Hard to believe it’s been more than three years since Lehman Brothers collapsed and the gravity that held the global economies in their orbits weakened to the point at which everything went haywire.
Fear and uncertainty reigned. And today? Uncertainty is still the word, even if we’ve all become a good bit more stress-hardy since 2008. Despite persistently high and protracted unemployment and a lousy housing market, the boating public has become hardier, too. True, new-boat sales remain near historic lows, but participation has remained relatively strong.
“It is what it is.” That’s how one dealer summed up the attitude of customers coming into his business this summer. I think that says it pretty well. You can’t change the macroeconomic picture, and you can only put your life and boating dreams on hold for so long. The base has held, with most people content to hunker down, hold on to the boat they own and ride it out.
Meanwhile, pent-up demand has been building. That’s what happens in recessions. You don’t need to look any further than the tepid new-boat numbers and the aging of the current fleet of pleasure boats — the average age today is 21 years, compared with 16 in the late 1990s — to sense that. But what’s going to cause that latent demand to finally spring? And when?
New-boat sales track consumer confidence pretty closely, and that important measure has been waning, at best wallowing. Based on the current economic trend, it may be well into 2012 — maybe longer — before consumers begin to leave the sidelines and climb off the fence, says veteran marine finance expert Jim Coburn, managing partner at Coburn & Associates of Macomb, Mich.
“They are deeper into the sidelines in this recession,” says Coburn, who does not see a significant improvement in the unemployment rate through 2013 (9 percent, plus or minus in 2011, 8.8 percent in 2012 and 8.4 percent in 2013). “In other recessions, consumers actually kept things buoyed and were ultimately the reason we came out of them. The question today is, will the pent-up consumer come out quickly or will they just trickle back into buying new boats? I’m guessing more on the trickle side. That’s better than nothing at all, and maybe that could be a good thing for the marine industry.”
The road to recovery has proved to be longer and marked by more ruts and soft spots than most of us would have guessed eight or 10 months ago. Have you ever buried a truck up to its axles on the beach? The more you press on the gas pedal, the deeper the damn thing sinks into the sand. That’s sort of the way this economy feels. Lord knows, we could use some traction.
One question posed and debated at length as the summer turned to fall was whether the economy is headed back into recession — the so-called “double-dip” scenario. A fair-sized camp believes we already are at the front end of a recession. Others predict slow but steady growth. It might not take much longer to find out.
Dave Pugsley, Brewer Yacht Sales general manager and vice president, points to continued improvement in the brokerage market as one of the positives this year. “Our brokerage business is up over last year,” says Pugsley, past president of the Yacht Brokers Association of America. “We’re feeling pretty good about it.”
Prices have improved, too. A year ago, boats were selling, on average, about 20 percent below the asking price. That figure is now about 13 percent. “We’re continuing to get listings, to sell boats and to get better prices for boats,” Pugsley says. On the other hand, he notes, the “new-boat business has been dismal.”
Matt Gruhn says one positive is stability in the dealer market this year, compared with the previous two. “The economic collapse of 2008 and 2009 wiped out a number of dealers, and those who remain have solidified their businesses and are finding some stability, if not growth,” says Gruhn, incoming president of the Marine Retailers Association of America. “They’re finding opportunities where they can, whether that has been in the preowned or non-current markets or in changing up their product lines or service or somewhere else.”
As we know, there’s business out there, but it’s a moving target. The foundations on which a lot of old assumptions were built have grown wobbly. “Those that have changed their business style and models will prosper,” Coburn says. “Those who are not as disciplined will become a consolidation statistic.”
This article originally appeared in the October 2011 issue.