Over the past three years, summer heat waves increased average daily revenues for HVAC businesses run on ServiceTitan by an eye-opening 55%.
That’s the takeaway from a ServiceTitan analysis that looked at how the summer heat affected companies nationwide.
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Weather events increased daily calls by 20%, jobs by 25% and revenue by 55%. In real numbers, this means that an HVAC company that averages $16,000 in revenue per day would see an additional $9,000 during the heat wave (using rounded figures).
“Fifty-five percent really grabs me,” said Chris Hunter, ServiceTitan’s Director of Customer Relations. “This means be ready for replacement opportunities and prioritize calls during the first heat wave. Most of these systems haven’t really been needed or stressed until that point, and this is where you find the systems with leaks and weak compressors.”
To grasp how much the trades are in demand when weather extremes hit, recall the 105-degree temperatures in the Northwest last summer and the freeze in Texas last February. Relief to customers leads to revenues for companies.
“Have a plan when you see the forecast, and make sure your team is ready for all hands on deck,” Hunter said. “And get your pricing correct because, with the wave of calls, this is not the time to be off on your margins.“
Record-breaking summer
ServiceTitan’s analysis looked at temperatures and KPIs from the last three years, which included one of the hottest summers on record. The National Oceanic and Atmospheric Administration numbers showed that 2021 matched the Dust Bowl summer of 1936. From June’s record-breaking heat in the southern and western states to the mid-August dual heat waves that affected both the western and the eastern parts of the country, the weather was relentless.
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When gathering data, ServiceTitan defined a heat wave as two or more days when the temperature was unusually hot for an area, and the heat did not relent at night. Last year, some ZIP codes in San Antonio saw the first heat wave on June 7 and 8, when night temperatures remained above 78 degrees for two days in a row. In California, Canoga Park saw its first heat wave on July 19-22, when night temperatures did not cool below 70.
ServiceTitan analyzed proprietary data on approximately 800 HVAC shops along with detailed records from weather stations to determine the increase in calls, jobs, and revenue from the heat waves. A deeper dive analyzed the timing of the heat waves within the season and the geographical differences between regions.
First heat wave vs. fifth? Big difference
The impact on daily revenue was clear with the 55% increase.
What was just as clear was the first heat wave of the season has a much larger impact on revenue than subsequent weather events.
Figure 1. Average Impact of Heat Waves on Daily Revenue, by Order Within a Season
Compared to a baseline of a summer day without a heat wave, the first temperature event increases daily revenue by about 90%, which is about two-thirds more than the second and more than double the third. By the time the fifth heat wave of the season arrives, daily revenue increases by only 20%, on average. The impact after the fifth is often at or near zero in many regions.
That company with $16,000 per day in revenue? The increase from the first heat wave would be $14,000. The second would be $8,500, the fifth $3,000.
“This means just because the cash is rolling in after the first heat wave doesn’t mean anyone should make frivolous spending decisions,” Hunter said. “Communicate this trend to the team so they don’t get so overwhelmed and burnt out after the first couple of heat waves. Schedule vacations or R&R later in the season if possible.”
Location, location, location
Where the heat wave hits also matters. Temperature domes in the Northwest, Upper Rockies and far West tend to have a far greater impact on revenue than similar weather events in the South or Midwest.
HVAC shops in the West and Northwest see much bigger impacts on their KPIs than the shops in the South and Southeast. Weather, HVAC systems and housing types vary substantially across regions, which means the magnitude of the impacts vary as well. Think about Portland and Seattle, and all the stories last year about how the 100-degree temperatures were hitting areas that did not typically have air conditioning.
Over the past three years, the Northwest experienced a 120% increase in daily revenue for work booked during heat waves. The Northern Rockies and Plains (Nebraska, Montana) and West (California, Nevada) saw increases of 100%.
By contrast, shops in the South and Southeast increased daily revenue by 40% and 30%. There, homes already have HVAC units installed.
“I would really pick up the branding before the heat wave hits,” Hunter said. “Some contractors wait until they get busy to market, and by then they could be just wasting dollars.
“I want to be top of mind with my customers, so that way at the first sign of discomfort, it’s a no-brainer who to call for fast, professional service.”
Charge based on demand?
Hunter said he thinks it wise to consider adjusting pricing based on demand.
“Airlines, Uber and hotels have dynamic pricing due to demand,” he said. “A contractor could consider this as well. A slight price increase in the busiest season will produce more profit. Also some contractors may charge a premium for front-of-the-line service and homeowners are willing to pay this.
“We only have so many jobs, might as well make those jobs the most profitable ones.
“Finally, the busy season is a great time to lock in new memberships. Especially if your membership plan provides priority service and you can make them a member and give that benefit right away.”
[Methods: ServiceTitan followed Environmental Protection Agency standards in defining a heat wave. The summer season is defined as May through August. Weather data comes from the Global Surface Summary of the Day (GSOD) dataset. Final numbers were from a three-year average from 2019-2021 and rounded to the nearest 5%.]
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