By Karen Erstad
May 23, 2011 15:42 PM
For many builders in the pool and spa industry, 2010 marked a turning point with numbers going up — though not by much and certainly not rebounding to pre-recession levels.
Yet the upward swing was welcome, and an encouraging sign the bleeding has stopped. This year, 205 builders responded to AQUA’s State of the Industry survey, sharing numbers and useful commentary. Based on these responses, it appears that things have stabilized, and many builders are poised to grow gradually.
The majority of respondents, 67 percent, plan to maintain their current staffing levels, and 26 percent even plan to add to current levels, while only 7 percent anticipate a decrease.
Ten percent more builders are planning to increase spending this year compared to last year. Many plan to invest in their businesses, buying new equipment, educating employees and beefing up marketing and advertising efforts. Ron Robertson, owner of Robertson Pools in Coppell, Texas, plans to invest in $350,000 worth of dump trucks this year. Robertson shares more about the pool and spa market in North Texas and his growing business on page 86.
He’s not the only one taking steps to improve his standing in his market. A few builders started doing fiberglass pools, and some others began offering weekly pool cleanings. The many builders who already offer a full gamut of services, from pool building and renovation to weekly service, focused on doing better what they already do.
And that made a difference. Overall, gross revenues in 2010 were up compared with 2009, if only by a few percentage points, and the majority of respondents expect increases in 2011, as well.
Yet for those builders whose business is closely tied to residential construction, 2011 will not likely mark a strong comeback. Many communities are still dealing with the foreclosure crisis, and new homes won’t be sprouting up at pre-recession levels until foreclosures drop.
“The pool market is tied to new home building and until that takes off, you’re not going to see ample growth,” says Steve Ast, vice president of sales and marketing for Shasta Pools & Spas in Phoenix, Ariz.
Many builders have looked to their renovation division to help pick up the slack. In 2011, respondents expect 40 percent of their work to come from renovations and 60 percent to come from new pools.
Staying competitive, whether it’s with new pools or renovations, has proved challenging in recent years. Many respondents indicated that competitors willing to do the work for little or no profit has made a bad situation in this recession even worse.
“Competition has lowered their prices, causing us to do the same,” said one respondent.
Others echoed this sentiment, saying, “There are about the same number of contractors competing for about half the number of projects. This has caused a price war.” And, “New builders moving into our area from Florida, California and Arizona where business is bad are cutting prices dramatically, making it difficult for good, long-term builders to compete. Homeowners are assuming lower price is best for them.”
Dan Lenz, owner of All Season Pools in Orland Park, Ill., combats these price wars by emphasizing his staff’s knowledge and APSP certifications to show clients how they get a better value with his company — even if the price tag is slightly higher. “We try to show people they’ll save money in the long run because we’re not cutting corners to make a sale,” says Lenz.
Show Them The Money
A lack of financing options for consumers continues to be an issue for builders; many say they have clients who want a pool, but can’t find financing.
Lenz, though, is excited about some financing programs being offered through vendors this year. “With the one through Latham Industries, they’re requiring things you hadn’t seen before, like a credit score of 680 or better. But if customers qualify, we can get them a $30,000 line of credit at 658 ths, so although it may not be a line of credit large enough to do a whole project, it can certainly be a big part of it if homeowners have anything to put toward it on their own.”
Happy With Distributors
This year we asked survey takers about their relationship with their distributors. It comes as no surprise that 53 percent of respondents use Pool Corp. as their primary distributor, though respondents’ level of satisfaction with their primary distributor was even higher than anticipated. An overwhelming 91 percent of respondents are either very or somewhat satisfied with their distributor.
Clearly, pool and spa distributors are doing a few things just right, though when respondents were asked if they could change anything about the products or services offered by their distributor, comments ranged from: “Nothing, they do a great job for us,” to “Shipping surcharges are too high; and liners and steel are constantly getting more and more expensive even with their knowledge that it makes selling pools harder, therefore reducing their end sales. I reduced my prices to compensate for the economy. Why don’t they?”
Onward & Upward
Despite the challenges ahead, 23 percent of respondents believe the pool and spa industry in their area will turn around in 2011, and 24 percent expect a more noticeable upswing in 2012.
As economists and many in the industry expected, economic recovery has been slow, but consumer confidence is gradually improving, and as it inches up, so does interest in pools and spas.
Builders hope this increased interest translates into a healthier bottom line. Time will tell.
To learn more about the state of pool and spa building industry, take a few minutes with the statistics and feedback on the following pages that AQUA gathered from folks just like yourself.
WHAT YOU’VE BEEN UP TO
AQUA asked builders to identify what types of projects they worked on in 2010. Almost 70 percent of respondents remodeled pools or spas, and more than half built gunite or concrete pools or spas. Quite a few, 38 percent, constructed vinyl-liner pools.
For 89 percent of respondents, none of the types of construction in the graph above were a new service for 2010. For the 10 percent who did add one of the above, many said they started selling and installing fiberglass pools.
Sixty-one percent of respondents maintain a year-round staff of between zero and 5 employees, while a mere 5 percent maintain a year-round employee roster over 25.
It appears most pool and spa businesses had right-sized their staff by 2010, as the majority indicated they neither hired nor laid off any employees, though 16 percent said they laid off two employees in 2010.
“Our newest employee has been with us 10 years.”
Looking forward, staffing appears stable for 2011 with 67 percent of respondents reporting they will maintain current staffing levels and only 7 percent anticipating a decrease. Respondents were more evenly split this year when asked, “Do you have a hard time finding and retaining quality employees?” Fifty-two percent said they do, while 48 percent said they don’t. Here are some comments:
“We can get plenty of workers, but most do not know basic hand skills. They can run the computer, but that is not what we need.”
“Cannot find anyone who cares or wants to work. They just want a paycheck.”
“Hard to find quality employees. We’ve done well at retaining.”
SOME GO, MANY STAY
Forty-seven percent of respondents said they lost competitors in last year’s survey, whereas in 2010, 40 percent of respondents reported losing competitors. Some say competition has not affected them, but others have stronger opinions.
“I have not been able to raise my prices, even though my costs have gone way up.”
“Illegal, unlicensed, unknowledgeable laborers are doing the work at prices way below what is our cost. (They don’t pay taxes, insurance, workmans’ comp, etc.)”
“So many people working out of their trucks siphon off business at very low pricing.”
SLOW, STEADY GAINS
While many builders experienced a slight increase in the number of projects completed in 2010 compared with 2009, numbers were pretty even overall, with businesses generally getting near their expected goals. Last year 35 percent of respondents told us they expected to build between 1 and 10 pools, and 33.7 percent did. And early in 2010, 28 percent of respondents expected to build between 11 and 20 pools, and 23.8 percent reached that goal.
UP, DOWN & IN BETWEEN
2009 vs. 2010 Gross Revenue
The economy, consumer confidence and limited financing options all continue to have a considerable effect on the pool and spa industry. The gross revenues respondents reported indicate noticeable change for some. Eleven percent said their gross revenue went up somewhere between 6 and 10 percent, while an encouraging 20 percent said their gross revenue went up more than 10 percent in 2010.
2010 gross revenue for construction, installation and renovation
CATCHING YOUR EYE
While demand for pools is down compared to a few years ago, industry suppliers continue to improve equipment, automation and other features that make pool-ownership more inviting. So this year we asked: In the past year, What pool feature, product or service surprised you with its popularity with customers or its increase in sales in the past year?
HERE’S A SAMPLING OF THE “OTHERS”:
Swim jets | Outdoor living areas | Travertine pavers | UV sanitation | Firepits | Quartz plaster | VGB installation | Geothermal heating and cooling | Heat pumps | Glass tile | Stamped slate concrete pool decks | A lot more opening and closings | Silk tablets and non-chlorine shock | Converting D.E. filters to fiber and sand filters to zeolite.
What do you believe is the most interesting development in the building segment of the industry in the last three years?
“Soon-to-be iPad, iPhone and iPod control of pool equipment.”
“I found it harder to sell items. Consumers are more price conscious, and more willing to buy from the Internet. Unfortunately, I experience people coming to my brick-and-mortar business to get information and advice, then go home to buy it online. As a retailer, this drives me nuts!”
“The closure of long-standing companies.”
“No one is spending money.”
“The demand is still there.”
“How some builders have survived on zero margin.”
“New pool installations have been cut in half if not more, yet repairs are way up. Homeowners need to make the pool last five more years.”
It probably comes as no surprise that 53 percent of respondents use Pool Corp., which includes SCP and Superior Pool Products, as their primary distributor. What you may not have expected is that 30 percent of respondents go to a host of other sources, including Baystate Pool Supplies, HornerXpress Worldwide, PEP and Hachik Distributors, for their distribution needs.
No matter which distributor builders rely on, they are generally pleased, with 91 percent of respondents saying they are very or somewhat satisfied with their primary distributor. Just over one percent of respondents are somewhat or very dissatisfied, though many respondents had something to say when asked: What would you like to change about the products or services your distributor offers?
“Competitive pricing. I can buy several items online for less than SCP.”
“Industry is hurting and prices still going up!!!”
“Need more stocks items in stock, especially in mid-season.”
“Special order products received sooner.”
“Wider variety of spa parts and backyard items.”
“They keep shrinking the number of different products they keep in stock. If it is not used often enough, they don’t have it, and we have to wait for it to be shipped, making us look bad to our customers.”
“Pricing consistency, returned phone calls, online ordering system.”
ON THE HORIZON
This year’s survey respondents are clearly an optimistic group, as the majority expect revenues from construction and renovation to increase in 2011. Fifteen percent expect revenues to rise somewhere between 1 and 5 percent; 23 percent of respondents expect an increase of 6 to 10 percent; and 31 percent look for construction/renovation revenues rise by more than 10 percent in 2011. And respondents expect a greater percentage of this to come from new construction.
Percentage of new builds vs. renovation you expect to do in 2011
To facilitate this growth, many builders will invest in their businesses. In fact, 9 percent more than last year plan to increase spending. Thirty-nine percent of respondents plan to invest more in marketing/advertising, 22 percent will buy new equipment, and 17 percent plan to invest in employee education. A few other expenses included “Web-based promotions and business, another store,” “a new location,” and “remodeling/updating our store.”
While many builders expect to see modest or slightly more-than-modest gains in 2011, only 23 percent expect to see the pool industry turn up noticeably in their market. A few more, 24 percent, expect the market to turn the corner in 2012. One not-so-hopeful respondent said, “We have one of the highest unemployment percentages in the country. It will take a while to rebound.” Considering that new pool construction tends to follow trends in new home building, an end to the foreclosure crisis and an uptick in new home building will be sure signs the pool industry is on the rebound. Until then, many builders are keeping a close eye on consumer confidence.
When will the market turn around?