[State of the Industry 2007] Termite Control: Slump Continues

While general pest control boasts a number of strong business areas — think ants, bed bugs and public health pests — one area of the industry that has seen better days is the termite control market.

It’s true, termite control is still one of the top segments of the industry, being named as the top growth market by 21 percent of the respondents in PCT’s 2007 survey. However, that’s down from two years ago, when 30 percent of PCOs saw termites as the top growth pest.

So what’s behind the apparent business slump in the termite market? By all accounts, the problem has at least two major factors: A lack of termite swarming activity in recent years, and the recent slowdown in the housing market.

With regard to the lack of swarming activity, pest professionals across the industry continue to be perplexed by the phenomenon. Close to half of PCOs surveyed (49 percent) characterized the 2006 termite season as “below average,” with 40 percent calling it “average” and 11 percent calling it “above average.”

Don Goudy, vice president of business development, safety and training, Pestguard Fumigating, Sarasota, Fla., described the termite season in his area as light. “This is the slowest termite season we’ve seen in a very long time but I think it’s just one of the cycles,” Goudy said. This summer has been hot, he added, and the first half of the year has been drier than normal. “I think that the lack of moisture may have been one of the environmental factors affecting the termite season,” Goudy said.

Paul Felker, president, Bug Out Service, Jacksonville, Fla., characterized this termite season as nonexistent. “I don’t really see a season anymore,” he said. “We just don’t get a large volume of calls at any particular time of the year.”

Bob Wanzer, chief executive officer, HomeTeam Pest Defense, based in Dallas, all but dismisses the idea that the nonrepellent termiticides may have something to do with lackluster swarms. “I think Mother Nature has a way of surviving,” he said. “I’m not ready to say that we’ve won and there’s no more opportunity, but it’s been a long time since we’ve had a good termite swarm.”

Another major reason for the soft termite market has been the slowdown in real estate, in both new and existing home sales, which have in turn led to fewer pretreatments as well as termite inspections.

The new builder market is a big one for HomeTeam, and the company is feeling the pinch. “It’s very, very significant,” Wanzer said of the downturn in the real estate market. “We really expect it’s probably going to be slow and tough for the next 12 to 18 months.” The company works with more than 1,500 builder partners nationally. “Anybody who does this type of work,” said Wanzer, “(has) got to be feeling the pain from the real estate market.”

Regardless of the swarming activity or the real estate market, there are PCOs who are making the best of a less-than-ideal situation. “I see that it is becoming more of a preventative sale type of market,” said Felker. For the past several years the company has worked to market its termite prevention services to new and existing customers. He admits the termite market is changing, but, he adds, “I don’t find it alarming or anything that would motivate me to get out of it.”

Meanwhile, Jeff Preece, B.C.E. and owner, ZipZap Termite & Pest Control, Kansas City, Mo., is marketing its “Peace of Mind” and Canine Termite Inspections to fill gaps in its schedule. “That’s been pretty successful for us,” he said. Preece sends out mailings to customers, letting them know it’s time for another annual inspection. “That’s helping our termite jobs,” he said. Having a termite dog to help with inspections has also worked well for the company.

And Goudy notes there’s an underlying lesson in competing in this market: “You’ve just got to be more diligent in lead generation and inspections.” Toward that end, Goudy and his team are working to build relationships with property managers and home association boards in the area to try to get more opportunities to perform inspections. “If we’re still doing inspections,” Goudy said, “we have the opportunity to pitch a preventative job.”

Of course, as the survey numbers indicate, there are some PCOs who have abandoned the termite market. Shield Pest Control, Torrance, Calif., used to offer termite control services, but got out of the market last year. “We had it for two years and it wasn’t making any money,” said owner Robert Ruiz. “We just decided to put the money into our general pests.”

But it’s not all bad news. Half of the survey respondents said their 2006 termite treatment revenues increased, while 31 percent said they remained the same and 19 percent said they decreased. Most PCOs (60 percent) maintained their 2007 termite treatment prices, while 34.5 percent increased them. Only 5.5 percent decreased their prices.

The survey also indicated that post-construction treatments account for 52 percent of the revenue generated. That’s a drop of 6 percent from last year’s data. Meanwhile, renewal fees account for 23 percent, and pretreats for almost 15 percent. Both of those segments grew slightly over last year.

The survey also asked pest management professionals about the tools they use to treat for termites. About 42 percent of PCOs use primarily soil treatments for termite control, 28 percent use both soil treatments and baits, 22 percent use wood treatment and soil treatment, and 3 percent use baits only. (Fumigation, wood treatments and baits, and other types of treatments make up the remaining 5 percent.) About one-fourth said their company routinely uses both conventional soil treatments and baits on the same structure.