Bob Maricich

By Mark Hansel

Friday, Jan. 30, 2009 | 2 a.m.

Bob Maricich is chief executive of World Market Center Las Vegas. Maricich replaced Harvey Dondero last year after more than 30 years in the furniture manufacturing industry.

He talked to In Business about the state of the home furnishings industry and his goals for the World Market Center.

IBLV: What has the first year in Las Vegas been like for you?

Maricich: It’s been a lot of fun. You know, I expected change, but with the economy this whole notion of change has been magnified and put on steroids more than any of us could have imagined a year ago. In general, it’s been a fun year, personally. It’s been fun moving to Las Vegas and an entirely different lifestyle experience from what I expected.

We went from a lifestyle with kids at home and a big house and lots of property to really a cosmopolitan lifestyle. It’s been a fun change.

Obviously the economic downturn was a big surprise for everyone, but have there been any other big surprises for you in taking over at World Market Center Las Vegas?

No, I think the economy was the most significant surprise. Coming in I knew there were a lot of moving parts in a very complicated project such as (World Market Center). Being the beneficiary of a lot of hard work before me and that coming together with the completion of Building C was really great. But I don’t think any of us imagined even late last summer what was going to develop in the second half of the year. As you recall, we went into the July market with some pessimism about home furnishings, and now we know this recession officially started in December 2007. We felt it, but ended up having really a remarkable market in July. But from then on it has been, not a surprise, it’s probably more like a shock. In home furnishings it is beyond the proverbial perfect storm. When you get into access to credit, at the end of the day we’re driven by retail sales as well, our customers all have a consumer-facing strategy. As you know, in November home furnishing sales at retail were off more than car sales. Although we haven’t felt the impact as directly, our tenants are really feeling it. In some ways we are really a beacon of hope, and we’ve done everything possible for the February market to be a show of optimism. Our advertising campaigns have messages such as “Survive or thrive” and “Dream or do.” Everything is really built around the fact that if you stay at home and your only strategy is to cut costs, you are just going to get run over. So, we’ve tried to put took together many compelling things to get the year off on a really positive note. I think, without a doubt, our tenants ­— the retailers, buyers and designers — are looking for optimism and new ways of doing things. They realize that the past is just that. The things that have worked in the past are not going to help in swimming out of this.

What do you think you have brought to the World Market Center?

I’m not so sure that I brought any new perspective. I’d like to think I brought a heightened sense of energy, a focus. I think that with some of the major tenants I brought some added credibility. After all, I was one of them. I walked in their shoes, so to speak, and I understand their issues. And just as important, I think I am able to articulate the vision for the future of this being not just a furniture market. There are a lot of more exciting ways to transform this into a business platform, if you will.

It was more than just that, though. The man you replaced, Harvey Dondero, was very well respected in the industry and in Las Vegas. Wasn’t it critical for the reputation of World Market Center within the industry to get someone of your caliber to show continuity?

You don’t make investments like this and not want to pair it with a world-class team. And I am not talking about myself, I’m talking about the people who were here and the people we’ve attracted here. I would say we’ve revamped our management team and strategically added some very key, high-talent people. Obviously, we don’t lack for physical infrastructure and our success largely in the next couple of years is going to be driven by the quality of people and our ability to execute on the vision.

How difficult was it to transition from a manufacturing background to a showcase environment?

I’d been in manufacturing for over 30 years and my friends who are still in manufacturing think I’m the luckiest guy in the world to have gotten out at the time I did because their lives are very complicated. It doesn’t matter what their business model is or where they manufacture on the planet, it’s really a tough environment for them.

I have never been involved with a big real estate project and had 1,500 tenants, so that’s been really interesting because of the diversity of tenants and their expectations. The only thing worse would be to be the manager of a club where everybody thinks they own the place.

The 2007 Summer Market was the first time all of the market events took place on the World Market Center campus. How did that go?

It was great. We’ve made the decision to convert an additional floor — the second floor of Building B — to permanent temporary, meaning it is space that’s leasable by market and that’s become a more significant part of our strategy. We have found that not only to be an incubator for companies to come here on a more permanent basis, but some companies are willing to pay more on a short-term basis for that flexibility. Of course, we didn’t have that capability before, when we were going off-site. Second, there was always kind of an underlying feeling if you were a permanent tenant here, that we were taking buyers away to another location and, certainly, that’s not the case anymore. As we look at developing more events here, there will be more reasons for people to come here, which will increase the value proposition for our tenants.

Speaking of tenants, you’ve had some high-profile additions recently with Furniture Brands International adding some brand names and Kreiss expanding its presence. That has to be very rewarding in this economy.

It’s really remarkable. I’m hopeful in the next couple of months that we’ll add a couple more very, very impactful, big-name tenants. I think it just speaks to the point that we’ve reached a critical mass. It sends the message that if you want to be a national marketer of furnishings, you’ve got to have a presence at World Market Center Las Vegas. There is, just simply, now a large group of supporters of our market that aren’t going to other markets. We can factually prove that to those who are willing to listen and those who are open-minded enough to really consider a different business strategy. There are people with generational ties to these other, older markets. We’re not in the business of just putting on a market. We’re in the business of changing the platform of trade shows, of markets and of marts, which is what the Las Vegas Design Center is. It’s a little frustrating that it takes as long as it does to pull together these alternate events and different up-to-bats for our tenants, but they can clearly see the direction we are going in.

What is your view of the state of the furniture and home furnishings industry, both short-term and long-term?

Well, short term there is no question that both manufacturers and retailers are just in a fight for survival. Not having ready access to credit and having consumers putting off any sort of large-ticket purchasing is really difficult for all of them. I predict there will be some substantial business failures within that group of manufacturers and retailers, unfortunately. That being said, when adding up the size of the home accents, home gifts, lighting, floor coverings and furnishing businesses, it gets to $500 (billion) or $600 billion very quickly, even in a downturn. It’s a classic time of changing business models and changing fortunes. Out of this will grow great opportunities, and the survivors are going to be the clever ones, the ones that were conservative with their balance sheets and do have adequate financing. I’m convinced that there is going to be a decade that’s so phenomenal once we’re through this and really fundamentally more sound. It won’t be built on crazy credit terms and unsupportable leverage. The courageous and the clever, when this thing plays out, are going to be positioned extraordinarily for a decade, maybe longer.

One of the interesting things about this business is the enormous diversity of manufacturers, suppliers and retailers. It isn’t like the auto industry where you have six or seven players and half of them are in trouble. There is room, even in this kind of an environment, for success, and in a lot of ways it’s much healthier (than some other industries) because of that.

Are you anticipating a decline in attendance at the February market because of the decline in the industry, and if so, how much of one?

I think it will certainly affect attendance. I don’t think it will affect the number of companies that are represented. I’m going to give you an economist’s answer, where there is always an “on the other hand.” If you are running a business and you’re not going to go and see customers or new ideas, I think you are doomed to failure. I think in a lot of cases, in the past where a company might have brought five or six people, they realistically will bring a couple this time. So, in terms of overall attendance, it’s bound to be down, but I don’t think the number of companies will be down.

We have seen a real jump in pre-registrations in the past week as we have started heavily marketing the incredibly low hotel rates and costs to travel to Las Vegas. It’s so dynamic, it’s literally changing daily. People are realizing they can come to a market like this for $500 to $600, so how can they not come? I think we are going to get a real bump in registration in the next few weeks because of that. We’ll see.

You talked about the industry being in a state of transition, when everything shakes out. What, in your opinion, is the revamped industry going to look like?

You know, I’m a bit of a contrarian. I think that the fallout of manufacturing in China is going to be far more severe than it is here. A company, DeCoro, a huge Chinese leather manufacturer, just announced it is going to liquidate. There are significant problems with Asian manufacturing, and I think the pendulum could swing back to more domestic production. It’s never going to swing back to what it was. Globalization is going to continue in terms of markets, access to markets and products. I think fundamentally, the people who are going to be able to develop great products at reasonable prices and have a great point of differentiation are going to win, regardless of whether they are in China or California or Vietnam.

The decline of the Asian market has been very quick, hasn’t it? It seems like just a year ago that was considered a strong manufacturing market.

Yes. Certainly the energy thing, with transportation costs going way up, combined with a real decline in volume. Most of the Asian business models were built on large volume. I would put in there an incredible increase in the green movement, sustainability and buying from people who are supportive of good environmental practices.

Will a revamped market be big enough for two major domestic market centers (High Point, N.C., and Las Vegas)?

Who knows? I think that as it relates to World Market Center Las Vegas, there is still a lot that we don’t have in furniture. There is growth potential there. We have just scratched the surface on the gift market. Home furniture is about an $85 billion industry and gift is about a $350 billion industry, and so there are huge opportunities for us there. It’s going to be big enough for us. I don’t know if you have followed this thing in High Point where it has become open, which we were well aware was going on. People tend to look at High Point as a harmonious market and it is, in fact, 180 different buildings that collaborate for a market, but they are all competitors for space. There are no published numbers, but it’s obvious to anyone who goes there that there are huge amounts of vacant space. There was a story on the wire service where basically one of the buildings paid a company to walk away from their lease and come to another (building). I think that they’ve got significant issues as it relates to the competition within the market.

Also, we rely on no public funding, and the High Point Market has large funding by the North Carolina Legislature. They fund the transportation system, they underwrite some of the cost of the market. You’ve got to wonder where that’s going with the state’s finances being challenged like all states are now.

Do you have a date in mind for construction to resume?

No. We would have to see, first of all, more lease-up of the buildings now and a clear indication that the economy is in a recovery mode. It just would be financially imprudent to do anything in this environment.

You mentioned the gift market industry and the potential there. When do you plan to expand your presence in that market and other specialized markets?

We’ve already announced that we are going to have our inaugural gift show in June 2010. So gift will be an element of our two big furnishing shows in February and September as well as a specialty gift show in June. We are diligently looking at other shows that we could sponsor that would benefit our permanent tenants as well as to attract people on just a show basis.

How much of an advantage is it to be in an industry where the different segments are so complementary?

When you look at retail, there are some people who are in very narrow niches, but there are a lot of successful small retailers that it’s hard to put a label on. They may have greeting cards, a few sofas, some incredible home accent pieces, some softgoods and they do quite well because the owner is entrepreneurial and has a nice taste level. I think that’s a pretty successful format.

World Market Center Las Vegas is not just successful internally, it has been held up as a showcase for the city and it has also been very generous with this facility. Will you do more of that?

We want to be a great corporate citizen. In addition to our charitable giving, we also want to be a center and a resource that the community can use for functions, meetings and outreach. Certainly, I think we bring great diversity to the community just in terms of business. It’s an alternative employment source to the gaming industry, and we bring a lot of people into town and we look forward to bringing more and more. I think that a lot of growth occurs when you can leverage other strengths in the community, yet create a different business model.

I think the greatest strength that we leverage is the hospitality expertise that exists in Las Vegas. In kind of a throwback in terms of service, we have just decided that we are going to have every elevator manned by a person who greets the people getting in, talks about what’s happening on campus, can give directions around town and just be really friendly. It’s not hard to do that here. If we need something logistically in the form of transportation, it’s easy to get done here. We don’t have to go to the government for a handout for infrastructure and so, it really is building on the strengths. Las Vegas is a natural travel destination and that is another strength we build on.

Let’s talk about the change to a fall market. What prompted that?

Well, first and foremost, we’ve got a core of supporters — buyers, retailers and designers and buying groups — that have supported World Market Center Las Vegas since Day 1, who would rather not come to Las Vegas in July. That is somewhat driven by the weather, but I think it’s more driven by the fact that it’s just not a great time in the furnishings purchasing cycle. In February people are purchasing basically new items that will make their way to the retail floors around Labor Day. That’s a very convenient time to launch furnishings sales, and people’s thoughts turn more to their homes. Then six months later, the September time frame would include product that is delivered after the January clearance sales and would be another convenient time to refresh traditional retail floors. So, it makes sense in the buying cycle.

In my lifetime there have been three furniture markets that have failed or been greatly diminished in stature — Chicago, Dallas and San Francisco — and they all had one thing in common and that was a July market. I felt that it just didn’t make sense and we might as well face it sooner rather than later. There are a lot of manufacturers here that also support High Point that have expressed their displeasure because they have to come here for a market, then 30 days later prepare for a market in High Point. Our perspective is that we’ve got to take care of the loyal buyer base. As long as we have buyers coming to this market and that base is growing, then manufacturers will want to be here. Again, once you get to the scale and size that we are, no matter what you do, there are going to be some people who disagree with what you do. I will add, too, that you are going to see us do some incredible things for the September market to ensure that it is a success.

What has the overall response to the date change been?

Overall, it’s been positive, and like I say, there has been some vocal opposition to it. The core of that displeasure are people who are really strong supporters of the High Point market and don’t want to see that diminished. That’s their prerogative.

You briefly mentioned your charitable endeavors here, can you elaborate on that?

Well, we do the sample sales, which are open to the public and we are open to doing more things. We support several charities, including Child Haven, Safe Nest, Ronald McDonald House, Catholic Charities of Southern Nevada and a host of others. I think, in this environment, the most difficult thing is to just sit down and write a check and people need that. But there are other ways we can help, and certainly the donation of furniture, being a partner in space for events and helping local charities with a venue that would raise money or to have events that would help them are all things that we have done or are open to doing.

What are people going to see at the February market?

What I hope we see is that there will be a real last-minute rush to come to market and that there will be, truly, a sense of optimism. I think that after November and December most of the people in the furniture industry just had their breath taken away with how difficult the economy is and how widespread the problems are. There are so few pockets of success. At some point, you need help. We have an administrative change, we’ve flipped the page on the calendar and we’re having a Las Vegas market. If you are involved in furnishings and you want to look forward instead of backward, then this is the place to do it. That’s what I hope happens, that there are a lot of people like me who believe they can’t just sit and wait this thing out and that we are the venue to help them move forward. It’s an interesting time because we have three weeks before market and a lot always happens when it gets this close.

What are the plans for World Market Center Las Vegas in the next few years?

Well, 5.1 million square feet just as it is, is pretty remarkable and impressive. We’ll continue to really block and tackle on the experience side. I like to say that there is just no other place where you can have a market like this. From the number of partner hotels, any method of transportation and when you get here, regardless of the weather, it’s a convenient place to shop, it’s an efficient place to shop and we have compelling events on top of that. So the execution part of things will occupy a good part of our time. On the creative side, we are looking at how to get traction with additional events and create more up-to-bats for our tenants outside of these two major markets. We’ll dedicate a lot of energy to that. The interesting thing is that we’ve just completed three years. If where we are today were the vision for the entire project everybody would be declaring victory and most people would look at this as an incredible victory. I just happen to be associated with an ownership group of big, big thinkers.

I know you have always welcomed other business downtown, but you also believe your business model can stand on its own. Now there are some huge questions about some of the projects planned for this area. How concerned are you about that?

As a community partner, we are concerned about that. I would like to think that we might be looking at a delay on some projects, rather than things not happening. At the end of the day, we are a destination and we are close enough to the support that we need, which is lodging, world-class entertainment, the airport and all of the infrastructure. So if nothing else happened, it would not impede us at all. But, as a concerned citizen, we’d love to see the renewal of this area proceed as planned.