Sunbelt Rentals – Case Study

History of Sunbelt Rentals

Sunbelt Rentals was cofounded by Thomas Smart in 1983 in Charlotte, North Carolina. The initial focus was heavy equipment for utility contractors. The rental offerings spanned from trench shoring to compaction equipment, all in the heyday of oil. The business model was successful and attracted attention of potential buyers. As a result, in 1990 the company was bought by UK company, Ashtead Group. Finally, by 1997, after having grown the business to 38 locations across seven southeastern states, Smart was ready to leave.

Today, Sunbelt Rentals is Ashtead Groups’ premier business line. The multinational operates in the US, UK, and Canada and generates multibillions every year. They employ over 17,000 employees worldwide to serve over 700,000 customers. Their US division generates over $5.3B of revenues per year and is one of the leading heavy equipment rental companies by market share.

The Heavy Equipment Rental industry

In the United States, Heavy Equipment Rental is a $46.6B industry. During the 2014 to 2019 period, the market grew at a rate of 2.0% annually. Industrial activities such as construction, aviation, and oil drilling all drive growth in this sector. In the earlier part of the five years, increase in demand for oil prompted quick set up of development and extraction infrastructure. Additionally, expansion of US shale production ultimately led to a boom in short term rentals for heavy equipment. As a result, revenues increased significantly during this time.[1]

Over the next few years to 2024, the industry forecast indicates growth at 1.8% annually to $51B. As the price of fuel continues to rise, demand for alternative fuel-efficient transport will increase. Investments into these alternatives, such as rail, will support revenue growth.[1]

Customers and competitors

The competitive landscape of the Heavy Equipment Rental industry is highly fragmented. The top four incumbents account for 22% of the market share by revenue.[1] The remaining market is made up of single operators who are regionalized and heavy machinery manufacturers that provide rentals of their products as an additional service. Sunbelt Rentals leads in market share with 8.3% of the market. Following them is United Rentals with 7.2% and GE Capital Aviation Services with 4.6%.[1]

Customers in this industry are typically companies in construction, industrial, forestry, and or mining operations. There are also transportation operations, such as airline companies and trains. These companies may opt to rent or lease heavy machinery and equipment in place of purchasing for accounting and cost purposes. For companies that need equipment for short durations, renting becomes an optimal choice as a way to avoid significant capital expenditure. Because the majority of the customers are in diversified sectors that use the equipment to perform tasks that are further downstream, the industry is fairly resilient.

Sunbelt Rentals business model

Sunbelt Rentals generates revenues by renting out tools and heavy equipment to a diverse range of customers over a short-term. By providing a wide range, they can position themselves as the comprehensive partner for companies who want to rent the full suite of equipment for completing a job. This results in being able to attract a wide variety of customers for various types of projects, further mitigating risk of down turn in a particular industry. Moreover, their global reach is also a value proposition they provide their clients. Global companies that want to work with one rental company for the majority or all their services can choose to partner with Sunbelt Rentals, resulting in potential volume savings.

Sunbelt Rentals success factors

Despite a highly fragmented market, Sunbelt Rentals generated 19% compound annual growth out of its largest market, the US. They attribute their success to their strategy for optimizing opportunities. This includes increasing same-store investments and selecting appropriate acquisition targets. Both of these increases the quality and value of the offerings available to customers, which ultimately drives loyalty.

Another success factor of the company is the deep relationships it builds with communities. For example, programs like the Sunbelt Rental’s Emergency Response team, allows the company to leverage its equipment to deliver necessary supplies and support to areas that have experienced devastation. Such actions ultimately demonstrate the reliability of the company, allowing clients to trust in Sunbelt Rentals’ ability to deliver the products and services it offers. It also contributes to a strong community relationship, which is needed to to address regional players.

Looking ahead

While Sunbelt Rentals’ diverse industrial base helps mitigate risks of downturn, black swan events like the COIVD-19 pandemic can substantially and permanently change how industries operate. To respond, the company will need to build capabilities to be able to quickly adapt their product rentals and services to fit a new customer groups that emerge post pandemic. Furthermore, they company will want to invest in their staff to further drive customer service and loyalty. This will galvanize the company from potential regional threats.

Related Readings

Professional Leadership Institute (PLI) is an educational website providing professionals from all types of businesses with practical education in human resources and leadership. To keep evolving your leadership toolkit, additional PLI resources below will be useful:

[1] John Madigan, “Heavy Equipment Rental in the US,” IBIS World, December 2019


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