NEW YORK — The economic slump and cost reductions that are inhibiting capital expenditures are driving the power rentals industry, according to a report issued by strategic growth consulting firm Frost & Sullivan. According to the report, the North American power generation rentals market generated revenues totaling $405.9 million in 2002. The Frost & Sullivan report predicts that total market revenues could reach $706.3 million by 2008.

“The fact that the North American market expanded exponentially during 1999-2001 means that the industry has served more customers than ever before,” says Frost & Sullivan research analyst K. Ravi. “Even though a lot of them might desist from renting generators in the short- to medium-term due to perceived needlessness, this is a potential end-user base that has experienced and understood the advantages of rentals in comparison with capital purchase.”

Ravi said service would be a key factor in the market's growth. “Pre- and post-rental services ranging from engineering assistance to maintenance support are emerging as key distinguishing factors between competitors,” he added. “Companies need to effectively communicate their business value proposition.”

The report emphasized that increasing end-user awareness of rental benefits such as availability of extra capital for core activities, reduced equipment obsolescence, better inventory control, elimination of maintenance, warehousing and disposal costs, and greater cost control is driving customer demand. It added that increasing homeland security initiatives and their need for back-up power are creating opportunities and that the rental demand for non-diesel technologies is growing as emission restrictions increase.

“Economic recovery and greater consumer spending will prove the biggest shot in the arm for the rental industry,” added Ravi. “In the meantime, aggressive pricing, geographic expansion, extension of product and service offerings to low and premium market segments can ensure steady growth.”