If any rental company collectively thinks "outside the box," it's AMECO. Formerly known as American Equipment Co., AMECO (No. 9) has taken a lead role in adapting equipment rentals to the outsourcing trend in American business, and has taken the rental concept to countries where it was little known before. RER asked AMECO president Charles Snyder to share his thoughts on the future of the industry.
RER: What trends do you expect to see among the "RER 100 companies" over the next few years?
Snyder: I expect that we will see continuing up and down cycles of acquisition activity and/or greenfield branch starts depending upon availability of public equity capital, stock valuations and cost of debt capital. When the RER 100 companies grow to a point that they collectively garner more than 50 percent market share, we may see a refragmentation trend that could be accelerated by the re-entry of former independent owners back into the industry as their non-compete agreements begin to expire.
We may see a further blurring of lines between traditional distributors and traditional rent-to-rent companies as each looks for ways to improve margins and fuel growth. As the RER 100 matures and stabilizes, this business medium will become popular for top-tier client and supplier organizations.
Globalization by larger national players will continue as rental becomes more popular in the international arena.
RER: Many people are concerned about the difficulties in finding qualified personnel, especially with the fairly low unemployment levels we are currently seeing. What should RER 100 companies do to develop long-term strategies to deal with this problem?
Snyder: RER 100 companies should encourage the American Rental Association to establish a leadership position in developing an educational foundation designed to develop skill sets required by key position categories critical to the ongoing success of rental companies. This foundation could be funded by contributions from industry and supported by a network of continuing education institutions throughout the U.S.
RER: How do you see the economy over the next three to five years?
Snyder: The demand side of the equation should remain fairly strong over the next few years as rising prosperity and recovery of international markets sustain consumer demand and construction and infrastructure spending. The supply side of the equation will be challenged because of oversupply of product, which will drive the need for rationalization of fleet levels and branch overlap.
RER: How much do you expect to see the rental industry expand over the next five years? Is 20 percent per year a reasonable and probable growth rate for the industry as a whole?
Snyder: I do not believe that a 20 percent year-over-year growth rate is sustainable (growth rate as defined by industry demand). I do believe that top-20 companies can post double-digit earnings growth rates by a mixture of acquisition, organic growth and globalization.
RER: What is the biggest problem or challenge to your company?
Snyder: Finding efficient and effective methods of sustaining the velocity of fleet unit sales without diluting sales gross margins in order to maintain a "fresh" fleet.
RER: What kind of business conditions are you seeing in your market area now, and what do you expect over the next few years?
Snyder: Continued strong demand but increasing supply-side capacity, which adds to price/rate/margin pressure.
RER: Is global satellite tracking of equipment going to play an important role in the rental industry in the future, and if so, how?
Snyder: This remains to be seen. Further technology developments need to occur specifically in terms of inside trackability and operating characteristics reporting. As hardware, software, installation costs, durability, reliability and breadth of data analysis improve, demand should begin to increase.
RER: How would you most like to improve your company over the next year or so?
Snyder: By fully exploiting the potential of emerging e-commerce trends in our industry. We have just rolled out a new Web page, which is just a next step in the process of developing a three-pronged approach to becoming fully e-enabled. The three prongs are defined by some industry experts as these: supply-chain management, customer-relationship management, and intermediaries.-MR
