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CEDIA Expo To Grow Again Despite The Flagging Market

8/20/2007 02:00:00 AM Eastern

Single-family housing starts are falling for the second consecutive year, and the custom channel's 2007 revenues might fall for the first time ever, but CEDIA is preparing for what could be its biggest Expo ever.

Despite tight quarters at the Colorado Convention Center, the number of exhibitors will grow at next month's event to at least 578 from 2006's 568, and the exhibitor count could go higher because CEDIA was still selling show space as of Aug. 15, the association said. With pre-registration numbers running ahead of last year, Expo chairman Ken Erdmann said he expects attendance to exceed last year's record of more than 28,000.

As of Aug. 15, exhibitors committed to 300,100 net square feet of exhibit space, which was expected to grow in the weeks preceding the show to potentially match the 315,293 net square feet consumed at the 2006 show.

The Expo's trade show floor is open Sept. 6-9, and education sessions run Sept. 5-9.

In another sign of Expo growth, CEDIA will add 30 more core curriculum courses compared with last year, providing about 180 more hours of training, said Erdmann, who is also president of the Springville, Utah-based Erdmann Group installation company.

The 30 new courses, however, don't include tips on adapting to a housing slump, which enters its second year this year with a 27.5 percent drop in first-half single-family housing starts to 591.2 million, according to Census Bureau statistics.

The custom industry has grown through multiple housing-market declines since 1990, five times in fact before the current slump began in 2006. The magnitude of the 2006 and first-half 2007 declines, however, far exceed the declines of the pervious decade and a half. In 2006, the number of single-family housing starts fell 14.6 percent to 1.47 million, marking the biggest decline since 1990's 10.8 percent. This year is shaping up for a steeper decline based on first-half statistics.

Although his Utah market "is very busy," Erdmann said some installers in other markets have found that "things have slowed a bit" and that as a result, they're no longer struggling to keep up with their work volume.

Bob Gartland, the president of national custom-install distributor AVAD, believes installer revenues are "probably flat to down year-to-date" after possible single-digit gains in 2006. This year could "conceivably" mark the industry's first revenue decline, he added, blaming the housing slump and collapsing flat-panel TV prices.

Not all installers are suffering equally, however. Installers who focused on production-home installs "are struggling" because the product-home segment of the housing market has suffered the most, Gartland said. "The high-end one-at-a-time custom-home market, probably the core of the average CEDIA member's business, is probably relatively okay, though probably flat compared to last year," he said.

U.S. Housing Starts
  Total   Single Family  
1959    1,517.0    1,234.0
1977    1,987.1    1,450.9
1979    1,745.0    1,194.1
1984    1,749.4    1,084.1
1986    1,805.4    1,179.5
1988    1,488.0    1,081.4
1989    1,376.1    1,003.4
1990    1,192.6 (-13.3%)      894.9 (-10.8%)
1991    1,014.0 (-15%)      840.4 (-6.1%)
1992    1,199.6 (+18.3%)    1,031.1 (+22.7%)
1993    1,287.7 (+7.3%)    1,125.6 (+9.2%)
1994    1,457.0 (+13.1%)    1,198.4 (+6.5%)
1995    1,354.2 (-7.1%)    1,076.3 (-10.2%)
1996    1,476.9 (+9.1%)    1,161.0 (+7.9%)
1997    1,474.0 (0%)    1,133.6 (-2.4%)
1998    1,617.0 (+9.7%)    1,271.4 (+12.2%)
1999    1,641.2 (-1.5%)    1,302.5 (+2.5%)
2000    1,568.6 (-4.4%)    1,230.9 (-5.5%)
2001    1,602.9 (+2.2%)    1,273.2 (+3.4%)
2002    1,705.0 (+6.7%)    1,358.5 (+6.7%)
2003    1,848.0 (+8.4%)    1,499.0 (+10.3%)
2004    1,953.0 (+5.7%)    1,608.0 (+7.3%)
2005    2,068.3 (+5.9%)    1,715.8 (+6.7%)
2006 1,800.9 (-12.9%) 1,465.4 (-14.6%)
Jan.-June '07       729.3 (-26%)      591.2 (-27.5%)
Source: Census Bureau, www.census.gov.

In the past, the custom industry posted revenue gains despite housing-start declines in 1990, 1991, 1995, 1997, and 2000, but this time is different, Gartland contended. For one thing, the industry never endured back-to-back housing-start declines of this magnitude. "Housing starts stopped in 2006, and as these homes were finished, there haven't been homes to replace them," Gartland said. Second, although market penetration still has room to grow, the industry has already skimmed "the cream off the top," so now "dealers have to seek out business," he said.

Another factor in the custom market's stagnation is the 35 percent to 50 percent decline in flat-panel TV prices during the past 18 months, Gartland said. "That's a lot of money to make up, especially if you've sold two TVs into a house." Declining prices might aid cash-and-carry retailers because falling prices drive more people into stores, but that's not the case with custom installers who typically don't operate stores, he said.

In this market, the best installers are tapping previous customers, marketing to architects and interior designers, and targeting the retrofit market, Gartland added.