NeoCon 2011: Increase in show attendance mirrors business conditions

Home Inside FCNews NeoCon 2011: Increase in show attendance mirrors business conditions

CHICAGO—The commercial market is on the upswing, and NeoCon 2011 could not have been more reflective of that trend. Hotel room reservations were up 27% over the three-day NeoCon 2010 period, forcing many members of the A&D community to the outskirts of the city. Elevator wait times at the Merchandise Mart were longer than in recent years, and hallways on the floors housing the permanent showrooms were more challenging to negotiate—all signs of a healthy show.

When the dust cleared, the reported attendance of nearly 43,000, was a 4% increase over 2010. That was particularly illustrated in the carpet showrooms, many of which boasted overflow crowds throughout the first two days. But quantity was only half the story; it was the quality of attendee that had manufacturers buzzing. For the first time in awhile, there are projects in the works, and architects and designers were doing more than window shopping. “Ever since the economic dip, the quality of attendance has improved,” said Glenn Hussmann, president and CEO of Tandus. “I find myself being introduced to customers with active products. Very few companies are sending people here just to look. They are here to bring product decisions to closure.”

Companies also seemed to bring more people than in recent years. “Where last year there was one person, this time around we are seeing three or four, suggesting they are busier,” said Anthony Minite, president of Bentley Prince Street. “We are definitely seeing better moods and hearing no doom- and-gloom.” He knew it was going to be a good show early on. “People were lining up to get on the elevators at 8 a.m. [Monday] morning.”

And Diane O’Sullivan, global marketing director for Antron, which took home the award for best small showroom, said the company scanned 4,200 people in the first day- and-a-half. “This show is more than 10 times better than last year. It helps having an intriguing space. This showroom is an environment for human interaction and inspiration. As a fiber manufacturer, it’s all about interacting with the product.”

The increase in attendance mirrors business conditions, which took a turn for the good in fourth quarter 2010. Most manufacturers with whom FCNews spoke pegged the market up 6% to 7% through the first five months of 2011.

“Business is solid,” said Tom Lape, president, Mohawk Residential and Commercial. “We are seeing the market continuing to recover. Customers are talking about major products both on active status and on drawing boards. There’s not much new construction, but renovation has always been 80% of the business and will continue to be so. Equally important, sample activity, which is the window to the future, continues to be solid.”

Business has also been solid for Johnsonite, where Jeff Krejsa, vice president of marketing, put growth around 10% over last year. “Two reasons. First, the integrating of Tarkett’s European-manufactured product under the Johnsonite brand is seeing some strong results. Secondly, there has been a growing acceptance of alternative materials, like rubber and linoleum, for healthcare and education. We are also seeing a growing acceptance of LVT and heterogeneous sheet in hospitals and long-term care facilities. It’s the same in education. In many cases, K-12 has moved away from lowest first cost in material to best return. That means acceptance of products like linoleum tile, rubber and even premium vinyl tiles.”

InterfaceFlor, also up double digits in the first quarter, attributes its success to a number of factors beginning with a strong diversification strategy. “We used to be an office company; now it is less than 50% of our business,” said John Wells, president and CEO. “What you are seeing is carpet tile taking share in all segments at different speeds and different proportions.”

InterfaceFlor also benefits from being aligned with large, multi-location, national accounts that expanded in 2010 despite the tough climate. And then there is the company’s reputation and brand strength around sustainability. “In the flooring industry, as more people are sensitized to green building and valuing green materials, we are getting an opportunity in many of those places,” Wells said.

Finally, Interface is as much a global company as any carpet manufacturer. “Every competitor we have, with the exception of one or two, only manufactures in the U.S.,” he said. “50% of our sales are outside the U.S. We just built our third plant in Asia. So, we are in the emerging markets. Also, it’s a global economy, so if you look at our customers in the U.S., they are buying around the world. Global standardization is something that happens because they want a single source of supply. Others can export from the U.S. But it’s different when you have your own facilities overseas.”

Crossville is also up “significantly” over the first five months of 2011. “July 2010 is when we started seeing an increase and it has been continuing,” said Laurie Lyza, director of marketing. “We’re seeing more confidence in moving ahead with projects that may have been put on hold. Projects we were hearing about for two or three years are finally starting to come on.”

Very strong is how Tyrone Johnson, president of Amtico North America, describes business through the first five months, continuing the momentum from “one of our best years on record. We are doing well because of a combination of things, most notably the growth of the overall LVT market. We also think our business model is successful. We offer incredible service, getting product to a customer’s location in a number of days. Our product is made in the USA, and we have a direct sales organization. We do not rely on any non-Amtico employee to do what we do, so we have incredible focus.”

Talk to any NeoCon exhibitor, and the resounding theme centered on the return of the corporate office segment— the largest casualty of the five- year economic malaise.

“Corporate is coming back,” said Mohawk’s Lape. “We are seeing large projects and a lot of renovation work in the tenant market that was deferred. People are committing to three- five- and seven-year leases. That’s important because retrofits for carpet are based on those leases—not one-year leases.”

He added Mohawk is particularly seeing a good deal of renovation work on corporate campuses. “They have cash on the balance sheets. But they are spending with an eye toward value, so it is incumbent on us to provide the best value for their budgets.” In response, Mohawk focused its introductions on more saturated colors, and more coordination between broadloom and tile. Examples included Scenic Journey under the Bigelow brand and Fresh Observations from Lees, offering DuraColor performance assurance at a more competitive price.

Over at the Bentley showroom, Minite was seeing much of the same. “No one spent any- thing in 2009, but a little opened up in 2010. [This year] leases are up, and there is a lot of pent-up demand. The financial guys are spending. It may not be good long term, however, because companies are down- sizing.”

Bentley unveiled 20 products at NeoCon, all of which can go corporate, and one, Silver Screen, that captured a Best of NeoCon Gold.

“It’s an offering that can be available in tile and broadloom, and comes with our enhanced backing,” he said. “It offers customers lots of flexibility because it can stay within one yarn bank and they can color coordinate.”

Minite noted corporate is still going more to tile but believes it will come full circle and eventually more broadloom will be specified. For now, tough, monolithic tile is popular. “People don’t want to see quarter turns anymore.”

At InterfaceFlor, parent company of Bentley Prince Street, Wells agreed there is a lot of cash on balance sheets across corporate America. “The technology and financial sectors are very good. We are also seeing activity in the design segment, which spells increasing momentum for the corporate office segment.”

But corporate isn’t the only sector fueling business. “Hospitality and retail are coming back,” Mohawk’s Lape said. “Retail is under cost pressures, but you have to stay fresh and relevant. It’s the same thing with hospitality. You can go only so long before you can’t keep deferring.”

Minite also cited higher education, a strong market for the company, as doing well. “People are out of work, so they are going back to college. Kids are going to grad school because there are no jobs. That has worked well for us because we have great products and a strong sustainability message. Universities are partnering with companies that have that type of message because those are the questions kids today are asking.”

Tandus’ Hussmann noted the federal government budget was approved in late April, so there is pent-up demand that will hit in the second half. However, K-12 is spotty. “Spending will not be robust this year due to budget issues at the state and local level. Higher education is a little more consistent, so we are seeing more activity— not at 2007 levels, but we have to stop comparing to 2007.”

Healthcare and retail are also strong for Mannington Commercial, according to Jack Ganley, president, which has contributed to a double-digit increase through May. “Those are two segments well suited to our portfolio because they use multiple surfaces: broadloom, carpet tiles, VCT and homogeneous and heterogeneous sheet. It’s the same for retail, where there is also a lot of pent-up demand. We can offer walk-off tiles, VCT, LVT, rubber wall base, etc. Anything they put on the floor we can bundle together.”

Trends

Carpet tile has been outperforming broadloom for a number of years, and if anything, is accelerating. Other trends cited at NeoCon:

•Budgets being introduced earlier in the process. “We believe pressure to sometimes value engineer product is happening more pervasively today,” Lape said.

•Product’s environmental attributes are moving from a recycled content game to a sustainable product view. It’s not only about the product’s construction but also where it comes from. “It’s about the company that makes the product and how long the product will last. It’s a more holistic approach,” Lape said.

•Multiple backing options, multiple textures and styles. “Not everyone is going nylon,” Minite said. “People are going wool in conference rooms and solution-dyed in other spaces. That’s not been the case the last few years. It’s been all solution- dyed and carpet tile.

•On the hard surface side, abstract visuals are gaining in popularity. “We also see larger formats—everything bigger, longer, wider,” said Amtico’s Johnson.

(Editor’s note: Part two will look at some of the newest products introduced at NeoCon.)

-Steve Feldman


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