OPINION: Boat rentals are a viable option

Posted on Written by Michael Sciulla
Michael Sciulla

From expensive residential solar panels to the growing fleet of Zipcars on many urban streets, renting rather than owning is coming of age. Whether it’s a DVD from Netflix or the lease of an expensive new BMW, renting just makes sense for a lot of folks who choose not to own – a decision often made for convenience or sound financial reasons.

Because new-boat sales haven’t been what they once were for a very long time and no one seems to know how to reverse this trend, perhaps it’s time for those with the largest stake in growing the boating industry to consider promoting an additional business model. Rather than being limited to marketing the “dream of boat ownership,” how about lifting the financial barrier and building a mass market based on getting new customers into quality rental or leased boats so they can partake in the boating experience without having to first purchase the product?

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Although I am not the first to advocate such a change in the way we go about building and marketing recreational boats, a number of recent developments in social commerce have emerged to make the concept of building a rental/lease market much more viable.

But first let’s review the facts. New-boat sales peaked more than a generation ago in 1988, two years after Microsoft went public and nine years before Steve Jobs returned to Apple. There was no Google, Amazon, Netflix or eBay and the Soviet Union was still propping up the Iron Curtain. Ronald Reagan was soon to be a former president and Barack Obama was but 27 years old.

Although the world, and especially commerce, has undergone a wholesale transformation since 1988, how the recreational boating industry markets its products remains little changed and the engine that drives the entire industry — new-boat sales — has dropped into a black hole. From 1988 to 2010 annual sales of new outboards have plummeted from 355,000 to 112,000, inboards from 20,900 to 7,300, sterndrives from 148,000 to 18,700 and sailboats from 14,500 to 4,300.

Without fundamental change this downward spiral could continue for years, and no one I know expects the boating consumer of tomorrow to revert to the consumer of yesteryear anytime soon. Because something has to give, let’s look at the barriers to boat ownership.

Although all sorts of studies have been commissioned in recent years by and for the marine industry, common sense tells me three things: First, new boats have become just too expensive to be sold at the rate they once were; second, it’s increasingly hard to justify putting a boatload of money into a fixed asset that sits at a dock and may only be used a few times a month; and third, folks just don’t have the time to devote to one recreation anymore, especially if their children would rather spend their time on Facebook than fishing or facing into the wind offshore.

Marketing at its core is about creating and managing demand, and it’s especially difficult to create demand in tough economic times for a modest 25-foot sailboat or powerboat that costs $50,000 to $100,000 and needs a berth and has to be constantly maintained.

It’s an article of faith in our industry that boating can’t be compared with other industries. That said, a look at other industries is instructive. Before the Great Recession as much as 25 percent of all new cars were leased, with the luxury BMW brand at the top of the list, leasing 85.7 percent of its 7 Series automobiles. To strengthen its share of this market, BMW earlier this year launched a $100 million fund — BMW i Ventures — to invest in companies that will, among other things, develop alternatives to traditional car ownership.

At the other end of the “rental” market more than 1.6 million automobiles were in service from Enterprise to Hertz in 2010 at more than 17,000 locations. Moving along the food chain, Zipcars, founded less than five years ago, now has more than 560,000 members paying a $60 annual fee and a fleet of more than 8,000 vehicles in 28 states.

Don’t want to own and tie up a lot of cash for a basic condo at the beach or in the mountains? More than 6 million Americans have chosen instead to purchase a timeshare vacation property.

At the upper end of the vacation rental market is the destination club industry, which may have much in common with the boating industry. Multimillion-dollar vacation properties around the world are offered to members on an equity or non-equity basis. The largest company, Exclusive Resorts, says it has delivered more than 100,000 completed vacations for more than 3,250 members in nearly 400 homes at more than 35 locations.

Inspirato, a destination club that recently advertised in the Wall Street Journal, has more than 20 properties from Abaco to Vail that it rents to members who pay a $15,000 initiation fee and annual dues of $2,500.

Although some might say that chartering a yacht allows people who want to go boating the opportunity to do so without having to own the vessel, the fact is that it’s not inexpensive, usually lasts for more than a day and typically requires a certain level of skill or experience — all significant barriers to attracting large numbers of people who might like to get their toes in the water and experience the joy of boating.

One alternative, fractional memberships, is working right now, says Douglyss Giuliana, who owns a SailTime base and dealership, one of 50 bases worldwide.

“These bases give boaters a chance to get on the water when they want in a young and professionally maintained boat,” Giuliana says. “This is a great option for folks who can’t afford a boat of their own, don’t want to spend the time working on the boat or don’t want to see their investment sit in the slip for a couple hundred days a year. Plus, these members then get excited about boating, get their families involved and eventually buy their own boat, confident that the purchase will be worthwhile. More manufacturers need to get on this concept for their own benefit and the benefit of the sport.”

Renting boats, either as a daily rental or through a membership club, is an entirely different kettle of fish. Although costs to the consumer are generally much less than a charter, the problem has always been getting enough people in the door.

But the times, they are a-changin’. Social commerce sites such as Groupon, Living Social and Buy With Me are making it much easier to attract large, targeted audiences. Groupon says it has 70 million subscribers, and Living Social 28 million. Best of all, there are no up-front costs to try this approach to marketing. Net revenues are generally split 50/50 after the promotion has been completed.

Griffin Bell, of South River Boat Rentals, one of the largest rental operations on the middle Chesapeake Bay, owns a fleet of more than 20 boats and does 80 to 100 boat rentals a week during the season. A Groupon promotion this past summer generated more than 250 new powerboat rentals.

Boat clubs are also getting on the bandwagon. The Freedom Boat Club, which has 62 locations, 687 boats and says it has 6,500 members, and the Carefree Boat Club, which has 21 locations and 1,200 members, are testing the viability of these social commerce sites.

The general manager of Carefree, Kevin Bonnema, says a Groupon offer he did in June pulled in 110 customers at $149 a person for a day’s trial membership. “It’s not designed to make money, but to expand my market,” he says.

Although Bob Daley, co-owner of the Freedom Boat Club, has used Groupon and Living Social to produce new leads for his membership club, he says, tongue-in-cheek, “The best thing going for him right now is the recession. People just can’t afford to buy boats, and joining a club is an easy way to get into boating.”

Although it may appear that an increasing interest in renting rather than owning could attract more people to boating, not everyone is so sanguine.

Bonnema, of Carefree, says that when he was at the Norfolk (Va.) boat show a few years ago a boat dealer overheard him giving a sales pitch to a potential club member about the merits of renting rather than owning a boat. Carefree was promptly kicked out of the show.

“We bring people into boating and show them how easy it is,” he says. “After a while, many then go out and buy a boat. We don’t take any food off anybody’s plate that’s selling boats. We bring in new business. There’s an old-school mentality in this industry that has to change.”

Michael Sciulla is vice president of the Marine Marketers of America and a member of the Boating Writers International and Marine Marketers of America boards of directors.

Comments

8 comments on “OPINION: Boat rentals are a viable option

  1. Douglas Goldhirsch

    We build boats and have some inventory of our Handy Billy 21. Rented them successfully this summer. But our season is so short (8 weeks max) adn the insurance cost and risk is instructing us to stop offering this service. Instead we will likely reduce the price of the boats and stop having to care for them.

  2. Kevin

    I operate a large 13 boat fleet (power and sail) of “fractional lease-share” boats in Houston Texas. it is great way to sell new boats and also memberships with recurring income. Check out http://www.nauticshare.com for more information, starting a NauticShare is very easy with my 9 years of experience to help…

  3. Captain Bob Armstrong

    I whole heartedly agree. In my book, Your First Powerboat (International Marine/McGraw-Hill), which is primarily devoted to everything that’s involved in the process of buying a powerboat, the entire first chapter concentrates on viable alternatives to owning – they are often a better choice.

    When OMC was an active force in our industry, the company bought Adventurent, the parent of Club Nautico Boat Rental franchises, simply because management believed that rentals were a great way to get new people interested in boating and thus they might, in time, become buyers.

    Boating is an enjoyable life style. And one of the best ways to build new business is to get people on the water. Once they discover the pleasures involved in our sport, they WILL become owners, even if it takes a while.

    In this tough economy, we shouldn’t overlook any avenue to new business.

  4. bill gardella

    Rentals without training on nearly any boat are likely a bad idea, due to excess risks of injury and damage, etc.
    CLUB models that enable proper training remain a key to industry growth.

    The only thing new here is our industry finally awakening to shared-use potential. Sole-ownership built boating but unless things turn quick, sole-ownership cannot grow us.

  5. Rick Spellman

    Michael’s article is one of the best and clearly stated I have read in a long while. One of the primary reasons I left the boat industry after 18 years was the unrealistic and overly optimistic approach to every challenge that came down the pike. (remember “grow boating?) Above all, a successful business plan, for a mom and pop or a national chain, must be objective and based on current impartial information. Even a quick look at the marine industry shows that has not been the case for years.

    Industry leaders, both at the manufacturing and retail level have continued to pusure their own interests at the detriment of the whole. No one tells the truth until their business collapses draging others down with them (genmar) or they just keep hyping their numbers until some overly enthusiastic buyer comes along. (Fountain) Yep, boating needs some major changes or it will follow the same path as bowling.

  6. Eric Landon

    I started a program in Costa Rica in Los Suenos Marina 12 years ago under the name of Yachtshare. My belief was and still is why pay for it 365 days a year when you do not use it. We have experimented with shared ownership of 4 shareholders and recently realized that 10 shareholdred per boat worked. It significantly lowers the entry costs and also the monthly operating costs. In our history, the maximum use per shareholder has been less than 30 days. What does that tell you?
    Shared ownership of boats has been a difficult hurdle to overcome insofar people tend to have a difficult time imagining sleeping in the same bed…… The Hilton and Four Seasons seem to have overcome this problem.
    I feel the secret in going forward in todays market and attracting new boaters is to allow them to experience a totally crewed experience and removing the fear of having to know how to operate and maintain such a vessel.

  7. JR Hilderbrandt

    Check out our online boat renting networking service of both privately and commercially owned boat rentals available worldwide at http://www.BoatRenting.com or http://www.Rentaboat.com. We are the only network that holds and distributes renters past boat rental history and rental damage report for other rental companies to view.
    Also check out; “The Limitation Act” limits a boat owners liability from accidents that result in personal injuries and other losses that occur on navigable waters. 46 U.S.C. App. §188..

  8. Christopher Kourtakis

    I operate a yacht rental company and a fractional ownership company in Detroit. Even in a down economy (Detroit is worse than others), I have seen consistent growth each year in both sides of my business. Could it be better, yes, but it is still growing.

    Many of my customers are former boat owners who still want to get out on the water a couple times a year. Others are new customers looking to see if they want to get into boating. Either way, there is a need and a market for the services.

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