Getting into Hot Water for Fun and Profit
by Adam Bello
Some say water and winter do not mix. Tell that to Bnui Spaidal, marketing manager of Blue Falls Manufacturing Ltd. in Thorsby. His company's revenues have grown 397% over the last five years with its Arctic Spas line of all-weather acrylic hot tubs. "Taking an outdoor soak during -40 C weather is not done just by thrill seekers at ski resorts; it's becoming a way to spend an evening at home with family and friends," Spaidal says.
Since the late 1980s, a growing number of folks have turned their backyards into year-round bathhouses, seeking escape from the stresses of the workplace, bumper-to-bumper traffic, and other daily anxieties. What better way to find relaxation, rejuvenation, and an invigorating massage on the frostiest of winter nights?
According to the 2001 Canadian Spa/Hot Tub Market Report by Pool & Spa Magazine, nearly 3,000 acrylic hot tubs were sold in the province last year, representing 14.4% of total sales in Canada.
"In the past, fall purchases for winter slumped; now our Calgary and Edmonton showrooms are packed on Saturdays, and sales for the period are rising year-over-year," says Spaidal. "Alberta has the highest per capita hot tub sales of any province, and I don't see any signs of saturation. The trend over the last few years has almost totally been outdoor installations, now representing 98% of our business."
One of Alberta's leading manufacturers of all-weather hot tubs, Blue Falls Manufacturing's Arctic Spas line is known globally for its ability to perform in harsh climates. Making the "Next 100" list in Profit magazine's ranking of Canada's fastest growing companies in 2002, the company's gross annual revenues nearly doubled in its first three years of operation ($1.6 million in 1994, to over $3 million in 1996) to an impressive $25 million in 2002.
The company has developed a distribution network in the United States and overseas. Blue Falls now has 250 dealers worldwide, with corporate offices in Edmonton, Salt Lake City, Birmingham, U.K., Sydney, Australia, China, and most recently Boston. Spaidal expects value of worldwide retail sales will surpass $50 million in 2003.
Today, Arctic Spas sell in over 30 countries, including Finland, Russia, and England. The latter market, Spaidal says, can be very lucrative. "In the U.K., hot tubs are a much newer consumer concept, and they're willing to pay almost double, leading to larger profit margins," he says. "Internationally, Canadian hot tubs carry a strong reputation for quality cold-weather products, and Alberta spa manufacturers are becoming the up-and-comers."
While the company now expects to sell 1,000 hot tubs this year in Alberta alone, success did not come right away, neither for the company, nor the local market. "In the beginning, spas were imported from California, the birthplace of the hot tub industry, to satisfy consumer demand. However, the products usually did not have the insulation and technological requirements needed to operate effectively and economically in Alberta's winter. This sometimes led to expensive heating costs and frozen plumbing. The uncertainty led many owners to shut down their spas for the season."
To win back consumer confidence in the then-fledging marketplace, the newly formed Blue Falls saw an opportunity to create a hot tub model that would meet the local market's specific needs, while creating an exportable product to other cold-weather countries. The result is an insulated product that can sustain 100-plus Fahrenheit temperatures (approximately 40 C) without an additional heat source, even when the temperature dips. "We even captured heat produced by the motors to help keep the water warm," explains Spaidal. "Even if the power shuts off in winter, the water can keep from freezing for three to five days."
While the quality of hot tubs was rising, intense marketing had to overcome long-held perceptions about hot tubs and their users. "We wanted to reach the married 40-somethings with double income and children, and retirement-bound baby boomers with disposable income," Spaidal says. "When we started, many people associated hot tubs with the swingers lifestyle, such as the heart-shaped models for couples. It was necessary to show that the spa was not centred around the Austin Powers of the world, but the average person and their family."
Over its first five years, Arctic Spas ran newspaper ads, showing how customers enjoyed their backyard spas. "The ads had to be attention grabbing, communicating both stress release, and the opportunity to hang loose. One ad, for example, showed people making snow angels in their bathing suits, and then jumping back into the hot tub."
In addition, a radio campaign and cross-promotions with the Edmonton Eskimos and Edmonton Oilers during half-time shows and period intermissions were used to bring brand exposure. Annual promotions with the Calgary Stampede and at the Canadian National Exhibition in Toronto helped Arctic Spas reach target audiences.
Spaidal says the company focused on selling the merits of rejuvenation of mind and body, not other bells and whistles. "Many spa companies today try to emphasize the accessories, like adding stereos, televisions, or even a computer to the unit. The idea was to escape from the outside world. Instead, we focused on the massage features, marketing water and air therapy, showcasing our plumbing and jet technology in the process."
Now Blue Falls must educate consumers in its new markets. "Albertans are better educated about backyard spas than most in North America," Spaidal says. "In our Boston location, only one in 10 visitors have previously sat in a hot tub, and usually it's a commercial model in a hotel, resort, or day spa. In Edmonton, nine out of 10 visitors to our showroom have already sat in someone else's backyard hot tub."
Industry members agree that future sales and expansion will be dependent on greater public awareness. Ken Nickel, production manager of Polar Spas Ltd. in Crossfield, believes developing an industry profile is essential. "We have not developed enough of an industry presence in people's minds that will build (sufficient) consumer awareness and confidence. We need to create industry-driven advertising that sells the idea of hot tub ownership."
However, the industry may face challenges as local markets for hot tubs mature. Richard Hubbard, publisher of Pool and Spa Marketing Magazine, and past executive director, National Spa and Pool Institute, says the Alberta market for hot tubs, like British Columbia's, is not expected to be as dynamic for sales as younger markets like Ontario or Quebec. "The province has a strong economy to encourage luxury purchases, but the hot tub market in Alberta is relatively mature. The focus is more likely to be customer retention, as current owners will be more inclined to purchase their second or third hot tub."
Nickel is more optimistic. "There is no way we have saturated the market. With all the homes being built in Calgary, there is great potential for first-time sales. "We're more at mid-point between a mature market like British Columbia, and newer ones like Ontario and Quebec. And because we have the advantage of more experience and reputation, selling to those younger markets becomes just as viable."
Instead, external competition for leisure and luxury spending, such as above-ground swimming pools, travel, recreational vehicles and other home renovations, are those that raise concern. "A bigger competitor to me would be Marlin Travel than Beachcomber (another spa manufacturer)," Nickel says.
For now, companies like Blue Falls Manufacturing are counting on cold weather and a long-term communications strategy to keep the market for hot tubs hot. "We're competing for discretionary dollars," says Spaidal. "For now, people will still spend money on a single vacation, because it's a commonly accepted choice. But when they see the value of a trip may be three rolls of film, the long-term benefits of the backyard spa will be perceived as more practical and affordable."
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