The key pool market of Phoenix is finally seeing a glimmer of improvement, with builders across the area reporting increases from 12- to 15 percent over last year’s dismal spring.
“There is a lot of pent-up demand,” says Steve Ast, vice president of sales and marketing for Shasta Industries, a Pool & Spa News Top Builder based in Phoenix. “A lot of customers in the past year were really taking care of their personal balance sheets and paying off debts. That’s starting to transition into [buying] things they may have wanted but not yet purchased.”
Cash buyers — those who had the funds needed but were guarding them more tightly in the uncertain economy — account for the vast majority of new pools in the area.
“We’re still selling projects between $200,000 and $300,000, but now we’re doing our share of $25,000 pools,” says Steve Rondeau, co-owner of Pool & Spa News Top Builder Rondo Pools & Spas Inc. in Phoenix. “We’re trying to diversify to stay afloat.” Many firms have also expanded into service and remodeling for additional revenue.
The growth has been reflected in equipment orders, too. Larry Reyes, PoolCorp’s regional manager for southern Phoenix, notes that delivery trucks are hitting the road quite full, and some days the distributor has to make double runs.
“Last year was sporadic at best for branches being busy,” he says. “This year, we’re seeing signs of recovery. Phones are ringing again.”
Interestingly, another factor responsible for the growth is our neighbors to the north — Canadians.
Responding to a historically high exchange rate, many are purchasing foreclosed properties in Arizona to use as winter homes, a trend which has translated into more pool sales. Larry Duffy, president of Pool & Spa News Top Builder Cameo Pools in Mesa, Ariz., estimates he sold 25 pools to buyers from Canada alone last year.
However, despite the positive changes happening in Phoenix, many builders remain cautious.
“My gut tells me this is a little bit of a false positive,” Rondeau says. “Because the first quarter of last year was so bad, we just had to show a pulse and it would be considered an improvement.”
In addition, the area has seen extremely price-focused consumers and cut-throat competition, both of which have resulted in heavy discounts from nearly all local builders. These lower prices can help drive digs, but may prove damaging to the entire market long term.
“The big boys are fighting each other in this price war, and unfortunately it’s affecting everybody else,” Duffy says. In an area of the country that traditionally has been based on volume, those price cuts are eating into many firms’ margins.
The trend has further spilled over into remodeling. With many firms diversifying into that sector, competition now is increasing, resulting in further discounts. A few firms that wet their feet in the renovation market now are getting out as they realize competition is just as steep. And, of course, financing for such projects is no better than it is for new construction.
Further affecting price are the many builders that, faced with a huge drop in business, closed their storefronts and now work out of their homes. According to industry sources, each such operation accounts for two or three pools apiece per year. Since these builders have very little overhead, “that’s bringing prices down even further and eroding the margins of reputable builders,” says Bill Alber, president of Pool & Spa News Top Builder Caribbean Pools & Spas Inc. in Gilbert, Ariz.
The credit crunch continues to hamper growth too, as obtaining financing remains a challenge.
“I went into this year thinking the market would be up 10- to 15 percent and I was pleasantly surprised … We’re up about 18 percent,” says Tim Murphy, owner of Presidential Pools & Spas, a Pool & Spa News Top Builder based in Gilbert, Ariz. “We’ve hired four people this year, including two we had to lay off [previously].”