How are lift and escalator manufacturers meeting construction industry demand?
How are lift and escalator manufacturers meeting the demands of the construction industry within an increasingly competitive market? Peter Ward investigates.
In industries where work is slow, competition can be fierce. But when business is booming and the market is flooded with rivals, the race for a decent share can be even more extreme, as members of the lift and escalator sector will testify.
A high level of competition can create rapid advances in technology, with companies constantly trying to outdo each other's innovations. It can also bring with it a number of problems and challenges.
While four or five major players seem to dictate the global market, in the Middle East they are joined by countless smaller businesses trying to break through.
ThyssenKrupp's sales director Josef Forkl explains: "The market itself is extremely competitive. I have never seen in any other market in the world such a density of elevator companies. If you go to Europe, Asia or the USA the four big players are always there...but I would say more than 100 smaller elevator companies are [operating in the Middle East] also."
One of the major issues facing all manufacturers in the sector is that raw materials costs are rising, but due to the number of firms offering lifts in the region the end-product prices have not increased.
Otis' director of business development Yusef Shalabi is wary of how this is affecting the sector: "It's not an easy situation. There is work, but at the same time it's becoming much more difficult to execute.
The costs are rising much faster than [manufacturers] can move this cost onto their clients because of competition.
"Shipping costs have gone up; raw materials costs have gone up; equipment costs have gone up; salaries have gone up - everything has gone up. That is at source, so the cost of equipment as it arrives is already higher. Now locally in the last two years our cost of doing business has risen hugely," he states.
According to Shalabi shipping costs can jump overnight, affecting companies like Otis that have their major factories in China.
He adds that the price of steel has increased "three or four times".
This can result in companies compensating for possible cost increases during the early tendering processes and removing the extra costs later in negotiations to have a better chance of winning contracts.
Maintaining a market share
Securing contracts and winning installations is the main aim for the lift manufacturers, and during the current construction boom there are plenty of installation jobs available.
But this will not always be the case. However firms are now planning for the future when the dust has settled on cities like Dubai, and are aiming to have as many systems installed as possible in order to continue operations by undertaking the maintenance and servicing of lifts.
"Of course we would like to make a little more money on new sales and installation, but the market is really competitive," says Forkl.
"As in most of the markets worldwide, profit margins are low or even zero in new installations and future maintenance will [ensure continued profits]. We are hoping for long-term relationships with our clients," he adds.
Shalabi agrees, saying: "Today there is a boom, so I say let me sell at a very low margin or no margin to increase my portfolio, so in ten years' time when this boom is over I still have a lot of lifts in town and this company can live without selling a single new lift but on income from maintenance."
Shalabi adds that a maintenance and servicing agreement can be "an investment" because although on some contracts large profits can be made, on others where there are major repairs needed, it is possible to lose financially.
Forkl offers a stark warning on the importance of responsibility within industry: "If you don't maintain an elevator [effectively] and if you don't obey certain rules, it could theoretically end in terrible accidents."
One issue that the lift industry shares with the majority of other sectors is the problem of finding skilled workers.
The competition and abundance of work is causing skilled workers' salaries to rise and other costs associated with recruiting new staff are also increasing.
Finding accommodation for employees has become both challenging and expensive, reports Shalabi.
"I have engineers arriving and I can't find houses for them. Or, if I find a place, it's so expensive that it's more than his salary," he states.
"It is creating a lot of disjunction in the way that you do business: in the old days the major cost was salaries, now the major cost is everything else," he says.
However, skills shortages are not a problem shared by all the main players in the sector. Kone director of new equipment business Reijo Penttonen explains: "We have not been affected as of today because we are a global company. We have access to a pool of resources on a global level, so whenever we have a specialist need, for example, project managers, we can get people moved from other parts of the world."
In terms of sustainable design and meeting environmentally friendly building legislation, lift manufacturers can provide some help.
One feature that is being almost universally used is the inclusion of regeneration drives. This makes use of the electricity that is created when the motor acts like a generator during braking. The resulting power can be reused in the building to lower overall energy consumption.
Other products that have been designed to meet sustainability needs include the Gen-2 Elevator system from Otis and TWiN design from ThyssenKrupp.
Machine room-less (MRL) lift systems are becoming more popular as a means of reducing the lettable space needed for shafts. In MRL systems the machinery for the lift is located in the shaft itself.
For tall buildings the use of this solution may not be possible due to the large scale of the machines attached to the lifts, however manufacturers are reviewing this technology.
Kone, for example, has taken its gearless MRL technology and applied it to the bigger and faster elevator systems, and it seems it will only be a matter of time before this technology is available on the largest of elevators.
Research into new products is ongoing and the major firms see this as the best way to remain ahead of the competition.
Kone's Middle East regional director Tarek Elnaggar reveals: "With people flow solutions the opportunities are limitless, so we try to combine our synergies and offer the best solutions to ensure an efficient, safe, comfortable and uninterrupted flow of people, whether they are in buildings, airports or train stations."
ThyssenKrupp has recently designed a system that controls the signalling in lifts remotely. This removes the needs for cabling that stretches the distance of the shaft.
For MEP consultants there are several factors to be considered when designing a project that includes lifts. The products that are installed must have minimum impact on the core of the building.
Gordon Wilcock, a partner at specialist sub contractor Cooper Wilcock, explains: "To maximise the usable office space the core areas need to be efficiently designed to incorporate not only the vertical transportation but many of the MEP services that serve the building. It is therefore common when planning the core to look at options such as double-decker cars and the Thyssen TWiN system."
Wilcock also cites the use of a destination control system as a means of reducing the impact of lifts on building operation efficiency.
With such systems, passengers enter which floor they wish to travel to and are transported according to the most efficient means taking into account other passenger destinations.
A host of positives are coming out of the industry as a result of the race to get units out into the market. At the forefront are the innovations and ideas being thought up in order to stay one step ahead of the competition.
These products are helping to take the elevator and escalator sector up to the next level, which is convenient considering that is where the buildings of the Middle East are heading as well.
Otis' Gen-2 lifts feature a polythene-covered belt that needs no lubrication, eliminating the need for oil. It has a working radius of 10cm on most low capacity elevators, which allows for a smaller pulley and less energy consumption.
ThyssenKrupp's TurboTrack is intended to bridge the gap between conventional moving walkways and automated people movers. Tracks can be provided for a maximum distance of 1,500m.
In the first section of the track there is a speed of 0.65 m/s, which accelerates to 2m/s in the central section before slowing to 0.65m/s close to the end of the track. This enables fast transport times combined with safe entry and exit onto the system.