable companies to nimbly adjust to market opportunities and challenges.
The labor challenge persists, making it critical for companies to optimize their workforce. The goal should be to allocate human resources to areas where they can have the maximum impact, while integrating technology and automation in other sectors. This approach not only addresses the labor shortage but also drives efficiency and productivity.
Going into 2024 with a clear idea of the end goal will help align strategy to achieve this. Looking to capture new market share? Looking to maintain? Looking to sell to a national player? Each goal will require a different approach to succeed in 2024
On the flip side, companies that fail to adapt to the changing landscape will struggle. These include:
Assuming the trends of the last three years will continue unaltered can be a critical misstep. The market is evolving, and strategies need to evolve with it.
Trying to solve every challenge by adding more staff is a shortsighted approach. It overlooks the efficiency gains that can be achieved through process optimization and technological integration. The increased cost of hiring and under-skilled workforce further reduces the ROI of this approach.
The era of making do with "just okay" tools is over. The industry is moving towards more sophisticated, integrated solutions. Companies sticking with outdated tools and methods will find themselves at a competitive disadvantage. The short-term pain of changing solutions should be seen as an investment into a more profitable operation.
The two-sided nature of 2024 will lead to a continued increase in consolidation across the industry.
In 2024, the equipment rental industry continues to grapple with labor challenges. While demand for equipment rental remains high, the industry faces a persistent shortage of skilled labor. This shortage not only impacts service delivery but also increases operational costs as companies compete for a limited workforce. The most successful companies are those that optimize their workforce management, focusing on employee training and retention, and leveraging technology to streamline operations where possible.
“The problem is not a recruiting problem. It's not a hiring problem. It's not a sourcing problem. It is an internal retention problem that needs to be fixed.” Shawna Armstrong, Roger That Podcast Episode 004
This shift towards a more efficient and technologically integrated workforce is critical for maintaining competitive edge and profitability in the current market.
When it comes to tackling the labor issue Blake Menning of All Choice Rentals puts it best
“Surround yourself with really good people. And once you find those people, they are hard to find, you do whatever you can to support them, hold onto them”
Check out our full conversation with Blake here:
Theft remains a significant concern for the equipment rental industry in 2024, with the average loss value per machine fluctuating between $35,000 to $45,000 Particularly vulnerable are skid steer loaders, backhoe loaders, excavators, mini excavators, and dozers. While recovery rates have improved to around 21%-22%, up from 5% fifteen years ago the financial impact of theft is still substantial.
Rental companies should look to begin, or increase, investing in advanced security measures and tracking technologies to mitigate this risk, ensuring better protection and recovery of assets. GPS and Geo-Fencing solutions that are designed for the equipment rental industry specifically build a great foundation for overall security.
In 2024, maintenance practices in the equipment rental industry have evolved significantly. Companies are no longer just focusing on predictive maintenance but are also integrating global supply chain dynamics into their maintenance strategies. This integration is crucial for ensuring the availability of parts and reducing equipment downtime. Companies that effectively manage maintenance schedules and part availability are experiencing fewer operational disruptions and maintaining higher customer satisfaction levels. The trend underscores the importance of a holistic approach to equipment management, balancing predictive maintenance with strategic supply chain planning.
At Heave, we see the equipment industry evolving for the better. Customers have been held captive for too long and forced to choose from a select few providers for everything- from acquiring equipment, to servicing equipment, to managing workflows on site. What we're proud of is the growing number of customer-focused solutions that have entered the market the past few years. We believe customers haven't been anti-technology rather they've been waiting for the right solutions to their day-to-day challenges. The principles of business are the same across all industries- it takes new entrants to come in and solve the problems that incumbents don't have the motivation to fix. We're excited to be in the group of new entrants- working to create changes that improve customer's daily operations.
Alex Kraft, Cofounder and CEO Heave
2024 will see a further evolution of predictive maintenance. It will no longer be enough to simply predict when an asset will require maintenance. The impact of global supply chains on parts will play a critical role in the success, or failure, of any maintenance program. Companies will need to develop a strong understanding of part specific lead times and pair that with predictive data on when they are needed. An asset sitting in the shop waiting on a small part to get back in the field can result in tens, if not hundreds, of thousands of dollars in lost revenue.
As the market shifts so will the demand for certain assets. Optimizing your fleets revenue will come down to having the right equipment mix in your yard. Leveraging data to understand equipment utilization, cost of ownership, and potential rental revenue has never been more important. When an asset isn’t a fit it’s time to sell. 2024 brings about the emergence of new markets that help companies streamline the equipment buying and selling process.
2023 saw a massive shift in the equipment market. Rising interest rates and economic uncertainty combined to stifle demand for new and used equipment. At the same time, COVID-era supply chain issues normalized, meaning a flood of new equipment has hit the market to fill backorders from the last two years, creating an oversupply environment. National-level rental companies are selling billions of dollars of their fleet in the coming months as they accept deliveries of new equipment from the OEMs. These dynamics have led to a rapid correction of pricing for used equipment, as high as 30% for some categories.
Looking ahead to 2024, rising economic optimism should help open up demand for equipment moving into the build season, but interest rates will likely remain high for most of the year. Smaller equipment rental companies that may still be waiting on deliveries of new equipment should look to the used markets for great deals on late / low equipment. For companies ready to sell assets, make sure you're making data-informed, objective decisions and not sitting on idle equipment unnecessarily. We are very unlikely to return to the sky-high pricing environment of 2022, so even if pricing doesn't meet an owner's expectations, it's better to get cash out of an idle asset and redeploy that cash into more productive equipment.
Aaron Kline, Cofounder and COO Boom & Bucket
Learn more about the State of Used Equipment in 2024
The trend of interconnected modular tools is reshaping the equipment rental industry in 2024. Companies are moving towards solutions that offer seamless integration and full utilization of software capabilities. The emphasis is on adopting systems that work cohesively, allowing for better data management, operational efficiency, and customer service. This shift is driven by the industry's recognition that comprehensive, integrated solutions offer greater value than using multiple, specialized tools at partial capacity. Companies investing in these interconnected systems are seeing improvements in workflow efficiency and decision-making processes, enhancing their overall competitiveness in the market.
Near the end of 2023 we sat down with Josh Nickell, VP of Equipment and Event Segments at the American Rental Association (ARA). To chat all things equipment rental and his predictions for 2024. The full episode can be found here:
“For the younger companies who only know this [strong period], they need to get serious about their business. Strategy matters. You can't just show up with equipment and make money. You have been able to in some markets for the last couple of years, but that's not gonna continue to work. If you're not careful and you're one of those companies and you don't start to think about process and efficiency and effectiveness and run it like a true business.”
“For those companies that have been in the industry for a long period of time, they're used to these cycles. I think it's important to not get caught up in the emotionality of the cycle and not feel like this is necessarily a down cycle because it kind of... feels like that because we're going from this really high space to a more normal space. But it's just a normal cycle.”
“Uncertainty is good for rental. High interest rates are good for rental. When a customer is having to make that rent versus buy decision and interest rates are high and uncertainty is high, they're going to lean into rental. So that's good for us. And traditionally, we know that once they try rental and don't make that buy decision, they end up kind of getting addicted to it. So this won't be as strong a cycle, but it will be a good cycle.”
At Frenter we are excited about the future of the Equipment Rental sector in 2024. If you’re looking to tackle challenges like equipment theft, maintenance management, and overall asset management reach out at hi@frenter.com or come see us at the ARA Show Feb. 18-21 in New Orleans (Booth 1980)
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