IBISWorld forecasts that revenue will increase at an average rate of 2.7% annually through 2016 to total $2.7 billion.
Los Angeles, California (PRWEB) November 02, 2011
Party planners are increasingly emphasizing simplicity over extravagance at their events. As such, event budgets will remain under tight scrutiny, and the recovery of party supply demand will be relatively slow in the first few years leading to 2016. From 2011 to 2012, revenue for the Party Supply Rental industry is expected to increase 2.2%, according to IBISWorld, the nation’s largest publisher of industry research. Despite this relatively slow recovery, the industry will eventually benefit from stronger confidence in the economy and higher income levels, which will expand consumers' party budgets. During the five years to 2016, revenue is forecast to increase at an average annual rate of 2.7% to total $2.7 billion.
The Party Supply Rental industry rents out tables, chairs, flatware, linens, centerpieces, stages, tents, canopies and other items for public and private parties and events. Major products include, wedding rentals, corporate event rentals, birthday rentals and other rentals.
The recession has caused people to put away their party hats and tone down their celebrations. While the Party Supply Rental industry experienced strong growth prior to the recession, the economic downturn caused households and businesses to cut back on their discretionary spending. This trend has forced consumers to reduce their event budgets and host fewer parties, leading to considerable declines in demand. Consequently, industry revenue is expected to fall at an average annual rate of 0.3% in the five years to 2011. Fortunately, demand conditions have been slowly recovering since late 2010, with consumer confidence in the economy rebounding and disposable incomes increasing.
According to IBISWorld analyst, Janet Shim, during tough economic times, many industry operators discounted their rental prices to bring in more clients. “This strategy was unsuccessful, since demand remained weak despite lower prices,” says Shim. “Instead, these price promotions actually reduced the industry's average profit margins because firms brought in less revenue for every rental turn.” As such, profit has plummeted; IBISWorld estimates that the industry's average profit margin has decreased from 2006 to 2011.
With margins falling, many smaller operators found it difficult to sustain their operations and closed up shop. As a result, the number of enterprises declined over the five years to 2011 to an estimated 3,300 businesses. The industry's larger firms fared better during the period, because they were able to expand their operations through acquisitions. To this end, the largest player, Classic Party Rentals, acquired three local party rental suppliers to add to their national portfolio of more than 29 locations.
Continued economic recovery will likely aid growth in the Party Supply Rental industry through 2016. Armed with higher personal and corporate income, households and businesses are projected to expand their party budgets, which will allow them to spend more on rentals beyond basic necessities (e.g. tables and chairs) to full-service products (e.g. centerpieces and other decorations). Operators will likely focus on providing more value rather than competing solely on price, enabling them to bring in higher returns. As such, IBISWorld forecasts that revenue will increase at an average rate of 2.7% annually through 2016 to total $2.7 billion.
For more information, download the full report from IBISWorld on the Party Supply Rental industry
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