The AHR Expo made its triumphant return earlier this month in Las Vegas. After a forced shutdown in Chicago last year, the HVAC super bowl was back at it in 2022. It was good to be back.
It was a little different. For one, there was a lot more hand sanitizer around. Also, with Las Vegas still holding onto that mask mandate, it was sometimes tough to recognize folks right off the bat.
But at the end of the day, it was the same old AHR Expo that we all look forward to attending. Having a great segment of the HVAC industry under one roof is always a great opportunity to take stock of the industry. As was to be expected, the numbers did not reach pre-pandemic levels. The final reported numbers showed 30,678 attendees and 1,573 exhibitors attended. This was less than 2020 in Orlando, when 50,000 people attended, and 2019 in Atlanta when the show welcomed 45,000 folks.
But there were certainly enough people to make traveling to Vegas worth it. For me, one of the great pleasures of the AHR Expo is talking with manufacturers to get a better idea of the trends that the industry is currently experiencing. Here is what I uncovered this year:
- Manufacturers are using products to solve the workforce issue. Everyone know that HVAC contractors have had a hard time finding enough quality technicians. This has only become more of a problem during this Great Resignation. Manufacturers have noticed this and are trying to help out. At nearly every booth I stopped by at AHR, those working the booth would introduce me to a new product and explain how the installation of this generation of product was far easier and quicker. They would point out that they hear from contractors the need to make installation as easy as possible so they can get these techs to the next job. It sounds like the manufacturers are listening.
- Supply chain issues are not going anywhere. While they were not excited to answer the question when I posed it to them, manufacturers were quite honest with the fact that supply chain issues will probably not be solved until the end of 2022 at the earliest. Four major factors are leading to the struggle: raw material shortage (steel, copper, etc.), lack of microchips for the products, labor issues, and transportation problems.
- Right now, it appears the lack of microchips is the biggest problem. Nearly every booth was showing products that needed these chips. These are the same chips that are needed in cars, home electronics, etc. One manufacturer told me the chips are the prevailing issue for their company’s inventory issues and that realistically, supply will not catch up until the end of this year. He said their lead times are now more than double, and that in regards to microchips, the manufacturer will be living “hand-to-mouth” for the rest of the year.
- Price increases will continue. While the size of the increases will slow down, don’t count on the pace to slow down. As one manufacturer put it, “Nobody can absorb the increase in raw materials, labor, and freight. We have to pass it along.”
- As an example, they explained that steel prices are costing them three times what it cost at the beginning of 2020. Of course, the recommendation is that the contractor pass it along to the end user.
- The good news is that raw material costs have begun to flatten out. So has labor. The third part of that equation, freight, is still quite volatile.
- Industry sales will begin to level off. Specifically in the residential sector, the HVAC industry has seen back-to-back impressive years. Most folks I talked to expect sales to level off, which means maintaining GDP but not necessarily outpacing it. After the COVID bump of having everyone at home investing in their IAQ and HVAC, manufacturers see the industry returning to the normal replacement cycle of 10-15 years.
- The consensus was mid-single digit growth for the commercial market. A bright spot was a 10-15% increase in the data center market.
- For everything else coming out of the AHR Expo, I recommend you read the individual articles in this issue about what was being showcased at the event.