Value Added: Geothermal systems heat up profits for Harvey Hottel Inc. of Gaithersburg

Thomas Heath
Reporter March 9

Dick Hottel shows no signs of slowing down.

Most 77-year-olds would be kicking back in sunny climes, playing shuffleboard or working the back nine toward cocktail hour — (mind you, I have nothing against the sacred cocktail hour).

Thomas Heath is a local business reporter and columnist, writing about entrepreneurs and various companies big and small in the Washington Metropolitan area. Previously, he wrote about the business of sports for The Post’s sports section for most of a decade. View Archive

Not Hottel, chief executive of Harvey W. Hottel, a Gaithersburg plumbing and heating company founded by his father nearly 70 years ago.

This guy isn’t some bureaucrat pushing papers, running to meetings, sounding important and marking time. Hottel works three days a week at business development, which means generating sales.

When I talked to him last week, he was mapping a driving route from his Rockville condo to Washington’s Navy Yard area, where he had an early-morning meeting the next day about installing a geothermal system in an apartment building. He said he would be getting up at 5 a.m.

Hottel said he has two big commercial jobs in the works and a bunch of other leads in the renewable energy market.

Hottel said if he didn’t work, he would “go home and whittle wood or something. This keeps me alive.”

I can see how people buy stuff from him. Hottel is an easygoing, chatty salesman who has a good phone manner.

Harvey W. Hottel is going to have a prosperous year, predicted Dick. That’s largely due to the Maryland company’s growing geothermal business, which is aided by a 30 percent federal tax credit and the growing desire by people to reduce their carbon footprint. I figured with everybody talking about the weather, now would be a good time to write about geothermal.

“Geothermal is hot and that is our hot number. We’re coming on this year,” Hottel said.

He predicts $20 million in sales this year, which should deliver a nice, seven-figure profit — and maybe bonuses for the owners, though that isn’t certain. The firm halted bonuses a few years ago. It is still working its way back to its pre-recession sales, which were in the neighborhood of $25 million before business slowed.

Harvey W. Hottel has 100 employees and 75 vehicles. All the employees get health coverage and a 401(k) company match.

Hottel’s revenue comes from three streams, the biggest of which is commercial service, repairs and small installations. Those bring in about $8 million a year, with the service contracts contributing the highest margins. No surprise there. Service is always where the big profits are. Just think, for example, how much you pay to repair your car.

The rest of the Hottel revenue is divided into two areas. One is residential jobs that include sprawling, 30,000-square-foot mansions and modest homes. The other source is renovation of big commercial building systems.

The geothermal work spans all the divisions, and it makes up about 20 percent of company revenue. The firm also does a little work installing solar systems and those that rely on other forms of renewable energy.

Basically, geothermal uses a well to heat and cool the house as needed. The wells can be dug as deep as 450 feet if there is limited horizontal space. But if there is enough acreage around the house, the wells fan out from the house horizontally, just beneath the four-foot-deep freeze line.

Liquids are pumped through the pipes in the wells, bringing the temperature of the ground into the cooling and heating system. The liquid temperatures help remove the heat during hot weather and warm the colder air during the cooler months.

The Hottel company has been thinking about heating and cooling since 1945, when Harvey Hottel, a self-taught engineer with a fascination for refrigeration, started helping people in Bethlehem, Pa., mechanize their iceboxes. Back then, iceboxes were literally oaken boxes filled with ice. The iceman made deliveries to your home or business.

Harvey Hottel was trained by Willis Carrier and his associates. Carrier is the father of air conditioning and built the Carrier Corp. Hottel came to Washington in the 1940s to help distribute Carrier refrigeration, which was doing a lot of work for the Army during World War II.

When the war ended, Harvey Hottel raised money from a group of investors and started a company on M Street NW in downtown Washington. Harvey W. Hottel Inc. specialized in building equipment for “comfort cooling,” which is how air conditioning was then known.

Most of the early jobs were for restaurants and grocery stores, but in the 1950s the company began to expand into theaters and office buildings.

Harvey Hottel valued highly skilled engineers, and he hired them to keep him on the cutting edge of the growing demand for air conditioning. The company moved to a warehouse in Silver Spring in the 1950s, where it used a sheet-metal fabrication system to build highly specialized, custom-built cooling systems for the U.S. military.

The systems were used across Europe, the Middle East and elsewhere to cool trailers that accompanied U.S. portable missile systems, among other things.

“It was profitable early on because we had a unique niche. They would ask us to build a two-foot-by-two-foot box that would put out a certain amount of air conditioning, and our guys would do it. We rode that market until the late 1970s,” he said.

When larger competitors got in on the action, the margins shrank and the company exited the business.

“When it becomes a commodity, you get out of it,” said Hottel.

Dick Hottel joined the firm in 1963 after a stint in the Air Force, where he pored over reconnaissance photos from U2 spy planes looking for enemy missiles, tanks, bunkers and the like.

Hottel’s geothermal business came about by accident. Around 1997, a fellow inventor named Bill Wright of Frederick, Md., approached the company about putting a geothermal system in a 20,000-square-foot house he was building.

“I said I’ve never done one, and he said he didn’t care. So I got a very experienced guy and he helped us through it. My son and I learned as we went.”

The system ended up costing $300,000 and making almost no money for Hottel. But the company won an award and found a lucrative new business line.

Not surprisingly, Hottel swears by geothermal, whose cost can range from $30,000 to $3 million, depending on the size of the job.

A 3,000 square foot house, for example, would probably cost the homeowner $30,000 for a conventional, natural gas-fired furnace. The cost for a geothermal system runs about 25 percent more.

Hottel said the $5 million his company earns on its geothermal business is equally divided between commercial and residential customers. The residential jobs are more numerous but tend to be smaller in size. The total number of geothermal jobs is about 200 a year.

“Most years we make money,” Hottel said. “It has done our family well.”

Well enough to build a home in St. Michael’s, Md., full of “all the bells and whistles,” which in Hottel’s world means the latest in geothermal, foam insulation and who knows what.

“It’s like a beverage cooler,” said the refrigeration enthusiast.

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Thomas Heath
Reporter March 9

Dick Hottel shows no signs of slowing down.

Most 77-year-olds would be kicking back in sunny climes, playing shuffleboard or working the back nine toward cocktail hour — (mind you, I have nothing against the sacred cocktail hour).

Thomas Heath is a local business reporter and columnist, writing about entrepreneurs and various companies big and small in the Washington Metropolitan area. Previously, he wrote about the business of sports for The Post’s sports section for most of a decade. View Archive

Not Hottel, chief executive of Harvey W. Hottel, a Gaithersburg plumbing and heating company founded by his father nearly 70 years ago.

This guy isn’t some bureaucrat pushing papers, running to meetings, sounding important and marking time. Hottel works three days a week at business development, which means generating sales.

When I talked to him last week, he was mapping a driving route from his Rockville condo to Washington’s Navy Yard area, where he had an early-morning meeting the next day about installing a geothermal system in an apartment building. He said he would be getting up at 5 a.m.

Hottel said he has two big commercial jobs in the works and a bunch of other leads in the renewable energy market.

Hottel said if he didn’t work, he would “go home and whittle wood or something. This keeps me alive.”

I can see how people buy stuff from him. Hottel is an easygoing, chatty salesman who has a good phone manner.

Harvey W. Hottel is going to have a prosperous year, predicted Dick. That’s largely due to the Maryland company’s growing geothermal business, which is aided by a 30 percent federal tax credit and the growing desire by people to reduce their carbon footprint. I figured with everybody talking about the weather, now would be a good time to write about geothermal.

“Geothermal is hot and that is our hot number. We’re coming on this year,” Hottel said.

He predicts $20 million in sales this year, which should deliver a nice, seven-figure profit — and maybe bonuses for the owners, though that isn’t certain. The firm halted bonuses a few years ago. It is still working its way back to its pre-recession sales, which were in the neighborhood of $25 million before business slowed.

Harvey W. Hottel has 100 employees and 75 vehicles. All the employees get health coverage and a 401(k) company match.

Hottel’s revenue comes from three streams, the biggest of which is commercial service, repairs and small installations. Those bring in about $8 million a year, with the service contracts contributing the highest margins. No surprise there. Service is always where the big profits are. Just think, for example, how much you pay to repair your car.

The rest of the Hottel revenue is divided into two areas. One is residential jobs that include sprawling, 30,000-square-foot mansions and modest homes. The other source is renovation of big commercial building systems.

The geothermal work spans all the divisions, and it makes up about 20 percent of company revenue. The firm also does a little work installing solar systems and those that rely on other forms of renewable energy.

Basically, geothermal uses a well to heat and cool the house as needed. The wells can be dug as deep as 450 feet if there is limited horizontal space. But if there is enough acreage around the house, the wells fan out from the house horizontally, just beneath the four-foot-deep freeze line.

Liquids are pumped through the pipes in the wells, bringing the temperature of the ground into the cooling and heating system. The liquid temperatures help remove the heat during hot weather and warm the colder air during the cooler months.

The Hottel company has been thinking about heating and cooling since 1945, when Harvey Hottel, a self-taught engineer with a fascination for refrigeration, started helping people in Bethlehem, Pa., mechanize their iceboxes. Back then, iceboxes were literally oaken boxes filled with ice. The iceman made deliveries to your home or business.

Harvey Hottel was trained by Willis Carrier and his associates. Carrier is the father of air conditioning and built the Carrier Corp. Hottel came to Washington in the 1940s to help distribute Carrier refrigeration, which was doing a lot of work for the Army during World War II.

When the war ended, Harvey Hottel raised money from a group of investors and started a company on M Street NW in downtown Washington. Harvey W. Hottel Inc. specialized in building equipment for “comfort cooling,” which is how air conditioning was then known.

Most of the early jobs were for restaurants and grocery stores, but in the 1950s the company began to expand into theaters and office buildings.

Harvey Hottel valued highly skilled engineers, and he hired them to keep him on the cutting edge of the growing demand for air conditioning. The company moved to a warehouse in Silver Spring in the 1950s, where it used a sheet-metal fabrication system to build highly specialized, custom-built cooling systems for the U.S. military.

The systems were used across Europe, the Middle East and elsewhere to cool trailers that accompanied U.S. portable missile systems, among other things.

“It was profitable early on because we had a unique niche. They would ask us to build a two-foot-by-two-foot box that would put out a certain amount of air conditioning, and our guys would do it. We rode that market until the late 1970s,” he said.

When larger competitors got in on the action, the margins shrank and the company exited the business.

“When it becomes a commodity, you get out of it,” said Hottel.

Dick Hottel joined the firm in 1963 after a stint in the Air Force, where he pored over reconnaissance photos from U2 spy planes looking for enemy missiles, tanks, bunkers and the like.

Hottel’s geothermal business came about by accident. Around 1997, a fellow inventor named Bill Wright of Frederick, Md., approached the company about putting a geothermal system in a 20,000-square-foot house he was building.

“I said I’ve never done one, and he said he didn’t care. So I got a very experienced guy and he helped us through it. My son and I learned as we went.”

The system ended up costing $300,000 and making almost no money for Hottel. But the company won an award and found a lucrative new business line.

Not surprisingly, Hottel swears by geothermal, whose cost can range from $30,000 to $3 million, depending on the size of the job.

A 3,000 square foot house, for example, would probably cost the homeowner $30,000 for a conventional, natural gas-fired furnace. The cost for a geothermal system runs about 25 percent more.

Hottel said the $5 million his company earns on its geothermal business is equally divided between commercial and residential customers. The residential jobs are more numerous but tend to be smaller in size. The total number of geothermal jobs is about 200 a year.

“Most years we make money,” Hottel said. “It has done our family well.”

Well enough to build a home in St. Michael’s, Md., full of “all the bells and whistles,” which in Hottel’s world means the latest in geothermal, foam insulation and who knows what.

“It’s like a beverage cooler,” said the refrigeration enthusiast.

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