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Bouncing back

Postponed contract projects, repairs now active again

FOR THE CONTRACT SEGMENT OF THE OUTDOOR FURNITURE INDUSTRY, IT'S A SEASON FOR COMEBACKS AS AMERICANS SHAKE OFF THE CHILLS OF BOTH WINTER AND RECESSION.

Ira Felsen

When the contract business slowed, Telescope did its homework. It came up with a method for retailers to sell contract pieces alongside consumer goods, zeroed in on marketing and pursued larger showrooms.

Ira Felsen
Contract Manager, Telescope Casual


     Manufacturers and industry observers are seeing more travel, more revenues and more willingness - or outright requirements - to make improvements now.
     Eric Parsons, president of Gloster Furniture, said the economic downturn essentially put the contract side of the outdoor furniture industry to sleep about two years ago. Recently, it has shown signs of reawakening.
     "The industry really has taken a beating during the last two years," Parsons said. "Among commercial designers, there are probably only a third of what were there two years ago. And there was no activity on new builds or refurbishments. There was a lot of activity prior to that, but those were closed up, and they were put away."
     Those project folders are being reopened and many projects are back on track.
     As business and personal travel begins to regain its footing - and consumers again have enough confidence to begin to spend money - both contract and retail sectors of outdoor furniture are on the upswing, Parsons said.
     On the contract side, both country clubs and exclusive resorts cut back on their spending in response to a marketplace in which consumers and businesses were limiting entertainment and travel. Even though the economy came to a standstill, Parsons points out that the weather didn't.
     "Furniture still gets weathered when it is outside at a major resort, and people are still using it, and there is still a need for upkeep," Parsons said. "If you are paying these kinds of prices, you want your surroundings to look good."
     Veneman Collections President Bill Markowitz noted many of its high-end furnishings star in Las Vegas outdoor

Telescope CasualTelescope Casual demonstrates how much product can be shown in a 10x10-ft. space.
and pool areas. As the economy slowed, hotels and restaurants have held back on replacing furnishings. "I feel like we've put a Band-Aid on it for the last two to three years," he said. "Now that projects are coming back, I think the pressure is on all of us to react quicker."
     In some cases, renovation projects are required. Ira Felsen, contract sales manager for Telescope Casual Furniture, said most medium and higher-end properties in the hotel and hospitality segments are required to replace all furniture, inside and out, every five years as a condition of holding a franchise, such as with Marriott, Hilton or Holiday Inn.
     But plans that came due between 2008 and 2010 were oft en not enforced because occupancy was down and the property owners feared they would run out of money. Franchises agreed to hold off for a year or two to allow the economy to improve - and now, the plans are coming due.
     When the contract business slowed, Telescope did its homework. It came up with a method for retailers to sell contract pieces alongside consumer goods, zeroed in on marketing and pursued larger showrooms.
     "Even though it was a roll of the dice, it worked," Felsen said. "It was the right time to do the right thing, and they did all the right things. That's what happens when you are a 108-year-old company that has seen a lot of business cycles."
     Woodard Furniture is also seeing the benefits of an improving economy, said Nick Ades, director of hospitality sales. "We are seeing renovations" Ades said, "people have access to cash, and it is a good time for them to do it. Labor and materials are relatively inexpensive."
     Like Telescope, Woodard appreciates the new emphasis by hotels to insist that the furnishings within their properties be upgraded. If they aren't, the franchisees risk losing the hotel contract and its benefits, from reservation systems to national marketing.
     In terms of other contract offerings, Ades said many high-end hotels, restaurants and country clubs are seeing outdoor spaces as an additional revenue source, which benefits the outdoor furniture segment because the space has to look the part in order to justify a consumer spending money there.
     Tami Newton, commercial sales director at Palm Springs Rattan & Garden Classics, said sometimes the disaster comes twice: An economic downturn and an oil spill in the Gulf of Mexico. Both conditions, thankfully, have improved for this season, and tourists are coming back.
     "People want to make sure they have decent furnishings so that they will have a nice facility that is memorable," Newton said. "It's not only mom-and-pop hotels but big resorts purchasing, too, so that's nice."
     Newton said Palm Springs positions to keep price points within reason and inventories at a high level so if a facility makes the call to replace its furniture, the business can respond quickly.
     Skyline Design also recognizes that need to move quickly. Allen Calzadilla, executive vice president, said he has seen funding come back to life over the past two years. More recently, buyers are willing to pay a premium in exchange for fast delivery. That demand plays well into Skyline's inventory supply already in place in the United States, close to potential buyers.
     Calzadilla was pleasantly surprised by the demand that came from consumers who, having seen the furniture on vacation overseas, began seeking it out online and purchasing it for their own homes.
     "We have gone from two years with no money (from buyers) to now, ‘we have money again,' " Calzadilla said. "Now, with the floodgates opening back up, we are ready for them."
     Tropitone President Cap Hendrix said the contract segment of casual furnishings lagged the downturn in the consumer segment by nine to 12 months. Projects that were planned before the downturn ended up being completed, but future projects were either scaled back or delayed.
     The industry - both consumer and contract - was hit twice between 2008 and early 2010. Those were major declines in demand because of the financial crisis, plus a normal down cycle.
     "We had planned that the commercial segment would not show significant growth in 2010, since it had lagged the consumer downturn by about a year," Hendrix said. "Nevertheless, the fourth quarter of 2010 demonstrated some
Skyline Design’sSkyline Design’s furnishings often fi nd placement poolside at European and Caribbean resorts as well as at U.S. hotels and restaurants.
vibrance, and that has carried over to 2011. The unusually bad weather in many parts of the U.S. has delayed the season somewhat, but Tropitone believes 2011 will mark the first year of a new growth cycle for the commercial segment."
     Charles Hessler, executive vice president of Barlow Tyrie, agreed conditions are improving in the marketplace, but said he has yet to see it translate into a measurable uptick in sales.
     "We have been doing quotes for luxury hotel projects, but nothing substantial has actually been purchased," Hessler said. "It will come, but I think it is still a good six months away. Purchase orders should start coming through in August and September with November and early December required dates. They want the goods before the holiday travel season begins."
     Windward Design Group had its start in the contract segment, Vice President Carrie Morales said. "Our contract customers have stuck with us for the past decade and a half," she said. "Our biggest customers are still contract distributors and those we deal with - water parks, apartments, homeowners associations. We developed relationships with all of them."
     In 2008, the purchasing stopped, with many customers opting to refinish their furniture instead of buying new. Windward took on much of the refinishing work, not only to keep those relationships solid, but to keep their workers busy.
     "The phone is ringing now again, and we're getting more quotes out, which is a good sign," said Jerry Rosengren, vice president of sales and marketing for Terra Furniture. "On the contract side of things, some of these projects that had been on hold for awhile are coming to fruition."
     Hotels are ordering mostly for renovations, he said.
     "We carry both contract and retail, but our main focus is the interior designer, the specifier," Rosengren said. "They are starting to spec again. The market is going to come back a little bit. It will be awhile before it recovers but is certainly headed in the right direction."
     Lloyd/Flanders President Dudley Flanders said his firm is not nearly as large on the contract side as many are, but that what he has is growing. Flanders finds senior living centers like to purchase wicker furniture, which helps make them look more like a home and less sterile.
     Lloyd/Flanders saw the effect of the slowdown - and now sees improvement. "I don't track it as a category, but I do have anecdotal evidence that our contract-specific reps' volume is up as much as 40%," Flanders said.
     Flanders said the new volume is encouraging and that it will help the profit margin and the bottom line.
     "I hope I am not being Pollyannaish," Flanders said. "It seems to me we may not get it all back at one time, but we will take it one piece at a time."

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