Despite a downturn in population growth between 1980 and 1990, Salt Lake City has managed to rebound and the U.S. Bureau of Census projected an approximate 12% increase in the area’s population by the end of 2000. The major freeways in and out of the downtown area are being enlarged, and the downtown area has come alive with the recent construction of the Delta Center, home to the NBA’s Utah Jazz.
Part one in this series on Salt Lake City contractors will highlight two uniquely different businesses. One has joined a national consolidator and is partnering with a local energy services provider in a service agreement program. The other has developed a small, niche market for radiant heating, both in the residential and commercial markets.
Market shift: industrial to high-techLike many urban areas, Salt Lake City is turning from an industrial base (in this case, mining) to a center of high-tech companies. The influx of new companies, coupled with the steady tourism business, has kept area hvac contractors busy — and very busy looking for qualified workers to keep up with the demand.
“It is a very tight labor market and has been since 1992,” said Mark Lowe of CSI Heating & Air Conditioning/Comfort Systems USA, Salt Lake City. “1994 hit us the hardest. We had more work than we could possibly do.
“We’ve been able to find some people from out of state, but there are others who have bounced around a lot and we’ve tried to avoid them.”
One local contractor, whose business is 100% radiant heating, said he has a bigger problem finding qualified workers because of the nature of the business.
“This is more of a problem for us because there is no formal training in hydronics,” said Clay Thornton of Thornton Plumbing & Heating, Midvale, UT. “We have to train our own people and then we seem to be targeted by other contractors who want to hire our people.”
CSI Heating & A/C/Comfort Systems USACSI started behaving a lot like a consolidator before the consolidation movement was ever given a thought. Back in 1990, two companies tucked in together and formed CSI/Bonneville. Separate entities were partnered to enjoin service and installation businesses under one roof.
CSI was formed in 1969 by John Phillips as a service-based company. Bonneville was founded in 1966 by Mel Taylor and was installation-based.
“The companies through the years competed heavily with each other,” said Mark Lowe. “At the time, Bonneville was more into residential new construction while CSI was into commercial service and replacement. The two companies complemented themselves.”
The consolidation with Comfort Systems was brought on by the looming specter of utility competition. Moreover, owner Phillips had strong reasons to sell.
“We knew what utilities were doing and we needed to carry some weight when we started competing with them,” Lowe said. “We wanted to stay on the cutting edge, on top of the trends.
“John [Phillips] didn’t have a succession plan in place. Consolidation was a way for him to stay with the company while getting his money out of it.”
Working with the local collegeThe 163-employee company is looking at a 48% increase in overall sales to $17 million this year. But the size and strength of the company is often no match for the tight labor market in Salt Lake City.
Even the most successful contractors are finding it increasingly difficult to attract and retain top employees. The consolidation with Comfort Systems gave CSI access to employees throughout the country who may be available to work on large projects. But it didn’t solve the local issue.
Lowe said that his company is taking large strides to improve its relationship with the local junior college. “In 1994 we got together with a group of contractors in the valley and Salt Lake Community College and put together a four-year training course in hvac,” he said. “Last year we graduated our first students, nine of whom work for our company.
“I wish we had something like this when I started in the business.”
CSI owner Phillips has sat on the board at the college and has tried to keep the curriculum current to the needs of Utah’s hvac contractors.
CSI has a sister Comfort Systems contractor in the Salt Lake City area, Freeway Heating. Lowe said that when his company needs extra help, he can call on Freeway to supply some workers, and vice versa.
On Lennox, other manufacturersLowe is taking a cautious stand on some of the new occurrences in the market, especially the purchase of Service Experts by Lennox.
“The Lennox purchase put a whole new light on the business,” he said. “Manufacturers always swore that they would never get into the retail side of the business.
“Down the road this purchase will change our relationship with Lennox [CSI supplier], but right now it hasn’t affected us. Nobody is telling us what brand to buy.”
Lowe is watchful of the other manufacturers and the moves that they have or haven’t made recently. “I never would have thought that Trane would sell their products to Sears,” he said. “And I don’t think that Carrier has played their cards yet. They might pick up the fallout from upset contractors.
“The bottom line is, they all want to sell boxes.”
Still, Lowe sees a lot of good within the changes. “Sears has always been a good competitor and they may actually raise the pricing bar,” he said. “Service Experts has bid on projects that we’ve bid on and they haven’t low-balled us. Prices have been kept at the same level.
“With all that has happened, the changes should help all of us raise the service bar and charge customers a reasonable price based on industry standards.”
Lowe is looking for better things soon for CSI. He notes the working relationship his company has with Questar, an energy services provider and his company’s continued diversification into the plumbing and mechanical service markets.
“There will be a lot of changes in the next five years,” he said. “I think the changes will be good if we learn to hang in there.”
Thornton Plumbing & Heating: radiantWhenThe Newsvisited with Clay Thornton last year, he showed off some of his work in the field of radiant heating. Many of his radiant heat clients have “showcase” homes, worthy of awards.
Thornton’s grandfather started the business 67 years ago after losing his job as a pipe welder for a steel manufacturing plant in Midvale. Since he also was qualified to be a plumber, he struck out on his own in plumbing and hydronic heating.
“Our company started doing radiant heat work 40 years ago, about the same time Frank Lloyd Wright was putting radiant in his projects,” said Thornton, the company president. “In the last 15 years we’ve shifted to radiant floor heating and snow melting, which is our specialty.”
Thornton said he has resurrected the plumbing business a bit. The company has about $150,000 in plumbing work under contract and $900,000 in radiant heat. Thornton has never done forced-air heating, having subcontracted that work out. But he’d like to have a forced-air contractor under the Thornton umbrella.
Thornton said most of the 8,000- to 12,000-sq-ft homes the company bids on involve radiant heat as the primary heating system. “These homeowners don’t live in these homes 11 months out of the year. When they come home, they want to turn up the thermostat and get heat real quick.
“Two-thirds of the homeowners we work with are absentee owners, some of whom are the who’s who of celebrities.”
Logic says there would be a lot of workers who would like the opportunity to work in a celebrity home, but that isn’t the case in this community south of Salt Lake City.
“We send out flyers to distributors and work with the local labor force to find help,” said Ken Barney, vice president. “A lot of people come to us because of our reputation and their interest in radiant heating.”
Working with the Radiant Panel AssociationBarney also is the vice president of the Radiant Panel Association (RPA), which offers radiant training on an as-needed basis when contractors need training for their people. Both Thornton and Barney are certified instructors and will be giving training seminars at the RPA conference and trade show, to be held in Providence, RI in May.
“I helped establish, through the Rocky Mountain Gas Association (RMGA), a hydronics certification test,” Thornton added. “And a lot of manufacturers are running good schools.”
The first local RPA chapter in the United States was set up in Salt Lake City with the help of Barney. One of the goals of the chapter is to promote high-quality work and resolve code issues, as well as enforcement of RPA code guidelines.
With a good reputation in radiant heating and an established track record, Thornton’s company looks attractive to consolidators. But consolidation isn’t in the picture right now.
“Lennox is marketing ‘In-floor’ products and a boiler which is made by Dunkirk,” Thornton said. “Lennox is interested in getting into the radiant market because they offer a heat source for radiant systems.
“How can they [Lennox] ignore this market? Radiant is five percent of the heating industry and it is growing geometrically.”
Utility on the moveOne thing that Thornton won’t ignore is the growing encumbrances from utilities who will eventually move into the service market once deregulation becomes a reality in Utah.
“Utilities are definitely stepping on our toes,” said Barney. “Questar [energy services] is working through a consolidator [CSI] and locking up a part of the service business.”
“The utilities will eventually dip their noses into the hydronics business,” said Thornton. “They have pursued the forced-air side, but it is just a matter of time before they go into hydronics.”
Area contractors successfully fought off Questar’s attempts to enter the service market in previous years through the efforts of the RMGA. Now, when a Questar service team visits a homeowner, they leave a referral card that includes the number of the RMGA, who will recommend an area member contractor for additional service work.
Like the lure of the customer service market, the radiant bandwagon is also luring area contractors because of its popularity and its marketability. Right now only a few contractors list it as one of their specialty markets, but all seem to like to associate with it.
“If you ask any contractor if they do radiant heat, they would say sure,” said Thornton. “You can’t ignore radiant heating. It is growing by leaps and bounds.”