Ap  HD Show: Las  Vegas

We attended the HD [hospitality and design] Show this week in Las Vegas (held at the Sands Convention & Expo Center), and were please with attendance, attitudes and the financial profile of most of the exhibitors. As several clients opined, “if you haven’t been growing and making money these past couple of years, then you are doing something wrong.”

Business is good in the hospitality world, with both new construction projects and renovation of old hotels and motels setting a record pace. Hot spots include Las Vegas [with a projected 80,000 new rooms to be built in the next 4 years], Vancouver/Whistler [for the 2010 Winter Olympics], and the Arab Gulf States of Dubai and Abu Dhabi [building a tourism trade before their oil runs out?].

Hospitality furniture companies continue to be primarily focused on this channel of sales distribution, and we remain amazed that more residential and office/contract manufacturers are not big players in this market segment. The firms that compete in multiple channels appear to be doing well and we expect to see more “cross-over” for companies seeking to compete in multiple distribution channels. This tactic will become more commonplace as products are sourced overseas.

Also in Las Vegas this week was the Kitchen & Bath Show (at the Las Vegas Convention Center), as well as limited residential product viewings at the World Market Center. Las Vegas has an uncanny ability to draw people from all over the world to conventions, but it is increasingly expensive for exhibitors and attendees to make these trips year after year.

 Mergers and acquisitions remain a hot topic. With profits and sales up, many owners are considering selling to take advantage of this cyclical up-tick. We are seeing buyer interest from 3 primary groups:

·        Strategic Buyers: these are typically larger companies within the industry attempting to acquire smaller niche players as a means of expanding market share, product offering, or geographical presence;

·        International Buyers: We are seeing more and more active interest by Asians seeking to acquire US companies as a means of quicker access to the US customers. We have seen this trend in the residential furniture segment, and expect to see it in the hospitality world;

·        Private Equity Groups [PEGs]: With over $200 billion of available private equity for investment, good companies with strong management will be attractive candidates for a PEG transaction;