Swimming pools are ubiquitous in Florida. A flight over the state reveals a landscape dotted with sparkling blue treasures. In fact, some believe the Sunshine State is such a leader in the pool and spa industry — in terms of sales and trend-setting — that it’s safe to say, “As goes Florida, so goes the nation.”
“A pool is almost a must-have item here. You move to Florida and buy a pool,” says Steve Bludsworth, president of All-Pool Service & Supply in Orlando. “I think the whole Sunbelt is a really strong pool market.”
Considering the prominent role that pools play in this state, an in-depth look at the current status of the Florida market may offer some clues for the rest of the industry. As 2007 unfolds, the country will be watching this southeastern state to see how it handles tricky issues such as a fluctuating housing market, rising costs and mounting regulations.
To gain a deeper understanding of these and other issues affecting Florida, Pool & Spa News spoke with a handful of industry professionals who shared their insights for this state-of-the-state report.
The year in review
Seeking to take the pulse of the industry, the Florida Swimming Pool Association recently conducted an informal poll of its members. On the whole, they are an optimistic lot. Despite some upheaval caused by the economy, more than 60 percent of respondents said 2006 was a good or excellent year. Half reported that it was better than recent years.
“We haven’t heard anyone had a bad year, only slow,” says Mitch Brooks, executive director of the National Plasterers Council in Port Charlotte. “Most people have welcomed it after several years of nonstop growth. We still have a good market; it has just slowed down.”
As a 31-year industry veteran, Roy Lenois, president of Artesian Pools of East Florida in Daytona Beach, doesn’t get too worked up over the highs and lows of the area’s pool market. He’s learned that the business is cyclical, responding to the ebbs and flows of the economy.
Like many of the state’s building firms, last year started off hot for Artesian, but as the housing market cooled, so did pool sales. After unusually strong sales in the fourth quarter of 2005, the builder kept busy for much of early 2006. The second half of the year had more modest results. Nevertheless, Artesian’s business still was up about 37 percent over 2005. The company’s saving grace was its diversification.
“We span different types of markets,” Lenois says. “We have multiple offices: one in a retirement area, one in a more upscale area and another that is in a middle-income area. When one is down, the other is up. They offset each other.”
Holland Pools & Spas Inc., a Pool & Spa News Top Builder in Longwood, had a similar up-and-down year. The residual effects of a booming 2005 wore off by the end of the first quarter of 2006, followed by a mid-year stall. Despite a slight bump in the fourth quarter, the housing downturn negatively affected the builder, which gets 95 percent of its business from new construction.
“New-home sales went down, and [home] builders had to drop prices,” says Holland Pools CEO Mike Holland. “They were giving away cars, discounts and pools.”
Yet even with the economic slowdown, Holland Pools closed ’06 with sales that were equivalent to its stellar ’05 numbers.
Holding steady may not please all pool professionals, but it does cause most of them to breathe a sigh of relief. Reports of real estate doom and gloom elsewhere in the nation caused Florida businesses to brace for the worst. “We consider a flat year good, given the real estate market and other economic news,” Bludsworth says.
Warning signs on the horizon
With 2006 on the books, business owners have shifted their focus to the new year. In FSPA’s poll, 54 percent of respondents expect 2007 to be an improvement over last year, while only 16 percent predict it will be worse. Unfortunately, recent demographics statistics paint a slightly less-rosy picture.
Though Florida remains one of the fastest-growing states in the nation (it is ranked fourth in population), a shift may be under way. With the state’s median existing-home price up 90 percent since 2001, Florida is now home to four of the 10 most overvalued markets in the United States, according to a report in The Wall Street Journal.
The overheated housing market may be pricing people out of the state, as evidenced by this year’s slowdown in school enrollment, including the first drop since 1971 in Palm Beach County.
“The real estate slowdown nationally has not affected the southwest Florida area until just recently,” says John Garvin, owner/president of Tri-City Pool Service & Supply Co. Inc. in Fort Myers. “The home builders experienced a slowdown in the last two quarters of 2006, and that has resulted in the licensed swimming pool builders slowing in new-pool construction.”
There are also signs that the eight hurricanes that hit Florida in 2004 and 2005 may be taking a toll on the population as well. The storms caused insurance rates to skyrocket, keeping some people from moving there and forcing some residents to relocate.
Increasing costs — especially those associated with salaries, overhead and materials — also are hitting builders, retailers and service firms’ pocketbooks hard. Many are responding by streamlining their operations, offering additional services and focusing more intently on their professionalism.
“As an industry, we have to recognize we are businesses. We have to spend as much time working on our business as we do working in it,” Lenois says. “It’s going to be critical in 2007 because we’ll be facing escalating labor and building costs. We need to be aware of market trends so we can stay ahead of the curve.”
Despite these signs of weakness, the industry professionals interviewed for this article remain confident about 2007. They point to local homeowners’ associations, which are predicting a pickup in the housing market by year’s end. They believe there will be a continued influx of baby boomers. And they say many of the real-estate troubles are psychological and not founded in reality.
For some, certain economic weaknesses actually prove positive. For example, soaring property taxes paired with stagnant or decreasing appraisal values have prevented some people from upgrading to new houses. “As a result, they stay in their homes longer and improve them,” Lenois says. “They invest in their homes with new or upgraded pools, and we’re very strong in that market.”
Likewise, minor economic setbacks typically don’t put a big dent in the service and repair business. A homeowner with a pool must keep it maintained regardless of a slightly higher tax or insurance bill.
“Pools continue to break whether the economy is good or bad, and the service business plugs right along,” Bludsworth says. “Some people do hold back on big-ticket stuff. For example, the maintenance business continues, but they don’t necessarily [buy] $4,000 heaters.”
Perhaps the biggest reason Florida pool pros are encouraged about 2007 is their confidence in their ability to turn a profit.
“So the market has recessed a bit and it may be toward the end of this year before it comes back to where it was in ’05, but we’re not going to wait for that,” Holland says. “We’re not going to let the norm dictate to us what our year is going to be. We’re going to be aggressive about looking for new business.”
A take-charge strategy served Holland Pools well in 2006. When company management noticed new-home sales dropping drastically in their area, they approached their best home-construction customers and offered to build pools at cost for model homes. This led to approximately 50 jobs that covered overhead, kept employees busy and helped Holland Pools retain its market share.
The company also reduced the size of its pool packages (fewer features, smaller decks), allowing home builders to reduce the option price and give customers an extra incentive to buy.
“We finished the year with a bang,” Holland says. “We had to get innovative and not sit back. We took control of our future.”
Florida pool businesses are doing their best to take the future into their own hands, but there are certain things over which they have little control. The state is known for its strict regulations, which are often years ahead of other states’ laws. While many of these codes are well-founded and welcomed by the industry, others are not.
If All-Pool Service’s Bludsworth could change one thing about the Florida market, he says it would be unfounded government regulation of the industry. He cites recent barrier laws that require fencing around all pools, regardless of where they are located or who owns them.
“That knee-jerk stuff just makes pools more expensive and harder for the average family to own,” Bludsworth says. “It’s a shame when a builder has to raise the price of a pool a couple thousand dollars [to adhere to] some unnecessary regulation that some politician came up with that might price someone out of the business. I would hate for pools to become something only for the wealthy.”
While there’s rarely consensus among pool professionals about whether a particular piece of legislation is justified, most do agree that laws should be clear, concise and implemented fairly.
That would help clear up much of the confusion about new regulations. For example, the barrier law that Bludsworth mentioned made certain requirements mandatory, but didn’t offer enough guidelines on how to implement them. This caused problems with compliance when the law went into effect.
Another issue for builders: figuring out if pending projects are subject to the new laws, and dealing with cost issues that may arise if they are. For example, if a law is enacted in the time between when a pool contract is signed and work begins, builders may have to absorb any costs incurred to meet the new requirements if the legislation makes no exception for projects already under way.
Many laws also blanket the entire industry, making no distinctions between different markets or the various arms of the business.
“One law tries to paint everyone with the same brush,” Lenois says. “I’m a concrete pool builder, and I may have different concerns than a spa guy or a fiberglass pool builder, but we must all follow the same law. If you’re not adequately prepared, you have to jump through hoops to try to meet the law because you have no choice.”
No longer willing to watch passively as legislators make sweeping and costly laws about their industry, the state’s pool and spa pros are banding together more than ever. Florida is widely recognized for its active and highly organized trade association, which now includes a government regulation arm with a full-time employee dedicated to legislative issues.
“We stay on top of legislation, ordinances and codes that could affect our business,” says Lenois, who is a member of FSPA’s Executive Committee. “I’ve seen other industries get regulated out of business, and we’re trying to stop that from happening in our industry.”
Down to business
Pool and spa builders, service technicians and retailers also are using their strong peer groups to create a more professional image for the industry. According to the FSPA survey, unlicensed activity is one of the biggest weaknesses of the Florida market.
“We want to take the ‘pool guys and gals’ and make them better businesspeople,” Bludsworth says. “We’re an industry of people who tend to evolve out of the field. They have pool skills, but not business skills.”
Florida has no more shady pool businesses than any other state, but given the sheer size of the industry, the number of amateurs seems larger than it actually is. That gives legislators cause to try to regulate the field into professionalism.
“We have a lot more regulations in Florida than anywhere in the country,” Holland says. “All subcontractors — plumbers, gunite crews, everyone in every phase of the pool industry — must be a certified license holder.”
Florida also is one of a few states that have continuing-education requirements for pool contractors. Most industry insiders believe licensing and education laws are positive. These rules protect the public and preserve the industry’s image. But they also hope that being proactive on the issues will pre-empt future unnecessary regulations.
FSPA, NPC and other associations offer educational courses that can be used to renew Florida contractors’ licenses. Many of these programs not only meet state requirements, but also focus on how to help entrepreneurs run more professional businesses.
Industry groups are partnering with the government to combat unlicensed and illegal activities, as well as developing ways to educate the consumer. For example, the FSPA Builders’ Council is working on methods to promote pool safety. The end goal of all these efforts is to improve the industry as a whole and, it is hoped, boost business in the coming years.
“We are not each other’s competitors. Our competition is boats, RVs or anything that takes away discretionary dollars,” Lenois says. “It would do our entire industry good — and if our industry is doing well, we’re all doing well — to get everyone involved in the state organizations to improve our businesses. We’ll all prosper from that.”