It Was the Summer of HVAC
Well, that went pretty well. I am speaking of the summer season for a good portion of our HVAC contractor audience. It was a banner year for many, as air conditioners were flying off the shelf faster than doughnuts at a Weight Watchers after-party.
In speaking with a lot of contractors at the recent Service World Expo in Las Vegas, I can’t remember one person saying they had a down year. In fact, most were letting me know that sales had grown double digits in 2018.
The Air-Conditioning, Heating, and Refrigeration Institute (AHRI) shipment numbers bore that out, as year-to-date shipments were up 5 to 10 percent, based on what category you were looking at.
Anecdotally, this has continued into the fall season. I recently had lunch with a Detroit-area contractor, and he was telling me how he could not remember ever being this busy in October.
It’s the shoulder season, but they are still going strong. The only thing holding him back was — you guessed it — finding qualified employees. At that time, he was looking for 13 positions to fill.
Certainly, the summer weather played a role in the results contractors saw. As contractor Butch Welsch has often told me — air conditioners can only break when they are on. In a tie with 1934 — anyone remember that one? — the summer of 2018 ranked as the fourth hottest in history. It finished strong, as August was the 17th hottest in U.S. history. I know here in Michigan, the summer weather started early and ended late.
However, that does not tell the entire story. Simply put, the HVAC industry is in a pretty good place, as shipments have grown steadily since 2011. Of course, there are multiple reasons for this. If you look back at the period from the mid-1990s to 2006, you might remember that the new construction market exploded before capping out. There was a great amount of residential homes built during that time, which is always good for business.
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Do the math. Those installations are now entering the replacement segment of the HVAC marketplace. It is a lot easier to sell the replacement when the repair is coming more frequently.
In addition, the country has solid economic conditions and a strong consumer confidence level. Consumer confidence levels are what manufacturers have told me they look at closest when projecting what the future will hold. Add to that the changes in the tax code and the amount of foreign investment into the country. Money is being pumped into the economy at an incredible pace.
This is not to say there were no headwinds that contractors had to battle through this summer.
The biggest issue I would hear about from readers were the tariffs. Most of it was based on confusion and uncertainty. Not sure any of that has changed. I am not going to get into the political debate on if the president has started a trade war with China or has finally responded to a trade war that has been waged against this country for some time. That could be up for debate.
What is not up for debate is a lot of manufactures raised their prices due to the tariffs (see Joanna Turpin’s story on Page 1). The contractors that know their numbers by and large passed on those price increases to the homeowner. And the folks I talked to were not hurt by it.
Just another reason that the good contractors rarely compete on price. Those contractors realize they need to provide value through comfort, convenience, and a proper installation. Let the other bottom feeders operate with paper-thin margins by taking on those customers that shop solely on price. If your business model is to charge correctly for the value you bring, it is not going to kill the sale when the manufacturer increases prices by 5 or even 10 percent.
Here is hoping that all our contractor readers have a great winter season, too.
Publication date: 10/29/2018
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