The pool and spa industry is more resilient than many had expected.
Over the past two years, plummeting sales of new pools and portable spas had led to dire predictions that those sectors would shrink to virtually nothing.
But builders, manufacturers and many dealers have fared better than projected, largely due to their adaptability.
Builders change course
Throughout this recession, many believed that the failure rate of pool and spa companies would keep pace with the dwindling number of new-construction permits. Observers zeroed in on the winter of 2009-10 as a time when many of those who had been significantly weakened by the recession would finally shut their doors.
Not so, professionals now say. While a significant number of builders have gone under,it hasn’t matched the drop in new construction, a phenomena that may be due to natural resiliency.
“I would just call it survival,” said Jesse Dutra, owner of Waterscapes by Jesse Dutra in Nantucket, Mass. “It’s amazing what people can do when they’re under the gun, and their lives and livelihoods are at stake. It’s almost an animal instinct.”
Following such instinct, some of the more nimble builders quickly cut costs and diversified into service and renovation, resulting in a more solid base during rough times. Others relied on savings. “I think a lot more guys than we gave credit to had put together a war chest, so they were able to withstand it,” said Kyle Chaikin, president of Chaikin Pools in Farmingdale, N.Y.
But many are taken aback by some of the survivors, especially the so-called “low-ballers,” who have stayed in business despite bidding pools at prices that couldn’t possibly generate any profit, according to competitors.
“Everybody says, ‘They can only sell that low for so long,’” said Ken McKenna, president of Tampa Bay Pools in Brandon, Fla. “But they obviously can do it longer than we thought.”
While more pool-building firms than expected are still standing, employees and subcontractors haven’t fared as well. Streamlining has meant massive layoffs, and builder diversification has taken jobs out of the pipeline for subcontractors.
In fact, desperation among subcontractors actually may have helped some builders stay alive. As subcontractors became more competitive in vying for each job, they continued to lower costs for builders.
“They’ve dropped their prices down because they’re in survival mode,” said Mike Geremia, president of Geremia Pools in Sacramento, Calif. “I think that has helped certain builders be competitive against somebody like me.”
Spa sector stays afloat
As with the pool sector, predictions for the spa market were uniformly grim, yet the picture today is more positive than some expected.
“We all went through a drop, but the major manufacturers have mostly stabilized now, and some are starting to see a slight increase,” said Danielle Lavalle-Wasson, international sales director at Bullfrog Spas in Bluffdale, Utah.
Sales of spas dropped sharply in the first year of the recession, and by the end of 2009, purchases were down as much as 75 percent from 2004-05, according to officials at the Association of Pool & Spa Professionals. This led many in the industry to predict that 2010 would be a year of consolidation, attrition and perhaps even collapse for manufacturers of spas.
In certain respects, those forecasts were accurate as some small spa manufacturers have had no choice but to shut down.
“We’ve lost a significant number of [small] manufacturers,” said Sony Banga, vice president of sales at Strong Pools and Spas in North Umberland, Pa.
Spa retail shops also have felt the pinch. “We’ve lost a lot of local dealers lately,” said Chris Robinson, business manager at Lucite Acrylic Sheet in Cordova, Tenn. “Whereas we used to have, say, a dozen dealers in a city, now we’re down to four or five. A lot of them just didn’t have the cash flow to continue on.”
Still, the large and mid-sized spa manufacturers have remained in business, and some of those companies’ survival strategies now are becoming clear.
One important factor was streamlining. “A lot of these manufacturers are half the size they were [before the recession],” Robinson said.
Additionally, when it comes to the largest spa manufacturers, their size may have been a component in their survival. “I know at least one of the big manufacturers still had financing options,” Robinson added. “Large companies have more opportunities than an entrepreneur would.”
He also noted that the largest manufacturers had spent years training a core group of loyal dealers, who sold most of their spas. This likely helped offset losses from the closures of other retail locations.
Some smaller spa makers, on the other hand, increased marketing efforts. “The companies that are continuing to grow financially are the ones that reached out to the public with advertising,” Lavalle-Wasson said.
The overall trend now is one of stabilization and gradual growth, according to spa experts.
“I think this year will finish on a slight uptick over last year,” Robinson said. “Over the next three or four years, we can expect to keep seeing single-digit growth.”