They say everything is bigger in Texas. That includes the pool market.
Whether they’re executives following their companies to the Lone Star State or ranchers suddenly rich on mineral rights, Texans are demanding pools at a rate not seen since the boom of the early 2000s.
The state’s economic growth is well known: A surging energy industry is sparking serious job creation, major corporations are relocating to take advantage of attractive tax benefits and housing markets in parts of Texas are some of the fastest growing in the nation.
But the economic upswing presents some interesting challenges. Builders are stretching themselves thin by digging pools both in the suburbs and sparsely populated outlands, subcontractors are harder to find and many new players are entering the game.
“There are a lot of new names on there,” says Keith Zars, examining a list of permits issued by the City of San Antonio. “But there are a lot of new names every year.”
Watching this influx of builders has become business as usual for homegrown pool firms. When the economy tanked, many in the backyard leisure business retreated to Texas, where conditions remained relatively stable. While many have since gone back from where they came (Arizona and California, mostly), the state continues to attract builders from beyond.
“Their dreams are to be here for the long haul, but it’s a tough business,” says Zars of Keith Zars Pools in San Antonio. “So many things can get to you.” Such as stiff competition.
Zars is among 15 other Texans who dominate this year’s Top 50 Builders list. (His firm ranks No. 2.) Most have been doing business in the state for decades, but that’s not to say there isn’t room for newcomers.
Texas has been good to Premier Pools & Spas. Where others have failed, the Rancho Cordova, Calif.-based company succeeded because its foray into the state was aided by people who knew the market, the culture and terrain — Texans, in other words.
In 2010, Premier began licensing the rights to its brand. The first to set up shop under the Premier banner was longtime Houston builder Bill Unger, new to this year’s Top 50 Builders list. Premier Pools & Spas of Houston is expected to top $25 million this year, up 60 percent over last year. Premier’s Dallas shop, another first-time Top Builder, will do $8 million, up 250 percent. Locations in Austin, San Antonio and the McAllen Mission area also are posting year-over-year gains between 250 and 400 percent, according to Paul Porter, CEO of Premier Pools Management Corp.
“Living in California, it’s pretty simple to see that businesses are exiting California and they’re relocating to Texas. It’s certainly a better business climate. It’s a situation, too, where incomes are stable and growing,” Porter says. “You haven’t had housing depreciation and there is a lot of robust new growth in the sunbelt where people certainly want our product.”
The company, now a franchiser, has 35 offices across the country (plus Mexico and India). Texas contributes 37 percent of PPMC’s total revenue, Porter says.
“It was a natural for us to move into that marketplace because all the economic barometers were so positive,” he adds.
Those blindly entering the market, however, could find themselves between a rock and a hard place. That’s more than a figure of speech. Many lowball bidders, unfamiliar with the state’s challenging terrain, underestimate the excavation process, which can require rock hammers and other heavy equipment to punch through unyielding bedrock that makes up much of the landscape.
“Some of them are coming from areas where there isn’t much rock,” says Jim Crites, co-owner of Texas Pools and Patios with locations in Austin and San Antonio. “They’re coming in with lower prices but realize real soon that it’s difficult and costly.”
They also may find that quality subcontractors are on short supply. Though Texas didn’t get walloped by the economic collapse, it did experience enough softening to scatter construction workers to the winds. Those that remain are committed to contractors who provide steady work.
“If you come here to be a builder and you don’t have a subcontractor base, to me, it’s hard to make it,” says this year’s No.1 Top Builder Mike Church, president and owner of Cody Pools, based in Georgetown, about 30 miles north of Austin. “Most of our subcontractors have been with us for several years.”
With demand outpacing the availability of labor, projects are getting delayed.
“We’re finding this summer, just because our own demand is so high, we are running short on tile and coping subcontractors and gunite for our pools,” Church adds. “Scheduling is taking us about two weeks longer than it did this time last year.”
Builders say the only way to maintain a steady stable of subs is to pay quickly and pay well.
Hot in Austin
With nine design centers throughout the Lone Star State, Church can gauge how individual markets bode for builders. In his opinion, Austin offers the most fertile pool-digging grounds. That’s because the state capital is reeling in big investments from tech giants, such as Apple, Google and Facebook, as well as fostering a burgeoning startup scene. As a result, moneyed executives and entrepreneurs are migrating en masse and they’re buying homes in rapid fashion.
Austin-area home starts have increased 8 percent year over year, according to second quarter data from Metrostudy, a real estate analysis group of Hanley Wood, which also owns PSN. Though pool construction hasn’t kept pace lately — Metrostudy data shows pool permits dropped seven percent in 2013 — they did climb gradually from 2009 to 2011, reaching a high watermark of 764 permits.
Statewide, Cody Pools is enjoying an outstanding year. Digs are up 35 percent.
“And it started early this year,” says Church, noting that January had contract volumes like those of May or June. “It’s been strong all year.”
Growth in the student housing sector also is bringing big business to the builder’s commercial division, which has done $8 million in bookings so far this year. That’s up from $3.2 million last year. The firm recently completed projects for Texas Tech, Texas A&M and Texas State universities. But opportunities are coming across state lines.
“We’ve got relationships with general contractors that are now paying us to go out of state with them,” Church says.
Building in the ’burbs
As metropolitan areas creep ever outward, the opportunities to plant pools in suburban backyards have never been greater. Untapped markets spring up almost overnight, and builders and service technicians are driving greater distances to serve them. That’s made it difficult for distributors to accommodate their customers. Suddenly, having one warehouse wasn’t going to cut it.
“One of the reasons we wanted to open a new location in Austin is because our customers were asking us to,” says David White, purchasing specialist at Pool & Electrical Products.
The Ontario, Calif.-based distributor opened its second Austin distribution center, this one in the northern part of the city, in May of last year. Though its southern branch took a small hit as a result, which White says was to be expected, the new warehouse is more than making up for the loss. “Both branches are trending at a rate of about 20 percent (year over year) for the first two quarters,” White says.
For further proof of the state’s unrestrained suburban sprawl, take a look at how the Houston chapter of the Independent Pool & Spa Service Association has branched out to accommodate members on the outskirts. Monthly meetings have been a burdensome obligation for those living in the 600-square-mile metropolis where it could take hours to drive to a meeting location. To make travel manageable, Houston now has four chapters when it had only one just a year ago. A fifth chapter is in the works.
While Houston’s surrounding metro region holds plenty of new pool potential, it’s also putting a squeeze on building materials. Concrete prices have spiked due in part to major infrastructure projects such as the Grand Parkway. The 180-mile outer loop currently under construction is putting heavy demand on sand. Church, of Cody Pools, says he’s paying $150 a yard for concrete, up from $130 just several months ago.
Landowners cash in
As local lore has it, a landowner took her royalty check from an oil company to the bank when the teller told her, “Sorry, ma’am. But we don’t carry that kind of money.”
“You mean to say you don’t have $1,500?” the landowner replied.
“Ma’am,” said the bank teller. “This check is for $1.5 million.”
Fact or fiction, the story illustrates the sudden wealth that’s coming to those who own scraps of earth in South Texas’ Eagle Ford Shale formation, one of the largest oil and gas developments in the world.
Suddenly flush, they’re converting sunbaked backyards into aquatic oases.
For pool builders willing to go the distance, there’s money to be made.
“There’s some nice work out there where these oil fields are, so you really wind up doing a lot more traveling than you ever anticipated on doing,” says Zars.
These opportunities, lucrative as they may be, are so scattered that it’s difficult to plan a pattern of projects, builders say. And with so much work in the city, they have to carefully consider whether these remote jobs are worth their while. In this vast, desolate landscape, hotels are far and few between, and those that do exist are typically booked by oil and gas workers. Some firms have had to accommodate crews with RVs and other temporary housing situations to see these projects through.
“That’s why we try to schedule these jobs in the off season,” says Texas Pools & Patios’ Crites.
While some rich country dwellers are splurging on high-end pools, not all of them are going wild with their newfound wealth. “A lot of them still have conservative-money values,” Crites says.
For a project priced around $200,000, Zars is willing to go as far as 250 miles west, but not quite as far north, “because there are builders there already,” he says. He’s currently overseeing two projects with 350 miles between them.
“It’s probably the most we’ve done,” Zars says of his widespread workload. “In the past, you had one maybe every six months that’s 200 miles away, but right now we’ve got them two or three at a time that are across Texas.”