MIAMI — The verdict is in: “We’re back. The recreational boating industry is back,” NMMA president Thom Dammrich said at the marine industry breakfast to open the Miami International Boat Show. Based on industry metrics and national economic indicators, he projects a run of good times for the next three years. “We can expect three years and more of continued growth before we see another downturn,” he predicts, reflecting the buoyant mood at the Feb. 12-16 Miami show and the Yacht & Brokerage Show in Miami Beach.
New-boat sales were up 5 to 6 percent in units and 8 to 9 percent in dollars in 2014, and both are likely to increase about the same amount in 2015, Bruce Van Wagoner said at a GE Capital leadership conference the evening before. “Our business is in a safe position — better than it has been in a long, long time,” said Van Wagoner, president of GE Commercial Distribution Finance’s Marine Group, reinforcing Dammrich’s message to an industry that was hit hard by the Great Recession.
Van Wagoner says dealerships, the engines that drive the industry through their relationships with buyers, are healthy again. Their operating expenses are going down, their revenue is going up, and their inventories are in better shape than they have been in years. Just 10 percent of their inventories were more than a year old, and 3 percent were more than a year and a half old in 2014. Dealer inventory turned over a little more than twice, on average, last year, which is a solid performance, he says. GE loaned $5 billion to the industry in 2014.
“After consecutive years of sales increases, coupled with low gas prices and low interest rates, expectations remain high for a good 2015 for the marine industry,” says Andrew Clurman, president and chief operating officer of Active Interest Media, whose Show Management produces the Yacht & Brokerage Show and co-owns it with the Florida Yacht Brokers Association. “The amount of new products and innovations are driving interest from buyers that should continue the market momentum.”
Dammrich delivered an upbeat assessment of the industry for the next several years. He said the economy has grown at an annual rate of 3 percent in each of the last three quarters and that economists predict annual growth of 3 percent during the next three years — all good for growth in sales of boats, engines and accessories. Unemployment is at 5.7 percent, which in the opinion of some economists is close to full employment, and disposable income rose at an annual rate of about 2 percent each month in 2014 and finished the year at 3.7 percent in December. Disposable income is likely to keep growing during the next two years, he says.
Consumer spending also has been rising at more than 2 percent annually, and consumer confidence in three of the last four months has been above 90 — a figure that historically bodes well for the industry, Dammrich says. “We expect consumer confidence to continue to improve,” he says.
Oil prices and interest rates, which can drive marine sales or hinder them, look as if they will favor sales in 2015, says Rob Podorefsky, managing director of GE Capital’s Interest Rate Management Group. “The U.S. is going to be a net winner from the drop in oil prices,” he says. “It’s a win for the country and the consumer.” In December, less than 3 percent of consumer spending went to gasoline purchases, a rate low enough to help consumer confidence and economic growth.
Podorefsky says shifting oil supply-and-demand dynamics could introduce some volatility in oil prices and monthly inflation. About 400 oil rigs have been shut down in the United States because of the low prices, a development that can curb supply and eventually narrow the gap between oil demand and supply.
Podorefsky says the Federal Reserve is unlikely to raise interest rates significantly in the coming year. “This Federal Reserve has no intention of derailing the recovery,” he says.
A review of history suggests that recessions often follow Fed rate increases that, though intended to cool inflation risks, end up tripping up the economy. “I am convinced that this Federal Reserve is going to be rather modest in raising rates,” he says.
There are some clouds on the horizon. The housing market still has not recovered from the recent recession, so a lot of excess housing stock remains on the market, Dammrich says. And the value of the dollar rose 15 percent last year, creating a headwind for exporters.
He identified two other risks for 2015. One is weather. “But we can’t do anything about that,” he says. The other is Washington, D.C. — federal policies that hurt the industry and the boater. He exhorted industry leaders to join the American Boating Congress and visit their legislators in Washington May 11-13 to advocate for boating.
Carl Blackwell, president of Discover Boating, identified another dark cloud: boating’s demographics, which still don’t look good for the long term. In 1997, 55 percent of boat owners were younger than 50; now that figure is 35 percent. “We are not replacing young boaters,” he says.
He says surveys show that 25- to 34-year-olds are among the most enthusiastic demographic about boating, and they “are all about experience.” But affordability in this demographic remains a problem because median household income has gone down among young adults since 1997. “Our theme must be, ‘There is a boat for everyone,’ ” he says.
Speaking at the GE conference, Salim Ismail — a technology strategist, entrepreneur and the founder of Singularity University, whose faculty spend 80 percent of their time thinking about the future — said the rate of change in today’s technologies is exponential. “We have been doubling our performance of computations every 18 months for over 100 years,” he said.
Our ability to digitize information with computers keeps getting faster and more all-encompassing. “Any company designed for success in the 20th century will not be successful in the 21st century,” he says.
One example of using that technology to bring new people into boating: Give people the virtual experience of boating with the latest virtual reality technology, which is the next best thing to really going boating, and that can point them to the real thing: going out in a boat. “When someone in your field says something’s not possible, run in the other direction,” Ismail says.
This article originally appeared in the March 2015 issue.