CHICAGO — Read most news items related to laundry operations today and what dominates the headlines?
Acquisitions. Mergers. Private equity investments.
Large industrial laundry entities are growing larger in terms of both the number of plants and areas of service.
Laundry businesses no longer service one city or region. Rather, they’ve spread across the country, united under major label umbrellas or owned by private investment groups.
But with industrial laundry business deals dominating the news, one type of laundry has slipped under the radar: on-premises laundries or OPLs.
How have industrial laundry maneuverings affected OPLs? How many still exist in the market? Will OPLs continue to operate in the future?
Let’s dive into the OPL market to find some answers to these questions and others.
BY THE NUMBERS
Matt Alexander, president of Pertl and Alexander, a laundry consulting firm in Jamesville, N.Y., says the number of OPLs has declined significantly.
“Most hospital laundries have closed over the past several decades, again with [Veterans Affairs] facilities being the primary exception,” he points out. “The vast majority of hotels have also elected to outsource laundry operations.
“Commercial laundries typically achieve roughly double the productivity per labor hour compared to hotel or hospital operations, and often operate with substantially lower labor costs. These factors have driven the long-term shift away from OPLs.”
James Scotton, regional sales manager for Dexter Laundry in Fairfield, Iowa, and Gerard O’Neill, president & CEO of American Laundry Systems, a division of E&O Mechanical Inc. in Derry, N.H., have the opposite view.
Overall, the number of OPL locations continues to rise, Scotton shares, as larger operations increase in size and locations, as well as new construction throughout many OPL segments.
“We’re also seeing strong growth in smaller, specialized OPL markets such as athletic facilities, pet services, fire and emergency services, restaurants, and salons,” he adds. “As demand increases throughout these markets, more laundry is being done every day, driving growth in OPL laundry facilities.”
“Let me share this with you,” says O’Neill. “Fifty percent of the business this past Clean Show that came to my booth was companies looking to build an OPL for themselves, and they were not in the least bit interested in outsourcing. That’s about 10 times more than any previous year I can remember.
“In my experience, as I design and consult for the surge in hotel and food-and-beverage business, I keep hearing from my own customers about businesses losing or, in some cases, deliberately cutting them loose and consolidating their clients, leaving these hotels that didn’t make the cut to operate a laundry by themselves again. Sometimes it is forced on them, and sometimes it is a choice they make.”
He goes on to say that higher costs from larger operators, a decline in quality, and lack of customer service will continue to be an issue.
“When you have 100 to 200 COG (customer-owner goods) clients in your laundry operation, it is easy to not worry too much if you lose one or two, but it all depends on why,” O’Neill says. “Is it you? Is it them? Is there another player in the market now? It is critical to know why, so you can make the changes as needed to retain customers. It is a lot cheaper to retain customers than it is to find new.”
Bob Corfield, president and CEO of Laundry Design Group, a commercial laundry consultant with main offices in Las Vegas, says the question of OPLs increasing or decreasing is a qualified one “that depends on the market in question.
“We use a qualifier of OPLs under 5,000 PPD (pounds per day), those between 5,000 and 10,000 PPD, and 10,000 to 20,000 PPD or more.
“The infrastructure and logistics of each OPL tier is considerable, but in our experience, we see the most growth in under 5,000 and under 10,000. The market segments are business hotels and assisted or long-term care sites. The exception in the 20,000-plus are rural or remote hospitals and resorts.”
He says the “why” varies by region but shares that as plants consolidate for scale into large plants, they elect to stop service to remote locations or based on size of account. This leaves these regions with little choice.
OPLs continue to operate in hotels across most major metropolitan markets, typically one or two per market, shares Alexander.
“Cities such as New Orleans and the Seattle area retain a higher concentration of hotel OPLs than many other regions,” he says.
Scotton says OPLs continue to operate across a wide range of markets.
“Hospitality is one of the largest business segments and continues to grow throughout the country, followed by medical facilities, athletic facilities, spas, pet services, etc.,” he shares.
O’Neill states that the types of businesses that operate OPLs are mostly hotels or resorts that care about quality and customer service, “or who are getting really hosed on price. If they have the space onsite or can find the space close by to the property, they’re looking at jumping back in the water or at least entertaining it or grouping together to do the same thing but on a large scale.
“There is also the situation that is happening in quite a few locations within the country where there’s a huge jump in hotel building but not enough laundry capacity to handle that jump. The same goes for condos and rental units. They are looking for their own laundry onsite controlled and managed by themselves.
“While the size of some laundries does not technically count as an OPL, they are more of a central laundry located on the premises or close by but off-campus universities and colleges that board students are also some operations making an effort to be masters of their own destiny.”
Check back Thursday for the conclusion about why a business would operate an OPL today and the future of these operations.
Click HERE to read part 1 about the effect of national/regional/private equity industrial operations on OPLs.
Have a question or comment? E-mail our editor Matt Poe at [email protected].
