n Sept. 11, 2001, Alice Cunningham sold two hot tubs.
It baffled her, too.
“I was shocked and wanted to say, ‘Excuse me. Did you watch the news?’ ” recalls Cunningham, co-owner of Olympic Hot Tub Co., a 2002 Pool & Spa News 100 company based in Seattle. “But the customers volunteered why they were buying. They said, ‘I’ve wanted this for a long time,’ and with the events that were unfolding, they felt, ‘If I don’t do this now, when will I ever do it?’ ”
The last 1-1/2 years have baffled many in the industry. Tragedy, a stock-market crash, unemployment, corporate scandal, wavering consumer confidence have been met with consistently increasing portable spa sales — as much as a 40-percent increase in some cases.
For the time being, all factors that lead to a buying decision have lined up: The desire to buy is sparked by an emphasis on family togetherness and the home, along with a growing awareness of hot tubs; low interest rates and a relatively low unemployment rate give consumers the wherewithal to purchase.
This trend, in turn, has allowed hot tubs to reach a lower-income clientele than before, exposing a huge new demographic: the middle class.
While dealers don’t know how long this growth will continue, they’ll certainly take it. They’re not just relaxing, though. They have a good feeling about 2003, but they plan to work a little harder to make sure the growth curve keeps moving upward.
Spas aplenty
Of course, they’ll have a hard time besting 2002. Sales that year went up dramatically for many retailers. Those contributing to this article say increases ranged from 10 to 40 percent.
This success caught many off guard because sales slumped the year before, says Chris Robinson, director of sales and marketing at Lucite International, an acrylic-sheet manufacturer based in Cordova, Tenn. Lucite’s sales of sheet acrylic to hot tub manufacturers around the nation and Canada were down about 12 percent in 2001, he says.
Cunningham felt the squeeze that year. “In 2001, we had the following: the dotcom bust, Boeing moved away, an earthquake, a drought, Sept. 11th,” she says. “And we had the energy crisis, when authorities threatened to ban hot-tub use. So 2001 was sort of a nightmare year. But somehow we got through it and actually did better after Sept. 11th.”
National acrylic sheet sales show the 2002 rebound. By August, 2002, Lucite’s sales were up approximately 13 percent. Sales dipped slightly the last quarter of 2002, Robinson says, but the year still saw a significant increase.
Fellow sheet producer Aristech Acrylics saw 15 percent in additional sales in 2002. By polling portable-spa manufacturers, Florence, Ky.-based Aristech found that portable-spa production jumped from 281,000 in 2001 to 375,000 in 2002.
Retailers largely credit the boom to favorable interest rates. “With the lower interest rates, everybody can afford one,” says Steven Metz, vice president of Central Jersey Pools in Freehold, N.J.
In fact, Robinson points out, lower interest rates have spurred a refinancing boom that injected $50 billion into the economy. Cheaper mortgages allow consumers to outfit their brand-new homes with a hot tub, says Cunningham.
Sociological and psychological reasons play into the boom as well. Consumers can purchase portable spas because of lower interest rates, but they want to because of current events.
“I think people are making the decision to stay closer to home and invest in quality of life at home,” says Dennis Marunde, president of Arvidson Pools & Spas in Crystal Lake, Ill, a 2002 Pool & Spa News 100 company.
Retailer David Williams agrees. “With all the trouble in the world, I think people are still reluctant to spend their discretionary dollars on vacations that involve a lot of travel,” says Williams, president/CEO of The Spa Depot in Olympia, Wash., a 2002 Pool & Spa News 100 company. “They’re investing in home improvements like decks and patios, and a spa is just a natural to go along with those other improvements.”
More families are looking inward and searching for new ways to spend time together, so they tend to purchase portable spas for that purpose. Meanwhile, the interest in hot tubs has swung away from entertaining company and toward family.
Just as pools help folks keep their kids close to home, so do spas. “A lot of times, parents come here when the children are about to become teenagers, and they’re terrified,” Cunningham says. “They buy one so they know where their children are, and who the children’s friends are.”
Breaking new ground
Economic and social trends may help sell more spas today, but retailers hope the effects outlast the fickleness of these factors.
And they’re betting a new group of spa consumers — middle-class buyers — will help. As these consumers get used to the benefits of spas, retailers hope the product becomes more entrenched in their lifestyles.
Williams hasn’t asked clients outright how much money they make, but he does observe little clues. “Our feeling from the type of things they’re buying and the credit cards they’re using is that hot-tub ownership is more of a middle-class thing than what we think it was five or six years ago,” he says.
“They are very price-point conscious, so that leads us to believe that they are watching their budgets. The middle-class buyer wants great features, but they spend a lot of time exploring and debating the different options before they buy it.” The very wealthy, on the other hand, will just buy the extras without deliberating.
Besides, Williams reasons, the upper class couldn’t be buying so many more spas on its own. “I don’t think the upward spike in our sales would be attributable to any other demographic than the mainstream,” he says. While mass merchandisers are a thorn in the industry’s side, the sale of spas at such outlets is another sign that the product is becoming part of the norm.
The energy efficiency of today’s spas should help them stay part of the middle-class lifestyle. They cost less to operate, making them less of a financial burden down the road and more attractive to a larger crowd. “It’s not considered an extravagance anymore,” Williams says. “It’s really an economical way to spend recreational dollars.”
Spas — even high-end ones — are also becoming more affordable to middle-income consumers. “I don’t think the cost of spas has increased anywhere near the speed that people’s incomes have,” says Pat Walsh, president of The Aboveground Pool & Spa Co. in San Antonio.
While more attainable by the middle class, hot tubs still have a cache that consumers like, he adds. “Surround sound, home theater, sports utility vehicles, portable spas — they’re all luxury items. I don’t think people look at them as only for the elite, but I think they are a measure of success. It’s part of what you try to get out of life.”
Perhaps that’s why many retailers report that even lower-income consumers don’t buy cheap these days. Jason Fronheiser learned that lesson when he tried introducing an entry-level line to his store. “I could not give those spas away,” says the vice president of Fronheiser Pools in Bally, Pa.
“We would set a $3,000 spa next to an $8,000 spa, and people would buy the [pricier] one every time,” Fronheiser reports. “They might think they’re only going to spend $5,000, but then they see the additional features and they can justify the extra price.”
He learned not to make assumptions about what consumers want based on their incomes. “It didn’t take me long to realize that while spa customers do fit a wide variety of the demographic scale, it seems they always go to the same things — the spas with more,” Fronheiser says. “I think if people are going to make the investment, they’re going to buy a quality product and are willing to spend the money for something that they’re going to be happy with for a while.”
Still, price consciousness hasn’t completely disappeared, say Metz and Walsh. Their entry-level lines are holding their own. “Our average spa costs about $5,200,” Walsh says.
“We sell more low-end than high-end spas,” Metz says. “Our entry-level spas, which cost $3,000 to $5,000, are pretty popular.”
Low interest rates may be nudging the middle class into retail stores. But retailers think something else is behind the sales trends.
“It’s becoming more natural to have a hot tub,” Anderson says. “It’s not like, ‘Oh, you have a hot tub?’ It’s just becoming more commonplace to have a hot tub. I think that’s going to happen more and more.”
Marunde sees this as a natural part of the industry’s growth. “Years ago, who would have thought of having two TVs in the house or three different phones? I like to think we’re in the early stages of that wave where spas become more commonplace.”
The boomer boom
And, of course, the aging of the baby boom generation leaves the industry with a glut of consumers who have money to burn. However, so far hot tub retailers don’t see them spending very much to cure aches and pains.
If anything, baby boomers see themselves in a younger light than their parents did at the same age, says Andy Tournas, a longtime member of the NSPI Hot Tub Council. “We are living a healthier lifestyle and trying to maintain the vitality of youth into an older age,” says Tournas, also president of ThermoSpas, Inc. in Wallingford, Conn.
Because of this mentality, hot tubs are reaching an older clientele than ever. “Fifteen to 20 years ago, it was very difficult to sell a hot tub to somebody who was 65 years old, but now it’s not,” Tournas says.
The baby boomers may dominate the discretionary purchase, but Cunningham points to the growing sales potential of their children.
“We’re seeing that people who grew up with a hot tub buy much earlier in their lives. They’re buying now in their late 20s, early 30s, whereas if people didn’t have one growing up, they’re probably not buying until 40-plus,” she says. “Older people who’ve never had one will wait until everything else is done and then it’s time for the hot tub. But more and more young homeowners will come in and say, ‘You sold one to my dad and the minute we got in the house, we had to have it.’”
Hard work and hope
Being a relatively new product category, hot tubs are still enjoying an upward hike on the growth curve.
But a hot tub isn’t a refrigerator or a stove, as many of these retailers quickly point out. So consumers will probably never look at them as a necessity. “However comforting and enjoyable a spa can be, it’s still a discretionary investment,” Marunde says.
While consumer attitudes and behaviors are better positioning hot-tub sales to weather the ups and downs, sales still depend on several factors outside the industry’s control. “Retail is kind of like farming: You have to have all the necessary elements there, and they can’t be acting up on you,” Cunningham says. “So we do depend on the outside things.”
The country may go to war, the stock market may crash again, people may start traveling. Anything can happen, so even optimistic retailers say they expect to work harder to maintain current growth. “Sales are not as easy to come by as they used to be,” Metz notes.
Loathe to becoming complacent, these retailers are putting new programs into effect or improving on existing programs to beef up sales. Several are focusing on attaining higher lead ratios, while others are sending their sales staffs to new seminars to continually sharpen their sales chops.
While retailers don’t want to undersell themselves, some are trying to attract the mainstream client by addressing their price sensitivity. “With that type of clientele, we start with a more basic spa and try to work our way up,” Williams says. “With a really affluent customer who isn’t as price-point sensitive, you can start at a higher point, price-wise.
“I think, generally speaking, the middle class seems to be more receptive to the energy-saving features that we offer in our product line,” Williams says.
If you try this approach, Metz warns, don’t limit your entry-level spas to one or two models. “People like choice,” he says. “They don’t like to be locked into one thing. Even though [our middle-class customers are] in the entry-level spas, they’re getting more choices.”
Anderson’s company has reinstituted better lead follow-up procedures in response to a slowdown it experienced toward the end of last year. “We want to take advantage of every customer who walks in,” she says.
“We’re just assuming that everybody’s going to buy a hot tub, not just picking and choosing who we think will,” Anderson continues. “It used to be easy when the economy was so great. You didn’t have to work hard at it; you could just let the people who wanted to buy come in and buy.”
Better lead follow-up means calling back every person who inquired about purchasing a portable spa. “I think people expect you to work harder for it,” Anderson says. “They expect you to do your job as a salesperson rather than just a person who takes an order. They respect a salesperson who does follow-up calls rather than somebody who waits for them to get back to you. Thank-you notes and that kind of thing also make an impact on consumers.”
Marunde’s sales staff has found the Internet to be a useful tool in lead follow-up. “I tried to find out what my most successful salespeople were doing, and they were using the Internet to maintain follow-up with customers, or to arrange visits into the showroom,” he says.
“It’s not as intrusive as phoning them,” Marunde says, “so we have a good chance to start building a relationship with those people without bothering them.”
