The 2010 state of the pool and spa building industry

Ddd 510 AqThe building industry was hit hard by the recession, thanks to a number of variables, most notably a battered and bruised housing market that brought new construction screeching to a halt. The numbers were frightening to look at as they underscore just how bad things really got this past year. But is the worst over?

AQUA heard from 264 pool and spa builders regarding the state of the building industry, and while much of the response was anticipated, the degree to which the industry has been affected was eye opening.

Nearly 36 percent of the respondents said they completed only between one and 10 new builds or renovations in 2009, and only 23 percent said they completed between 11 and 20. A mere 9 percent of builders surveyed completed between 50 and 100 projects.

How did that compare to 2008? The majority of builders (79.7 percent) said they experienced a decrease in production. Specifically, 12 percent said they completed 16 to 20 percent fewer projects this past year and nearly 11 percent said they completed 1 to 5 percent fewer projects. Nine percent reported a total production loss of more than 60 percent.

It wasn't all bad news, though, as 7 percent said they had a 1 to 5 percent increase in business, with 13 percent seeing an overall increase in business between 1 and 15 percent. Optimists remain steadfast that as the economy continues to rebound, so too will the pool business.

"Commercial and municipal projects that have been in planning stages for one to two years are now coming to fruition," said one respondent. "Funding and financing is available."

Another person summed up what seemed to be on the mind of many builders: "People put off spending and are now anxious to resume." A consistent hum that people itching to spend the money they've been hanging on to the last year has been buzzing about the media, but it's still safe to say that consumers are wary.

According to The Conference Board's Consumer Confidence survey, the consumer attitude index rebounded in March to 52.5, up from 46.4 in February, suggesting that while consumers remain cautious they do have faith the market will improve, just maybe not right away.

Money Talks

Overnight recovery is something the majority of builders regard as unlikely, but they agree that small steps toward growth and a stronger business foundation remain an achievable goal.

"Clients have started calling wanting to start up their projects again after waiting a whole year in 2009," said one respondent. "These are leads from 2008 that have just decided to keep going with their projects. I think people are starting to feel more secure in this new economy."

The positive outlook is refreshing, as it was less than a year ago when the numbers suggested otherwise.

Among survey respondents, 2009 gross revenues were significantly less than 2008. Of the 73 percent of builders that reported a decrease in revenue from 2008 to 2009, nearly 27 percent said they lost between 1 and 15 percent of their revenue while 21 percent said it dropped between 16 and 30 percent.

Overwhelmingly, builders summed up in two words the maker or breaker of business: the economy.

"[The] economic crash and decline in construction exacerbated by political mistakes that worsened the recession," replied one respondent about why his business experienced such a decrease in gross revenues from 2008 to 2009.

Builders said that consumer fear also played a heavy role in the decline of business.

"People fear spending on luxury items during poor economic times that many are calling a depression, not a recession," said another respondent, echoing the sentiments of many who believe major media outlets are frightening consumers into hanging onto their money for dear life.

The reality is, unless people let go of their money and start spending again, the economy won't improve. So how do builders encourage or promote what many would consider high-ticket luxury items? Simply stated, they need to spend money themselves.

Nearly 52 percent of respondents said they would not increase their own spending this year, but many others said they plan to invest in employee education, marketing and advertising, and new equipment, and some said they have plans to increase staffing levels.

There is good news for 2010 on this front. While twenty-one percent of respondents predict their 2010 revenues will remain unchanged, 42 percent report an expected 1 to 15 increase in revenues, citing an improved economy on the horizon and consumers' willingness - maybe even desire - to spend again.

New Vs. Old

The industry has also been hearing a lot of talk about how renovations have kept businesses afloat despite the drop in new construction.

Builders responded that on average, 61 percent of their work is dedicated to new builds while 39 percent is dedicated to renovations, a sign that even though renovations are not the main money-maker, there is a lot of incentive to promote that service, as new home construction isn't likely to recover quickly. Builders should expect little immediate help from home equity values, either.

"House prices are not out of the woods yet," Robert Dye, senior economist at PNC Financial Services, told "We remain concerned about rising mortgage rates, still-high foreclosure rates, and a half-speed economic recovery. We expect to see choppy house prices through late summer."

In an effort to recover some lost revenue, builders are trying their hand at different ventures, from increasing maintenance and repair service offerings to VGB pool upgrading to lawn care to backyard retailing items like fireplaces, furniture and outdoor kitchens. One respondent even said, "We are becoming more diversified by offering landscaping, surface drainage and other types of construction, plus we are opening a full-service salon and day spa."

What The Future Holds

Just as economists predict a slow housing recovery, builders feel the same about the pool industry. Twenty-two percent felt they didn't know when the industry would recover while the largest number (29 percent) said 2011. Eighteen percent remain hopeful 2010 is our year and nearly 10 percent said it'll be 2012 or beyond before we see any improvement.

It's safe to say that the overall feel from builders is that they want - and are ready for - the good times to return. In the meantime they'll do whatever it takes to keep their businesses afloat and as profitable as possible.

For a more in-depth look at the state of the building industry, turn the page, as we've gathered the statistics from the people that know them best - you.

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