Spa industry not yet cooling its jets
Furniture Today Staff -- Casual Living, November 1, 2008
|The Caldera Highland e Series from Watkins Manufacturing|
On the decline since 2004, hot tub sales have been weathering a downshift long before the recent economic crisis; however, those in the industry are remaining optimistic the category has room to grow.
Some retailers, in fact, still are reporting decent numbers as consumers revisit a version of the cocooning trend noted after Sept. 11 — now referred to as "stay-cationing" — and are taking advantage of the health benefits owning a spa can provide.
"We don't anticipate a quick turnaround, but we also don't think sales will continue to decrease as dramatically as they have," said Lauren Stack, director, Public Affairs and Industry Promotion for the Association of Pool & Spa Professionals. "The backyard has been a place where a lot of money has gone in recent years and that trend is expected to continue."
According to Stack, hot tub sales have dropped close to 50% in the last five years. "Being a discretionary purchase, the sale of hot tubs feels the blunt of a troubled economy faster than many other categories," she said. "We do believe that if consumers spend money on anything in the coming year, they will do so making their home more comfortable ... hot tubs certainly fit that profile."
Manufacturers are remaining upbeat as well, feeling that once the financial crisis begins to lift, the category will regain momentum.
|The Ultimate fitness Series spa from Cal Spas boosts health and fitness and features separate spa and swimming areas.|
"2008 has been a positive year for us," said Shiva Noble, executive vice president of Cal Spas. "We are expecting business to remain stable and keep pace with 2008 in the first few months of 2009, and we are optimistic sales will surpass 2008 numbers in the spring, when outdoor remodeling is at its peak."
Health and Fitness Factors
An aging Baby Boomer generation is helping to boost sales. Hot tubs and spas are known for having a positive impact for the body as well as soul, and manufacturers are plugging into that niche.
"This is our biggest opportunity," said Kevin Richards, national sales manager for Master Spas. "(Retailers) focusing on the health and lifestyle benefits of hot tubs can and will make a huge difference."
Cal Spas' best-seller, also a Consumer's Digest Best Buy Award winner, the Avalon A857L and A857B, provides hydrotherapy with multiple jets plus luxury features like pillow headrests. The company also offers the Ultimate Fitness Series, its fastest growing line. The spas feature two distinct areas — a spa and separate swimming area.
"A hot tub is not just a 'nice to have' product — rather, every home should have a hot tub because it will improve consumers' overall physical and psychological health," said Lissa Poincenot, director of marketing for Watkins Manufacturing, parent company for Hot Spring, Caldera, Limelight, Tiger River, Hot Spot and Solana spas.
Bob Jones III, president of American Sales, a specialty retailer based in Tinley Park, Ill., added, "Any luxury item that is a discretionary purchase is facing challenges regarding affordability, but when a potential customer learns of the benefits, we have a good shot at their business."
The Dream Backyard
When global or national crises affect consumers, the reaction to stay close to home makes it more likely homeowners will put money into remodeling projects, decorating and expanding outdoor spaces.
"With the current stress in the housing and financial markets, we believe we'll see more people investing in their homes because they can't afford to move until values rebound," said Anthony Pasquarelli, communications manager for Sundance Spas. "The emphasis has changed from people who want to flip houses or step up to the next model. More than ever, we see homeowners who find themselves staying in their homes and upgrading them."
Richards added, "(Homeowners) don't see themselves selling their house for a few years, so they want to upgrade on what they already have and a hot tub fits into this."
|Master Spas' Legend Series 1000 features a built-in lounge for sunbathing or just relaxing, plus LED lights and waterfalls and optional amenities like a CD/FM stereo, seven speakers, mounted remote or theater system that includes a 19-inch HD television.|
With more televised home makeover and design shows focused on the outdoors, customers are desiring not only a dining table and four chairs, but fully functioning kitchens, living areas (including TV), lighting, hot tubs and more — and they want it all to be fashionable.
"There is a new level of expectation we're seeing from customers," Noble said.
Alistair Palframan, owner of specialty store Canadian Home Leisure, Pickering, Ontario, said some retailers worry spas are just a fashion product. "In 10 years time, will it have lost its edge?" he said. "I personally don't think so, but there is always that feeling out there."
The High End
Customers who are buying are choosing hot tubs closer to the high-end. For Palframan, that means Sundance's 880 Series Optima spa. "Many are buying for the first time and feel they will never buy again, so they want (features) upfront that they want or think they'll want," he said.
The Optima also is a best-seller at Pelican Ski, Pool and Patio, Morris Plains, N.J., and Paddock Pools, Patios & Spas, Scottsdale, Ariz. Pelican's Spa Department Manager Rick Robinson attributes its popularity to the number of choices made available to the customer, from color to outside construction, as well as its warranties (Sundance covers internal jets for five years) and maintenance-free horizontal filter.
"With prices around $10,000, (the Optima) is our top-of-the-line spa series which includes an Ipod docking station and so much more," Paddock President and CEO Jim Cich said.
Jones agreed higher-end spas are selling better, but said he thought it was temporary "because the demographics of who buys a hot tub are very strong. As Baby Boomers get older, we will see more hot tubs sold. Also, as the Echo Boomers — many who had a spa when they were young — get out into the workforce, they will be able to buy their own spa."
Still, some other retailers are finding consumers seek more value.
"The spa category has been a good performer for us although sales have been tougher to get in 2007 and 2008," said Jon Chapman, Rich's for the Home, Lynnwood, Wash. Rich's for the Home carries Caldera Spas, which account for 15% of sales. Its best-seller, the c Series, retails between $7,000 and $8,000.
Erik Mueller, president of Watson's of Cincinnati, said he has had a good year with Hot Springs' more expensive spas. "I think the $5,999 to $6,999 price points are important. A bigger challenge is for vendors to get creative and keep costs from skyrocketing year after year. It has made the spa unattainable for a lot of people because the prices are too high."
Tom Tapken, CEO of California Backyard, Rocklin, Calif., plans to slightly expand its hot tub offerings, "mainly because other categories have dropped, which creates space for more hot tubs and barbecue islands," he said. Cal Spas provides both at California Backyard's five locations.
Tapken said hot tub sales are up this year — the only category to have an increase at his store. At California Backyard, "the market really is at $5,000 and below," he said. "Eighty percent of sales, based on units, are in this category."
|The Optima spa from Sundance comes in a variety of colors and constructions and features a maintenance-free horizontal filter.|
Even though sales are up for Jim Ornce, retail division manager and hot tub buyer for Pettis Pool & Patio, East Rochester, N.Y., he hasn't ignored what the current credit crunch could mean for business. "Consumers may hold off on purchasing a tub at this time," he said. "I think the lower priced hot tubs that are purchased more, as an impulse due to easy credit, will feel the crunch first."
Energy and Safety Concerns
New energy and safety regulations are a constant in the hot tub and spa industry, which keep both manufacturers and retailers on their toes.
"(Safety concerns) are all relevant and all good," Robinson said. "It's just staying one step ahead of the customer so we do have the knowledge and can present it to the customer."
Additionally, though some may argue the green trend has yet to catch on with the majority of consumers, manufacturers still are anticipating the move toward green products.
"Energy is top of mind for consumers," Poincenot said. "Manufacturers are being judged more critically in terms of their green profile. Consumers feel an increasing sense of responsibility about their personal carbon footprint, and they expect the same of the products they purchase and the places they do business."
An Oversaturated Market
The number of manufacturers who are entering the category as well as the number of safety regulations that go along with carrying hot tubs pose challenges as well.
"It's a revolving door, an easy category to get into," Palframan said. "You buy a van, you buy some tools and you are in business. There are some dicey business practices by a lot of people (at the lower end)."
Ornce agreed. "Too many manufacturers add to the consumer's confusion," he said. "I believe it gives each manufacturer a smaller piece of the pie which doesn't allow for strong national ad campaigns or more research and development money."
The year 2008 proved to be a good for many and bad for only some in the spa category. The threat of recession, tightening credit market and rising unemployment rates are expected to continue through 2010. Despite those and other challenges, like bad weather and raw material costs, specialty retailers all said they would either keep spa offerings the same or expand in 2009.
"The industry has every opportunity for growth; we just need to weather this economic storm," Poincenot said.
"Our challenge," Stack added, "is to cut through the clutter and reach out to consumers with the message that hot tubs are exactly what they need to get more out of life in their own backyard."