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Tent markets trend: a more competitive environment

October 1st, 2009 / By: / Feature, Industry News, Trend Watch

The impact of the recession on tent fabric suppliers, tent manufacturers and event rental professionals has been profound. Sales for 2009 are down 15-20 percent for tent manufacturers through April, tent orders from event professionals are down and many event operators are in a wait-and-see mode, holding back on making big purchases and trying to hold the line on their own pricing. In fact, in the Special Events magazine annual survey, only 37 percent of event professionals said they’d handle more events in 2009 than in 2008. This is down substantially from survey results in 2008, when 79 percent of event professionals said that they would handle more events in 2008 than in 2007.

There are about 4,000 companies in the United States that specialize in renting tents for corporate and party events. Most of these companies are small—$500,000 to $45 million in annual sales. They tend to market their tent rental businesses locally and usually have no more than five locations.

The lackluster economy, evidenced by poor customer demand and tight credit conditions, is the most cited reason for the downturn in business for tent manufacturers and event rental professionals. In the Special Events annual survey, 89 percent of event professionals said that the poor economy was their number one challenge in 2009.

A short history

As real estate and property prices began to skyrocket in the early 1980s, many event planners turned to semipermanent structures to accommodate the growing need for space, turning open areas—parking lots, grass fields or otherwise unusable land—into worthy alternatives for affordable, first-class event facilities. Many event planners now understand that it’s certainly more cost-effective to erect a semipermanent structure rather than a building, and tents offer much more flexibility in planning events differently each time they are used.

During the last 40 years as the popularity of tents has increased, so, too, has their functionality and appearance. From the classic striped and yellow-toned push pole tents in the 1960s and 1970s, tents have evolved into magnificent structures incorporating finely tuned architecture and engineering. The evolution of the tent has included a transition toward more striking all-white, and vinyl rather than canvas, structures.

The industry hadn’t seen a change in shape in a long time when more uniquely shaped structures began to emerge in the late 1980s and early 1990s, including high-peaked tension tents. Clearspans or A-frame tents started in Europe to deal with its severe weather. In the last 10 years or so, clearspan tents have become popular in the U.S. as the enforcement of building codes has become stricter in cities across the country, including the ability to withstand winds up to 90 mph. Tents are also now able to incorporate a range of lighting schemes and décor, and are available in widths ranging from 10 meters to more than 100 meters.

Current markets

For the first four months of 2009, the tent manufacturer and event rental professional markets experienced one of the worst markets in history. For 2008, total fabric consumed by U.S. and Canadian event tent manufacturers reached approximately 22.9 million square yards, down approximately 5 percent from about 24.1 million square yards in 2007. For 2009, IFAI’s market research services department is projecting a 15-20 percent average annual decrease in fabric consumption by U.S. and Canadian tent manufacturers, with total fabric consumption for 2009 forecast to reach about 19.4 million square yards. On average, event professionals have reported positive growth each year before 2009. An IFAI April 2009 tent climate survey shows that event professionals reported a 6.2 percent increase in annual sales in 2008, but that they are projecting a 3.3 percent average annual decrease in sales for 2009.

Survey results show divergent views on sales forecasts for 2009 by event professionals. The largest group (44 percent of respondents) projects sales decreases in 2009 from 5-25 percent; 31 percent held a more optimistic view, projecting positive sales growth from 2-15 percent, and 25 percent of those responding predicted zero growth.

Many event rental operators have seen their profit margins squeezed to all-time lows in the first half of 2009—in some cases virtually eliminated. As a result, they have made a conscious decision to tighten their operations by eliminating wasteful spending and investing in their businesses in a cautious, selective manner. Some have launched aggressive programs to cut business costs, such as placing their workforce on a four-day workweek until business improves.

Trends

Results from IFAI’s April 2009 tent climate survey show a more competitive environment in 2009 caused by increasing consolidation among suppliers, slow market growth, and the expense of meeting divergent state and city safety and building codes.

Suppliers. The poor economy means depressed sales for suppliers in 2009—up to 20 percent behind 2008—and with a growing number of lower cost, alternative fabrics, smaller profit margins are also in evidence. Suppliers may tweak their product mix a bit, given there has been a small shift in growth from laminate vinyls to coated vinyls. A trend toward more imported fabrics from China will likely have little impact on suppliers who are competing on high value and high quality fabrics.

Tent manufacturers. The slow economy has resulted in fewer tents sold per event and could mean a 25 percent decrease in sales in 2009 compared to 2008. With more consolidation occurring among tent fabric suppliers, as well as tent manufacturers, there seems to be more competition resulting in thinner profit margins. The market has also seen more imported tents, especially from China, but sometimes tent imports have shown serious deficiencies, such as frames that don’t meet standards and flame retardancy claims that are unsupported. Trying to meet divergent state and city safety and building codes has been a headache for tent manufacturers for years and sometimes increases the cost of tents.

Event professionals. Many event clients are fearful of the economy and have become cautious in their spending and cutting expenses as much as possible. Event professionals report that there has been an unusually high number of events cancelled or scaled back in scope in 2009 versus the past few years. This has led to a 5-20 percent decrease in year-to-date sales in 2009 for some event professionals. Corporate event clients are less extravagant and profit margins are down. With a shortage of experienced workers available, tent rental sales are sometimes lost. The enforcement of safety and building codes has also hurt growth in tent event sales in 2009. Clearspan tents are growing more popular, which offers potential for more sales, but profit margins are down due to competition for fewer events.

Outlook

In IFAI’s April 2009 tent climate survey, 75 percent of tent manufacturers and 54 percent of event professionals surveyed reported an unfavorable outlook for sales growth in 2009 compared to 2008; no tent manufacturers and only 18 percent of event professionals reported a favorable outlook for sales growth in 2009 compared to 2008.

Companies surviving these tough economic times in 2009 will be those who can manage their cash flow well, are diversified, and have a better understanding of the market trends and the implications.

Jeff Rasmussen is market research manager at IFAI, jcrasmussen@ifai.com, +1 651 225 6967.

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