By Alison Rice. When Del Webb opened Sun City Hilton Head in 1995, the community represented the West Coast active adult builder's first splash back East, where it hoped to sell 400-plus homes annually in South Carolina's low country.
But six years and a billion-dollar merger later, sales had slipped to roughly 250 homes a year--low enough to catch the attention of Pulte executives who were reviewing Del Webb operations.
"[Sun City Hilton Head] popped up because it wasn't performing up to financial standards," says Richard Dugas, COO for Bloomfield Hills, Mich.-based Pulte. "We weren't selling enough homes there to justify the financial investment."
The problem, Pulte determined, was the price tag at Sun City Hilton Head. Sales prices averaged $260,000--too rich to attract the traffic and sales the community needed. "We were leaving behind a segment of the active adult market," says Kenneth Hull, general manager for Sun City Hilton Head. So the company went back to the drawing board--literally--drawing on the expertise of Bill Pulte himself to create more efficient and less costly homes for the community.
"We came to the conclusion that the homes were too expensive, but it wasn't just a fact of lowering prices," says Dugas. "We needed to revamp the product lineup."
Hilton Head history
The coastal Sun City property, which is actually located on the mainland, not Hilton Head Island, has always had a few obstacles to overcome. "Del Webb's problem in Hilton Head is location," says William R. Parks of Parks Development Consulting in Scottsdale, Ariz. "Hilton Head is a destination resort, but it's not a destination retirement market because it's not affordable."
Photo: Courtesy Sun City Hilton Head
In search of less pricey housing, many active adult buyers turn to Florida instead, where they find greater affordability and choice. (The state has approximately 200 active adult communities, according to Parks.) They may consider North Carolina, with its handful of coastal and inland retirement developments. Or, they might just keep traveling up the East Coast, finally buying in a community closer to family and the home they've known for years.
"There are lots of competitive communities based in Florida and the Northeast Corridor," Dugas acknowledges. "We have to extend [our thinking] beyond Hilton Head."
The first steps toward making the prices at Sun City Hilton Head more competitive with its East Coast counterparts began in late 2001, as Pulte began planning the next round of models at the community.
Simplicity ruled the creation of the four new floor plans, which the builder wanted to make more affordable through more efficient design. That's because "it wasn't so much the features of the home [that contributed to the price creep at Sun City Hilton Head] as it was the complexity," Hull explains. "There were lots of jigs and jags."
That changed with the new model series. Pop-out designs on the front and rear were reduced. More efficient truss layouts and floor and roof systems were adopted. The old models required 119 different types of roof trusses; the new models use just 13. "It was really just a matter of building the homes more efficiently," says Hull.
Pulte also pared back the practice of accepting nonstandard options. "We were all things to all people, which gets very inefficient," Hull says.
Photo: Courtesy Sun City Hilton Head
Standard options came under similar scrutiny, with the list sliced to just the 250 options most popular with buyers. "When you have thousands of options, it's difficult for us and the buyer to manage," Dugas says.
By the end, the base price for these new Hilton Head homes had dropped as low as $118,900, with an average selling price around $200,000.
The full impact of these price and process adjustments won't be known until the winter selling season--the "real test," according to Hull--which begins this month and runs through April.
But Pulte, which introduced the new models in May, is pleased with the results so far. Cycle time has gone from 85 to 67 days, with additional savings expected. Buyer traffic has improved. And net new orders soared 90 percent between May and July, compared with the same period in 2001.
"It's a big jump--it's exciting," Dugas says. "And financially, it's better for Pulte. It means we're hitting our buyer."