Today’s market, A2L, and consumer dynamics: A view from the South

Over the past five years, the South has boomed economically. Both GDP and consumer spending have outpaced nationwide averages, with GDP growing a total of 40 percent and consumer spending climbing 62 percent, according to the Federal Reserve. The region also accounted for 87 percent of the nation’s population growth in 2023.

Given the mini-renaissance, to get an on-the-ground perspective, I spoke with Marty Landry, VP of Operations at Myrtle Beach-based One Hour Heating & Air Conditioning, about navigating today’s market, handling the A2L transition, and regional repair vs. replacement dynamics. Our conversation has been lightly edited for clarity. 

While no one knows exactly what’ll happen, there seems to be a certain level of optimism among contractors this year. Do you share that, based on what you’re seeing?

This is my opinion, but I think the bounce-back at the end of the year had a lot to do with manufacturers retooling for the new refrigerants. I don’t necessarily think the December shipment numbers were a true bounce — I think it was filling up the supply chain. We have bounced back, but I don’t know if I share the total level of optimism that’s out there — I’m cautiously optimistic. 

How are you translating that into the day-to-day?

We’re leaving a lot of flexibility in costs to adjust depending on what happens with the tariffs, what happens with interest rates and inflation, and what happens with all the things coming down, equipment-wise. 

One Hour-wise, is there any particular “push” this year at the national level?

It’s getting back to the basics. In 2021 and 2022, you didn’t have to be a rocket scientist to sell HVAC systems — people were spending money. We say that drunk monkeys can sell ACs in the summer, and we went through nearly two years of summer.

Now that we’re back to “normal,” we need to get back to processes. The One Hour model provides us with training — sales, call handling, etcetera — that we can reference. We have peers holding us accountable, being part of a group. But that’s what we’re pushing this year — it’s nothing crazy. It’s “run the darn company.”

What’s something top of mind for you right now, regarding A2L?

Our average tickets have gone up 30 percent compared to where we were in 2019 and 2020. So if commissions have stayed the same, salespeople are getting 30 percent more dollars per unit. So there’s going to have to be an adjustment, whether it’s with new people only and you grandfather everyone else in, or changing the entire structure. It has to happen. 

How has total lead volume trended since January 1? 

We’ve seen more lead flow through our marketing channels this year than we have in a while, which is interesting — interest rates are still high, for instance. But the housing market has appreciated tremendously in Myrtle Beach, so we’re fortunate. But yeah, we’ve seen an increase in lead volume.

How are you guys thinking about the repair vs. replacement dynamic, considering what’s expected with equipment prices?

I think pricing will put clients in a tough position. They’re either going to spend a lot of money to fix an old system or spend a lot of money to replace it. And helping them make the decision that’s right for them — not just right for us — is probably the biggest piece.  

We’ve been in a world where if you need a decent-sized repair, a replacement’s a no-brainer. But I think moving forward, that balance will be a little more tedious. We’re fortunate here because our housing prices have appreciated a ton, so people have a lot more money in their homes. And we don’t have the credit rejects other places are getting. 

But as you see interest rates and inflation going up, and disposable income going down, I think you’ll run into more credit rejects. And I think you’re going to have to find a third-tier credit vendor to help those clients find what they need.

So even considering Myrtle Beach’s dynamics, do you anticipate financing will make up a higher-than-normal percentage of your revenue this year?  

Yes. The top 10 percent have more money than they’ve ever had, but the other 90 percent are nowhere near where they were when that free money was going out. So, if you’re in the top tier, you have no problem. But I think everybody else will be financing — it’ll be a big piece.