Boats & RVs: On same road to recovery?Posted on
Some say both markets may turn the corner in late 2009, despite marine’s traditional lag time
It used to be that boat sales trends trailed those of recreational vehicles by about six months, leaving the marine industry to follow RVs into and out of each economic downturn.
This time, however, “I actually think we may have started in sync with them rather than lagging behind,” says Thom Dammrich, president of the National Marine Manufacturers Association.
If that’s the case, then both industries may begin seeing a turnaround sometime in the second half of 2009.
“In the later part of 2009, we may start to see a pickup in [wholesale] shipments,” says Kevin Broom, director of media relations for the Recreational Vehicle Industry Association (RVIA).
That prediction bodes well for the boating industry. RV companies have been battling the same economic challenges as marine businesses. Each industry has experienced production cutbacks and even some bankruptcies.
Both saw retail sales begin their descent in 2005, each falling 0.3 percent compared to 2004, according to NMMA statistics. In 2006, RV retail sales dropped another 3.1 percent to 310,200 units, while retail boat sales fell 4.4 percent to 418,300.
The decline slowed for the RV industry in 2007, however, with retail sales decreasing 0.5 percent to 308,800 units. The marine industry that year saw retail sales fall 5.5 percent to 395,200 boats.
Credit is the culprit
RVIA and NMMA both blame the same key drivers for the current state of their respective markets.
“The biggest issue facing the RV industry is credit,” says RVIA’s Broom. “The banks can’t or aren’t making loans.”
Dammrich says this is the biggest challenge for the marine industry as well.
“Credit is the No. 1 problem right now,” says Dammrich, who sees recovery in 12 to 18 months. “Dealers have to sell the same boat three or four times before they can get it financed.”
The credit crunch is exacerbated by the decline in home values and consumer confidence, Broom says.
“People are worried about what’s going to happen. Will they have a job? Can they afford to pay their mortgage,” he says.
“Uncertainty is our enemy,” says Dammrich, referring to the credit crunch and the summer’s volatile fuel prices. Fuel kept going up before a dramatic decline in price in late summer and fall. “Once fuel prices stabilize, people will adjust to the new price,” he says.
Rising fuel prices last summer didn’t help the RV industry either. “When fuel prices go up, people take shorter trips,” says Broom, echoing an observation made many times in the marine industry.
Manufacturers in both industries are striving to improve the fuel efficiency of their products.
Broom says the trend among RV manufacturers is toward smaller, more fuel-efficient motor homes. He says that started in 2006, after damage from Hurricane Katrina caused a spike in fuel prices.
“RV manufacturers decided to prepare for another spike,” says Broom.
He says he also has seen some RV manufacturers come out with lighter-weight trailers that promise better fuel efficiency and can be towed by more types of vehicles.
“I also anticipate more green products coming out like solar panels and wind turbines,” Broom continues.
Ads play to passion
Like boating, Broom says RVing is a lifestyle people will continue to enjoy despite the economy. RVIA statistics show that while RV sales are down, rentals have grown 18 percent in 2008, and campground reservations are up 5 to 15 percent for the year.
“The primary demand is still there,” says Broom. “People still want to go RVing; they’re just delaying the purchase.”
Dammrich says the same holds true for the marine industry, and both contend there are a lot of potential buyers waiting for signs of an economic recovery and an easing of credit.
“We certainly think there’s a lot of pent-up demand,” says NMMA’s Dammrich. “We’re able to sell boats, we just can’t close the deal because we can’t get financing.”
Both trade associations say their advertising campaigns have been successful in drumming up interest.
“We know from our Web traffic that core demand for RVs remains strong and we’re optimistic that it’s continuing to build as a result of our ads,” says Christine Morrison, senior director of marketing communications for RVIA.
As for the marine industry’s Grow Boating Initiative, NMMA says independent research indicates Discover Boating has increased participation in boating —6 percent more in 2006 and nearly 9 percent more in 2007.
Stretching ad dollars
Both associations have experienced a drop in revenue for their respective campaigns, however, because of the economy. The biggest chunk of the Discover Boating budget comes from a surcharge on engines, and the Go RVing program is funded almost entirely by assessments on RVIA member manufacturers’ new-unit shipments.
Despite the curtailed budgets, Dammrich and Morrison say their organizations are committed to continuing their campaigns. Each is trying to come up with creative ways to make advertising dollars go farther.
RVIA plans to use more Internet advertising next year, in addition to its magazine, running newly modified ads that stress the value and affordability of RVing. The campaign will also run on cable TV next year.
“We have decided to launch next year with an increased emphasis on cost-efficient, lead-generating media to help our dealers identify their best prospects in today’s market,” says RVIA’s Morrison.
The marine industry has decided to forego a national advertising campaign next year and will instead redirect assessments to support immediate sales-driving efforts at the retail level. Boatbuilders who sign a pledge to follow certain criteria will get an 85 percent credit on assessments they’re supposed to submit for the Grow Boating campaign.
“When we developed the Grow Boating Initiative, we realized it would require long-term support in order to see real growth, and so the NMMA board remains unanimously committed to returning to our united, national campaign as soon as market conditions improve,” says Dammrich.
This article originally appeared in the December 2008 issue.