A Lesson in Rate Dynamics

Sept. 1, 2010
In Great Britain, the rental rate structure is generally lower than in the United States often dramatically so leading some analysts to estimate that

In Great Britain, the rental rate structure is generally lower than in the United States — often dramatically so — leading some analysts to estimate that equipment (plant) time utilization in the U.K. needs to be at 80 to 90 percent in order to cover costs. This is a challenging metric, even when you take into account rental saturation. Approximately 80 percent of U.K. construction equipment is sold to the rental sector, a higher assignment than in any country in Europe.

In North America, where rental penetration is currently estimated to be below 50 percent, low rate/high utilization is not a viable game plan for profitability. It creates a lopsided dynamic that places unrealistic expectations on market behavior.

Lucy Peterson is president of Springfield, Mass.-based Balboni Associates and a frequent contributor to RER on overseas rental market trends.