One of the Phoenix area’s largest and more controversial pool companies is the latest victim of a crippling credit crunch and construction slowdown.
Riviera Pools, which enjoyed its highest gross sales to date in 2007, has closed all of its 15 offices and warehouse center. The firm, which has trimmed a staff of 105 to a skeleton crew of just six, is taking on no new business.
“We had our best April ever — we were on pace to finish 1,000 pools this year,” said Ron Ostlund, president/CEO of Riviera, a Pool & Spa News Top Builder. “But ever since then, it’s been straight downhill.”
Though an ailing housing market is largely responsible, it is the accompanying credit crunch that dealt Riviera its death-blow, according to Ostlund. Company officials reported that 33 potential customers were declined for financing in a recent 30-day span.
“The problem wasn’t that we couldn’t build the pools,” Ostlund explained. “It was that nobody could get financing. We just lost people who were able to qualify for loans.”
Riviera’s downfall follows that of White Water Pools, a Pool & Spa News Top Builder also based in Phoenix that ceased operation in mid-September. An estimated 50 percent of Phoenix-area pool companies, including small- and part-time builders, have closed their doors in the past several months, according to industry sources.
Ostlund confirmed he was locked out of his warehouse Sept. 26 after falling behind on the lease payment. The company filed for Chapter 11 bankruptcy protection Oct. 2.
Though still technically in business — Ostlund has vowed to complete some 50 pools currently under construction — Riviera’s future remains uncertain.
“Right now, I’m just trying to make sure those unfinished pools get done,” Ostlund said. “Beyond that, I’m going to have to decide if there’s enough business in this market to continue. I’m certain [business in general] will come back, but I don’t believe it will happen in the next 15 months.”
Founded in 1996, Riviera had become one of the area’s fastest-growing and most visible pool firms. Its expansion was fueled in part by aggressive advertising and marketing campaigns, some of which targeted Riviera’s competitors directly.
Stepping back, industry insiders questioned whether the company pursued an impossible-to-maintain strategy of selling pools. Ostlund frequently appeared in commercial spots promising to knock several thousand dollars off his competitors’ prices.
At least one Phoenix builder believes this approach may have been Riviera’s undoing.
“It’s always going to be difficult to advertise based on lowest price. It’s a combination that doesn’t mix well,” said Steve Ast, vice president of sales and marketing at Shasta Pools and Spas, a Pool & Spa News Top Builder.
“But this [type of downturn] does have a way of cleansing the industry,” Ast added. “When times are good, you often think they’ll last forever, and that’s just not the case.”
Ostlund himself seemed to cast doubt over his company’s ambitious business plan.
“Looking back, I think I was foolish to put the money into it that I did,” he said. “I should have had the sense to wind it down when the credit market started drying up. Instead, it took me four to five months to do it, and by then it was too late.”
In fact, in April it was reported that Riviera had agreed to a five-year, $1 million sponsorship deal with the Arizona Diamondbacks to display the Riviera Pools logo at the stadium’s famed pool beyond right center field.
Though the deal “paid for itself” in terms of exposure, Ostlund conceded it will have to be renegotiated.
Also keeping an eye on developments is Tom Nichols, president of Tom Nichols Excavating Inc. in Phoenix, one of Riviera’s subcontractors.
According to Nichols, his firm is still owed approximately $165,000. Payments from Riviera, he added, began slowing about three months ago.
“It sounds like [Ostlund] has enough to finish the jobs he has going right now,” Nichols said. “And I really hope for the best. But, to be honest, I’m not sure he can pull it off.”