Gulf business is getting back on track

Posted on Written by David Shaw

28_gulfbusiness_01On slowly rising waves, normalcy is returning to the region’s dealers and yards after the oil spill

During the first week of August, something unusual occurred at Emerald Coast Yachts, a charter business and ASA sailing school in Pensacola Beach, Fla. The phone rang.

Peggy Van Sleen, the company’s co-owner, says no new business had come in since late April, when the BP-licensed Transocean Deepwater Horizon oil platform toppled into the Gulf of Mexico in sheets of flame and clouds of billowing black smoke. The rig sank in roughly 5,000 feet of water and triggered the biggest oil spill in U.S. history – about 4.9 million barrels of crude, according to the National Oceanic and Atmospheric Administration.

With most of her eight boats on the hard and Little Sabine Bay, where she kept the fleet, boomed off to prevent oil from entering the harbor, Van Sleen’s business was effectively closed after the spill. She says that having no income for three months strained the company’s finances, but the first quarter of 2010 had been kind. Revenue was up 42 percent from the same period in 2009.

“Thank goodness we had a cushion to fall back on,” she says. “The problem is that the spill took a big chunk out of our income at the peak time, but I feel we’ve weathered the storm. We’re booking almost at the same rate as we normally do for this time of year.”

On Aug. 17, Emerald Coast Yachts held its first class since the spill, and Van Sleen was not the only marine business owner who saw renewed activity in early August, about three weeks after BP capped the well. The rebound appeared to gain momentum, albeit slowly, and it boosted sailboat charter companies, sailing schools, powerboat and sailboat dealerships, and full-service boatyards. However, activity generally remained anemic compared with August 2009, when the industry was in the depths of the recession.

28_gulfbusiness_02Keith King, owner of Ocean Marine Group Inc., which has locations in Ocean Springs and Gulfport, Miss., had been optimistic about prospects for 2010 earlier in the year. A dealership for Triton Boats, Chaparral, Cobia and other manufacturers, the company was “approaching normalcy for the spring season with traffic, sales numbers and inquiries” after coming out of a tough 2009, King says.

And then came the oil spill. “The recreational consumer just stopped looking and buying, and it stayed that way,” he says. “Everything went into a ditch. Our sales are off 50 to 70 percent when compared to the same period last year.”

The precipitous drop in revenue led to the layoffs of five of King’s 22 full-time employees. Because the majority of his business comes from selling offshore fishing boats, he says the closings of state and federal waters to fishing during the spill were the key cause of the revenue drop. He also argues that reports about the spill in the press often were misleading and made his problems worse.

“Once the well was capped, the coverage of the spill dropped off and you didn’t hear much about it anymore. Maybe that’s a good thing, because the bad news won’t stay at the forefront of the public’s perception of oil in Gulf Coast waters,” King says, noting that sales activity at both of his locations started to increase a couple of weeks after oil stopped flowing from the well.

Fishing in state waters along the Gulf Coast was open in August, which helped bring people back to King’s dealership. However, as of Aug. 27 about 20 percent of federal waters in the Gulf – an area of more than 48,000 square miles – still were closed. At the height of the spill, 37 percent of federal waters in the Gulf were closed, according to NOAA. As areas remain free of oil sheen, they will reopen after sufficient testing of fish for toxins, NOAA says.

“Sales and inquiries are now up about 20 percent since the peak of the disaster,” King says. “Going forward, we’re optimistic that sales will continue to improve when [more of] the federal waters reopen for fishing. We’re anticipating that there’s been some pent-up demand for fishing boats, and we hope to see more sales late this year and more normal activity next spring.”

Stanton Murray tells a similar story. He’s the president of Murray Yacht Sales, a dealership for Beneteau (sail and power) and J/Boats with locations in New Orleans and St. Petersburg, Fla. After the spill, business bottomed out, Murray says.

29_gulfbusiness_01“People just stopped spending money on new and used boats,” he says. “When people buy a boat, they’re rewarding themselves. They need to be in the right frame of mind, and so when everyone on TV says the sky is falling, people tend to hold off on making big buying decisions, like buying a boat.”

Murray points out that although the oil did profoundly affect some areas of the Gulf Coast, its effects were less pronounced in other places, and some locations, such as South Florida and the west coast of Texas, received no oil.

Taking an active approach, Murray launched an informational campaign for existing and potential customers. “We gathered information on the effects of oil on boats and boat systems,” he says. “What impact does oil have on a water intake, an engine, on gelcoat? We went out and got answers from experts and posted them on our company’s blogs.”

Murray’s company kept its head above water throughout the spill, and in August, he says, sales activity began to perk up. “There’s been three months of pent-up demand and we’re starting to see a lot more activity. It’s still going to be hard to make up for what we lost in sales, but I’m confident that business will rebound to what it was before the spill.”

The service side of boating also suffered. Saunders Yachtworks, based in Gulf Shores, Ala., is one of the largest full-service boatyards in the region. It caters mostly to owners of large sportfishing boats and business had been bad in 2009. Saunders laid off 20 percent of its work force.

However, the first quarter of 2010 seemed to promise a good year to come, so much so that the company began offering Saturday service for the first time to increase revenue and better serve customers, according to John Fitzgerald, the firm’s president.

“People were using their boats more going into 2010. We were seeing demand for service more like what we saw in 2007 and 2008,” he says. “Our revenue stream early in the year was exceeding expectations.”

35_oilspill_01All that changed with the oil spill. “The bad news hit us in waves,” Fitzgerald says. “Our top customers, the biggest boats with full-time captains, left the Gulf immediately after the spill began. Those boats comprised about 30 percent of our business. We had a big hit right away.”

And it didn’t get any better. Fishing closings followed in state and federal waters, leading to the cancellation of tournaments. “Local boats weren’t going out,” he says. Then oil started washing into nearby Perdido Pass in mid-June. Booms were placed across it and recreational boating was prohibited in the bays between the coast and the Intracoastal Waterway.

“We were essentially closed down as far as customer work went because people couldn’t get into the boatyard,” Fitzgerald says.

After the well was capped, Perdido Pass reopened. Recreational boating was reinstated in inland waters, as was fishing in state waters, prompting a slow return of business for Saunders Yachtworks. “Things certainly aren’t back to normal, but we’re seeing more people using their boats now and that’s good for us,” Fitzgerald says.

Charter fishing businesses were hit particularly hard during the spill. As of late August, most were not seeing much renewed activity. William Thorsen typically ran the 70-footer Chulamar every day out of Pensacola Beach on offshore fishing excursions in June and July, grossing more than $5,000 a trip. He also ran two smaller boats. But the spill wiped him out during his busiest season.

35_oilspill_02Desperate for work, he signed on with BP, which hired his three boats for oil scouting and boom inspections. However, BP’s daily rate did not make up for what he would have ordinarily earned, he says, adding that the BP experience was frustrating. Most of the business owners interviewed for this article had filed claims against BP for monetary damages.

In August, Thorsen’s phone started to ring again, although not the way it usually did. “People are calling to book fishing trips, but the federal waters are closed [to finfish off Pensacola], so I can’t run Chulamar offshore,” he says.

Thorsen did say he booked his first inshore fishing excursion since the spill for late August. At $550 for a four-hour back-bay trip, it’s a far cry from what he could be earning with Chulamar.

“I haven’t run any of my boats since April 25,” he says.

This article originally appeared in the October 2010 issue.

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