HD Vegas Market Update - May 2016

HD Vegas was upbeat and busy. Across the board the CEOs we spoke with were optimistic about the next two years, with most citing annual sales growth of 20%+. With a strong pipeline of continued new builds and remodels there is reason to be bullish on the hospitality industry.  As our team walked the floor we heard a number of explanations for the positive industry performance and likelihood for continuation of that trend. Including:

• Hotels are making up for the pause on upgrades, remodels and new builds during the recession.
• An impressive pipeline of hotel new builds and refurbishments that almost regardless of future economic performance will go forward, given the funding has already been raised.
• Airbnb and other crowd sourced alternatives to hotels are continuing to penetrate the market placing increased pressure on hotels to improve the aesthetic and furnishings to justify the higher prices – which is good news to hospitality furnishings providers.

In addition to the economic climate for the industry, top of mind for many industry CEOs were the following industry trends and topics:

• The increasing blend of hospitality, commercial and residential furniture under one roof and the cross pollination of design, a trend which one industry veteran termed “resi-mercial” and another "hospi-dential". This could clearly be seen in products showcased in many booths, for example residential Crate & Barrel – like finishes on case goods.
• A need for shorter lead times leading many to re-shore production to Mexico, Canada, or other North American locations. This is particularly true for upholstery.
• Customer emphasis on responsiveness and service was top of mind for many as they seek to maintain strong customer relationships.

The Stump & Company team feels the merger market remains vibrant with a strong balance of buyers and sellers. One public announcement in particular is worth note: LacquerCraft's purchase of Grand Manor is a signal that the market is open, and indicates the attractiveness of domestic upholstery. It also speaks to an evolving industry point of view that there is an advantage to platforms and brands that can offer case goods and upholstery to create one- stop-shopping for purchasers and hoteliers.

Our shuttle diplomacy was active this May with two ‎transactions "in the market" and several more to come later in the second quarter. We will continue our efforts at Neocon (Chicago) in June. Call us if you would like to discuss opportunities in this active climate.

Quote of the market #1:

"When I look into my crystal ball, the hospitality pipeline gives me reason to be optimistic about 2016 and 2017, likely even 2018, but it gets very hazy after that," noted an industry veteran when asked about his thoughts on the general hospitality market.

Quote of the market #2:

“Forget IRR – you eat spend IRR – give me the cash!” pronounced one CEO when discussing the merits of cash mergers versus the more esoteric and complicated stock swaps and industry benchmarking (internal rate of return).

Call us and let us help you navigate our exciting and ever-changing industry.