Profit Opportunities in the Hydronics Business

by Michael S. Weil, Executive Editor, Contracting business Since 1990, the sale and shipment of cast-iron boilers has steadily increased. In fact, according to statistics kept by the Hydronics Institute Division of the Gas Appliance Manufacturers Association, shipments of these units have increased by more than 15% over last year. Thats great news, a point not lost on the eight contractors and eight

by Michael S. Weil, Executive Editor, Contracting business

Since 1990, the sale and shipment of cast-iron boilers has steadily increased. In fact, according to statistics kept by the Hydronics Institute Division of the Gas Appliance Manufacturers Association, shipments of these units have increased by more than 15% over last year.

That’s great news, a point not lost on the eight contractors and eight wholesalers who gathered May 26 in New York City to discuss what it takes to be profitable in the hydronics market.

Dubbed the Hydronics Roundtable, this Burnham Hydronics-sponsored event is the second time the company has brought together contractors, distributors and other interested parties to discuss issues and brainstorm solutions. Bob Miodonski, publisher and editorial director of CONTRACTOR, and I served as co-moderators.

Similar to the discussions that took place last year (Growing into the hydronics market,” June 2003), contractors agreed that hydronics technology tends to be viewed by consumers and builders either as being more expensive than forced-air systems or as something they just don’t understand.

Furthermore, large national real estate developers are invading local markets, changing the way residential new construction business is done.

Contractor Rich Goelz of T&F Enterprises in New York said: “We have a very good business on Long Island but watched it lose ground as national builders began using air conditioning contractors instead of us. Plus, as national real estate investment trust-type companies began to hit our markets, the cost of land skyrocketed, which hurt our local builders, which, in turn, hurt us as well.

“However, we’ve been successful in making up the lost ground by using hydronics as a differentiator. People in our markets recognize the value and comfort that hydronics provides and are willing to pay a little more to have this type of comfort system.”

Jim Reid, president of James Reid Plumbing and Heating in Portland, Maine, agreed. He added that hydronic systems are usually an upsell, and he uses them to differentiate his company in its market.

The key, according to the contractors in attendence, is educating other contractors, builders, homowners, architects/consulting engineers and realtors on the advantages of using hydronic comfort systems. Furthermore, the group says they need to have access to the end user — the home buyer.

Throughout the day, as the conversation wound from incentive programs to marketing campaigns, a blueprint for profitability emerged. The bullet points of this blueprint include four key goals:

1. Creating a national incentive program for builders.

2. Selling hydronic benefits. The industry must do a better job promoting tangible items that consumers understand, such as unlimited hot water and warm floors (radiant heat).

3. Selling into a niche. The hydronics industry should concentrate on selling:

  • Higher end homes, and
  • New, higher-efficiency hydronic equipment and systems (which will appeal most to higher end homeowners).

4. Filling needs for hydronic heating contractors to increase their profitability. The needs include:

  • Better product availability of all system components from wholesalers (multiple stops at supply houses reduce contractor productivity);
  • Protect the distribution channel;
  • Innovations in high-efficiency equipment and systems to compete against forced-air systems;
  • Increased labor pool because the industry needs better recruiting of young people; and
  • Marketing/sales training for hydronic heating contractors.

Gabriel Santoro of B&G Heating in Batavia, Ill., told the group that education should begin around hydronic products but also should include the construction changes necessary to make hydronics happen.

“You really need to hold builders’ hands,” he said.

From the distribution side of the table, Prisco Panza of Shelton Winnelson in Shelton, Conn., said his company works very closely with builders to educate them on the benefits of hydronics. His firm also provides such training to contractors — especially from the perspective of selling the tangible aspects of hydronics.

“In the end,” Goelz said, “whatever we do as an industry must include ways to make doing business with us easier for the consumers and the builders. Finance plans are one way to do this. But that requires contractors, builders and distributors to partner and work together as a team.”

These are some of the needs, but the question remains, can contractors make money in the hydronics business? The answer is, absolutely.

The discussions that ocurred during this roundtable included many other topics that Contractor and Contracting Business and magazines will cover during the next several months.

Mike Weil is executive editor of Contracting Business magazine. He can be reached via e-mail at [email protected].