While there are plenty of disagreements about many issues these days, virtually everyone can agree that 2020 was a challenging year due to the COVID-19 pandemic. For the first time in recent history, most businesses were shut down, and people were largely confined to their homes in an attempt to stop the spread of the virus. So-called essential businesses, such as grocery stores and pharmacies, were allowed to operate, while others — including HVACR contractors in many locations — had to fight to remain open.
The unprecedented shutdown tanked the economy during the first part of the year, but by the second half of 2020, things were starting to pick up steam. For example, in the third quarter, real gross domestic product (GDP) increased at an annual rate of 33.4%, according to the Bureau of Economic Analysis, and by the end of the year, the national unemployment rate dropped to 6.7% (down from a high of 14.7% in April). This, combined with consumers’ growing awareness of the role HVAC plays in terms of comfort and IAQ in their homes and offices, is leading contractors to believe that 2021 will be a better year.
Most HVAC contractors were adversely affected by the pandemic, and Stack Heating and Cooling in Avon, Ohio, was no different, said company president, Brian Stack, who is also ACCA’s chairman of the board. Since Stack Heating and Cooling primarily services the residential market, customers were initially leery about having technicians enter their homes. As a result, the company had to lay off half of its employees for a month until it received PPP (Paycheck Protection Program) funds.
“Who would have ever thought that contractors would have to unite and fight for being ‘essential’ so we could work?” he said. “I’m extremely proud of the early alarm sounded from ACCA on this emergency and ACCA’s ability to rally over 6,000 contractors in short order to lobby federal, state, and local decision makers for our ability to work. The ripple effect of that win for not only contractors but the entire HVACR industry is just another reason I’m so proud to be part of ACCA.”
Another obstacle Stack faced was a shortage of equipment from manufacturers caused by lack of product availability and delayed shipping times. Unfortunately, this lack of equipment — particularly with coils and condensers — continued through the summer and into the early fall of 2020 and resulted in the loss of several jobs. These setbacks led the company to start carrying a second line of equipment to ensure they received the materials they needed.
“Thankfully, these obstacles did not last for long, and as the weather grew warmer and the desire for comfort in home increased, the need for HVAC repairs and replacement increased as well,” he said.
GREAT YEAR AHEAD: Hunter Botto believes 2021 will be a great year for plumbing and HVAC service, repair, and remodeling. (Courtesy of PHCC)
Most of the employees at Botto Brothers Plumbing & Heating in Hicksville, New York, were also laid off for a short period of time at the start of the pandemic, said company president Hunter Botto, who is also president of the Plumbing-Heating-Cooling Contractors — National Association (PHCC). Eventually, as the workload increased and PPP money began to flow in, most of their employees were called back to work. But there were challenges.
“We needed to retrain our entire staff to the current and changing CDC standards and to assure our clients that we were totally compliant with all safety measures to protect their families,” said Botto. “Since we are predominantly a service and repair business now, all our employees were retrained to protect our clients and themselves.”
HARD HIT: Being located in New York City, an area that was the first in the U.S. to be hit hard with COVID-19 cases, Mike Star had to immediately figure out how to respond to customers while keeping his entire team safe. (Courtesy of Amanda Star)
As the president and senior engineer of Lane Associates, a commercial contracting firm that services the greater New York City metro area, Mike Star’s first concern was the health of his team. Being located in an area that was the first in the U.S. to be hit hard with COVID-19 cases, the new chairman of the board for the Mechanical Service Contractors of America (MSCA) had to immediately figure out how to respond to customers while keeping his entire team safe.
“We had to secure PPE quickly and purchase gloves and even utilize homemade masks because none were available,” he said. “Luckily, we were able to quickly convert to a safer work environment by working remotely, based on our efforts in the past to ensure we were digital. We had a very small core group that was able to work safely in the office while the rest of the team worked from home.”
From a business perspective, Lane Associates lost 60% of its business virtually overnight when the governor signed the “New York State on PAUSE” order. Obviously, this caused a lot of uncertainty and stress, and the company had to act quickly to reschedule jobs in order to ensure its employees were working in safe and mostly empty buildings. Workflow also had to be reconfigured so that parts and equipment could be received and managed with reduced contact.
“Working through the ever-changing information and protocols, while remaining safe, continued and continues to be a challenge even now,” said Star. “It seems that every process requires more energy and thought than in the past. I can say that having the MSCA family for brainstorming and a sounding board was tremendously helpful.”
Indoor Air Quality Opportunities
As for what 2021 may bring, most contractors are optimistic, although there are a few concerns. For example, Star is worried that the commercial market could be in for an extended period of rebuilding, but he adds that there will be some opportunities as well.
“I believe sales will be down in our traditional commercial market, and I think capital project budgets will continue to stay mostly on hold until COVID-19 stabilizes,” he said. “I do think that there are certain industries and companies that will be confident in their longevity and will use this opportunity of low traffic and/or closed facilities to complete major renovations. IAQ products such as MERV 13 filters and UV lights will likely continue to be implemented and could become the norm. With many facilities having reduced or no staff, upgraded and remote controls and monitoring should increase as well.”
Botto agrees the commercial market is a challenge but that there will be opportunities for contractors to develop an expertise in providing air filtration and IAQ services, which are in high demand right now. In addition, he points to the positive news in a recent report from the U.S. Chamber of Commerce, which said that 85% of commercial contractors report having a moderate to high level of confidence that the construction market will provide enough new business in the next 12 months.
“PHCC conducts an environmental scan each year to help us plan for the future and adjust our strategic plan, and our review indicated a strong demand for P-H-C products in 2021,” he said. “In particular, we expect increased demand for upgraded and energy efficient equipment; smart technology; air and water filtration and purification; touchless faucets; and IAQ products including UV and bipolar ionization. Tax incentives recently extended and made permanent by Congress for homeowners and commercial building owners to upgrade to more energy-efficient HVAC systems will only help demand.”
As for the residential market, consumers are very interested in home improvements, which is why Botto anticipates that 2021 will be a really good year for plumbing and HVAC service, repair, and remodeling.
Stack agrees, adding that sales of residential equipment will remain strong this year due to the many individuals who continue to work from home. That, combined with low interest rates and a new focus on proper IAQ and ventilation, should lead to strong growth in new construction as well as add-on/replacement, he said.
“In addition, people have not been travelling and going out to eat as much due to quarantining, so there is more money to spend, which should lead to increased sales,” he said. “Customers also seem to be more focused on quality than just getting to work done as fast as possible. Because of this customer focus, our ability to provide a quality installation and service/maintenance is stronger than I’ve ever seen.”
With a new president in office, contractors are also keeping a close eye on what that may mean for the HVACR industry. Botto notes that President Biden’s pursuit of more aggressive policies to tackle climate change and other major environmental issues are definitely on PHCC’s radar.
“We expect movement on federal support for renewable energy, environmentally friendly infrastructure, expanded tax breaks for electric vehicles, and stricter energy efficiency standards,” he said. “The passing of the American Innovation and Manufacturing (AIM) Act opens the door to alternative refrigerants, and PHCC will be providing HVAC-minded members valuable updates on these changes.”
Stack agrees that the renewed focus on climate change will open the door for a stronger focus on efficiency. This could result in an opportunity for HVACR contractors to help decision makers understand the critical role contractors play in realized efficiency and reducing energy consumption. Indeed, various studies have shown that energy penalties due to poor residential installations may result in annual increases of energy consumption of over 40%, he said.
But most of PHCC’s focus will be on how to make contracting businesses stronger this year, said Stack. “From health care costs to employer liability related to COVID, and perhaps even an increased focus on union jobs, we must be vigilant and work together to make sure we create a level playing field.”
PHCC is also focused on ensuring their contractor members have the latest information they need regarding the $900 billion stimulus program, as well as the PPP. In addition, the association is keeping an eye on any movements on infrastructure development.
“PHCC is a strong proponent of investing in our nation’s infrastructure (including below ground) and equipping our workforce so it is ready for this challenge; we must ensure this legislation is prioritized for water and sewer infrastructure and construction,” said Botto. “The price tag for a major national infrastructure is expected to be high, but the economic costs of doing nothing will be even higher. PHCC believes an infrastructure overhaul is just what our industry and country need to recover from the economic fallout of the pandemic.”
While the uncertainty of the virus will continue to pose challenges for contractors this year, most believe that we are turning the corner and that life as we knew it may resume soon.
“I’m confident that the states and private companies will figure out how to open to more of a normal in 2021,” said Star. “Between the vaccine, rapid testing, and the acceptance of wearing masks, I’m optimistic businesses will continue to trend more towards normal, which will fuel our industry.”
Stack, too, is hoping that with vaccinations, a return to normal is in the near future. “We never feel pessimistic. Through 2021, we will continue to move forward and grow as a company. We have an aggressive plan for Stack Heating and Cooling for the future.”
Botto adds that he can’t help but feel optimistic.
“Our country — and PHCC — has weathered every storm that has come our way, and this situation will be no different. Speaking for PHCC, our organization never wavers — even in a pandemic — from professionalism in our industry and protecting our members’ interests.”
Another reason why contractors believe 2021 will be a good year is that it is hard to see how it could be any worse than last year.
“It seems that the initial impact from the virus has bottomed out,” said Star. “I think we will continue to feel the negative impact from what happened, but the initial free fall is over. For example, the closing of entire countries, states, regions, is over, and we are much more knowledgeable about COVID-19 in terms of how it spreads, how to treat it, and ultimately, how to control it with a vaccine. It is important for people to safely start getting back to normal life with travel, tourism, and leisure activities, which will get the economy — and our mental health — back to normal.”