Marinas on shores of opportunity

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International Marina and Boatyard Conference attendees are told their sector will lead the recovery

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The prognosis for marina operators is good, although the economy probably will drag along at a 3 to 3-1/2 percent annual growth rate for the next two to three years, according to economist J. Antonio Villamil and marina guru Neil Ross, who spoke to a record 800 attendees at the International Marina and Boatyard Conference in Fort Lauderdale.

"Your marinas, not boat manufacturers, will remain the most economically stable sector of the entire recreational boating industry," Ross predicted in his talk to a nearly packed hall at the Greater Fort Lauderdale/Broward County Convention Center during the Jan. 26-28 conference.

He says well-run marinas should remain a solid business model for delivering services and returning a reasonable income well into this century.

"You know it," Ross says. "Use it to your advantage. Make it happen, folks."

Ross, of Kingston, R.I., who started the first Sea Grant boating and marina program in 1969 and co-founded the International Marina Institute in 1986, says 2010 was a generally improved year for marinas: fewer empty slips, slightly more boat use, revenue up, fuel sales steady, a leaner staff and a shorter workweek - all to cut costs.

He says a few marinas, generally weaker ones, cut slip rates to attract more boats, but better marinas - the price leaders - are still pulling in new tenants as their waiting lists become depleted. Boaters who have been waiting to get into these marinas are making their move, he says.

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Ross gave dockominium marinas generally low marks as investments. "Worst management decision I ever made," one Massachusetts marina owner told him.

Ross predicts that 2011 will be better for marina operators. Based on the last four recessions, he expects marinas to lead the marine industry into recovery and expects a full recovery for the marina segment in a year or two.

Among the trends he sees are more rental boats, more rack storage for boats under 45 feet, upland storage on mobile cradles for boats to 70 feet and fewer but bigger in-water slips (40 to 70 feet, with some to 120 feet and a few 250 feet and bigger).

He also expects a resurgence of small wooden runabouts as nostalgia sets in in the era of fiberglass boats whose systems are more complex, more highly integrated and more expensive to buy, maintain and repair.

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"Boating, unfortunately, is going to become more costly," he says.

Marinas and boatyards will have to respond to boats' growing complexity and size - and more demanding customers - with better-trained staff and more sophisticated equipment. And in an era of constant change and new demands, he expects marinas to gradually make themselves over every 20 to 25 years.

Ross made these predictions against a backdrop of what Villamil, dean of the business school at Miami's St. Thomas University and economic adviser to presidents and Florida governors, called a new normal of prolonged "below potential" economic growth in the United States and Europe.

Fourth-quarter 2010 growth in this country was 3.2 percent - "slower than market expectations," Villamil says. He says a modest 3 to 3-1/2 percent growth rate is likely to continue for a couple of years, rather than the 4 to 5 percent that is typical after a recession.

"We're making progress - if you're looking at the cup half-full instead of half-empty," he says. Marina operators will have to adapt their business plans to the opportunities that a slow-growth economy presents.

Villamil says there are opportunities in the emerging markets of China, Russia, India, Brazil and elsewhere in Asia and Latin America. He says inflation will remain very low, although there might be some upward creep because of higher oil prices. In general, he says, pricing power will remain low for most products and services. Price increases aren't going to make sense for two to three years, he says.

On the plus side, consumers and businesses are paying down or walking away from debt. Corporations are holding record amounts of cash. Consumers - who lost a lot of equity in their homes and in the stock market - are "restructuring their balance sheets," he says.

"There's a lot of liquidity in the marketplace," he says, and consumer confidence - though improving - still is "not where we want to see it." Interest rates are low, but banks remain "risk-averse" and likely will remain so through 2012.

"You can't assume that because you've been a good customer [of the bank] that you are going to get credit," he says.

He advises business owners to monitor four areas: U.S. household net worth ($55 trillion in last year's third quarter, compared with $66 trillion in 2007); flow of funds, which shows who is borrowing (in last year's third quarter, households were borrowing 1.7 percent less than they were in the same period a year earlier, businesses were borrowing 1.7 percent more, state governments 5.2 percent more and the federal government 16 percent more); the monetary base, which is excess reserves in the banking system (volume soared from $750 billion in 2008 to $2 trillion at the start of last year); and the federal funds rate (down from 5 percent in 2007 to a fraction of a percent last year).

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The data are on the website of the Federal Reserve Bank of St. Louis (http://research.stlouisfed.org/ fred2/).

Villamil advises conserving cash and being ready to deploy it as the recession eases.

"Cash flow is king," he says.

Market globally, as well as domestically, he advises. Retain and continue to train talented workers. Lock in borrowing costs and get mortgages on a fixed rate. He foresees a gradual improvement of the business climate, but says it will be some time before "the good old days" of 2004-2007 return.

Two other speakers, Vince Morvillo, of Sea Lake Yacht Sales in Houston, and Bill Yeargin, president and CEO of Correct Craft Inc., of Orlando, stressed that even in a recession and in post-recession doldrums there are opportunities for growth and opportunities to prepare for growth.

Marina operators must embrace and manage change and see it as a gift instead of a problem, says Morvillo, who though blind since birth owns a successful dealership and brokerage and won the 2004 Ensign national championship with a sighted crew.

Morvillo says his blindness has turned out to be a blessing because it forced him to look for innovative ways to get on with life and prepared him for finding new ways to keep his yacht business moving ahead in the turmoil of Hurricane Ike in September 2008 and the onset of a recession two months later.

He says that in tough times marina operators have to look back to when they started their business: No obstacle was too big to stop them. They must brainstorm creative solutions to problems now the way they did then.

"The problem isn't really the recession," he says. "The problem is the engine that drives our business and creates new products and services and business models. It's the loss of the entrepreneurial spirit and our complacency and comfort with the way things are."

Yeargin, one of the industry's management gurus, exhorted attendees to adopt an organizational culture that is motivated to accomplish big things and nimble enough to keep a step ahead of changing conditions.

Organizational culture is "the way things are done around here," Yeargin says. He says it is a leader's responsibility to be sure the company's culture sets high goals and focuses and energizes the company to successfully pursue them.

Teams that are a company's vehicles for getting things done must trust their leader, be able to debate and handle conflict to arrive at decisions ("Conflict is good," he says.), commit to a decision once it's made and hold each other accountable for carrying out the decision to achieve results.

He says an effective organizational culture sets clear expectations, hires and trains good people and lets them do their jobs without micromanagement. It also recognizes differences in people's temperaments, demands good communication and has what he called a "growth mindset."

"Most people have a fixed mindset," he says. Although everything around them is changing, they want to stay the same.

"You've got to change or die," he says. "You've got to be open to seeing things differently and be looking for ways to get out of your comfort zone. ... It will make you more successful and you'll have a lot more fun at what you do."

This article originally appeared in the March 2011 issue.

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