Las Vegas Market Update

May 2009 - Charlotte, NC

The HD Market in Las Vegas was very upbeat and positive this year, despite the smaller crowds and the struggling economy. Many contract projects have been postponed or cancelled due to the credit constraints and the soft economy, but most of our clients are bullish about 2010 and feel the worst is over for the hospitality industry. We see the strong getting stronger and the weak going away, as part of the natural cycle of corporate existence. Several trends emerged, as follows:

• Residential Players in Hospitality: as reported last year, we saw several familiar faces from the residential furniture sector raise their banner and offer both casegoods and upholstery to the hospitality trade. This makes sense, given the proven residential product lines that are so similar to the ones used in many hospitality applications. We remain curious why more office/contract players don’t enter the HD world, given the similarity of specifiers and influencers in the purchasing decision.
• Predatory Marketing: with the total furniture market stagnant, or even declining, we are seeing the better companies focus on growth via predatory marketing practices, or “stealing market share” as the only way to grow. While some feel this is inappropriate, we applaud these aggressive companies who are strategically targeting weak firms as a way to bolster their own corporate health and shareholder value. We are seeing senior management take a more active role in developing individual client sales strategies and providing a more direct set of skills and tools for the sales reps to use in their new business solicitation. Conducting business the same old way will not result in corporate growth during this turbulent economy.
• Transactions: we believe the next 12 months will bring a host of mergers, alliances and joint ventures, as the strong owners will seek to expand product categories and geographic reach. Increasingly, the hospitality furniture purchasers are seeking “one-stop solutions,” which will result in casegoods and upholstery companies aligning, and east coast and west coast producers (along with an integrated global supply chain) linking up to provide a unified product line and more seamless customer service capability.
• Credit: the banks are not lending and private equity is still hard to attract, so we encourage owners and managers to reduce debt and be very careful with Accounts Receivable quality. Many suppliers, manufacturers, importers and purchasers will go out of business, and the best managers will shine during this difficult and chaotic time.

Call or email us with your thoughts on these important topics.