Despite serious weather issues, the state’s oil-and-gas-driven economy has kept boat sales on track
The oil and shale boom in Texas has brought millions of dollars and thousands of jobs to the Lone Star State so rapidly that in some areas, banks, schools and housing have struggled to keep up with the growing population and economy. Boat dealers, of course, say it’s not a bad problem to have.
They say the thriving economy has offset what might have been devastating seasons because of the many weather challenges the state has faced. “Locally here in the Houston area, I believe it has really helped,” says Ken Lovell of the Boat Trades Association of Metropolitan Houston. “Weather slowed things down a little bit, but business for 2013 has been good as a whole despite the windy weather. I think that’s slowed fishing and boating down some, but all in all I think business has been pretty good.”
Bob Bean, general manager of Singleton Marine Group Wake, of Houston, concedes the recession was painful for boat dealers there, but says it wasn’t as bad as in other parts of the country. “The gas and oil business maintained us,” says Bean. “The economy didn’t plummet as badly here.” And things are improving quickly. “There are people in south Texas who were dirt poor that are trying now to figure out where to put their billions of dollars. In these rural areas of central and south Texas, you can’t find a hotel room. They’re booked for two years. Even hotels under construction are booked for two years.”
Chris Rinker, co-owner of Rinker’s Boat World in Houston, says his business has improved consistently during the past several years. “We sell upper-end products, and that’s what’s selling,” Rinker says. Triple-tube pontoons with high-horsepower outboards in the $40,000 to $80,000 range are selling well, as are Moomba ski and wakeboard boats in the $70,000 to $100,000 range. Sea Hunt has done so well the dealership is essentially sold out of inventory for the year.
Small inboards and pontoons, such as Malibus and Benningtons, have been doing very well at SMG Wake this season, Bean says. Cruisers between $200,000 and $700,000 are still “almost non-existent,” he says. “I’d say the middle-management people that would be buying those $150,000 to $400,000 boats, the 30- and 35-footers, that guy has completely disappeared. I don’t think those people are feeling that comfortable in the marketplace yet. I think the smaller boats seem to be recovering at a pretty good swing, though. The high-end boats are still selling.”
After the recession, Bean says, the very high end of the business actually experienced a spike because people were buying deals. It softened, but Bean thinks the oil and gas boom is reinvigorating it.
Rinker says he made a quick decision to exit the small cruiser segment when it died four years ago. “We lost a lot of money in inventory, but we took that available floorplan space and put it into different types of boats, and we’ve done very well,” he says. “The cruiser market has remained very soft, but a $100,000 open-bow ski boat is not unusual to sell now.”
The boom, however, is not being felt equally throughout the state. With floods, drought, wildfires and tornadoes, Texas has seen plenty of weather challenges in the past few years. “We’re not feeling it particularly,” says Rod Malone, president of Sail & Ski Center, which has three locations in central Texas. “In the south Texas area, there is a considerable amount of oil activity. Of course, the money gets distributed throughout the state. In terms of the impact being felt in the housing market and in some areas, I don’t feel it yet in our business.”
Malone thinks the drought and low water conditions have severely limited any effect he might otherwise be feeling from the money and jobs coming to the region. “I feel like if we had a better environment, we’d be doing much better on the boating side,” he says. “We’re in our third year now of low-water situations, and there’s really no forecast that says it’s going to turn around tomorrow. So we’re, in essence, in a holding pattern.”
The proximity to the coast has helped offset the drought’s effect, but business is not as robust as in the past, Malone says. Whaler and Nautique have outperformed other brands. “Water sport and fishing enthusiasts are going to satisfy that passion, regardless of what the circumstances are, so we’re benefiting from that,” he says.
If the drought eases — some lakes were 50 feet below average — Malone says it could influence how he orders for the 2014 season. “We’ll see it in the next 12 to 18 months as we experience a general improvement in the economy,” he says. “If people feel comfortable with their net worth, we’ll see a return to the nicer and larger boats as the conditions to use them improve. If we see some improvement in our environment, I would expect to see improvement in our sales and activity, which would affect my buying and inventory decisions for the upcoming year. If I’m sitting here in the same circumstance that I’m in now I’ll be conservative at that point.”
Real estate, which never took as hard a hit in Texas as it did in other areas of the country, has been taking off because of the job growth in the area, Bean says. In a span of 60 days, prices increased $100,000 in his Houston-area neighborhood. Still, he says, homes remain affordable. “There’s a lot of people moving here, and a lot of industry that’s gas- and oil-related that’s moving here and growing,” he says. “So competition for real estate, wages, all those things seems to escalate. As homes become more valuable, people begin to feel more comfortable and … want to start to live life again.”
Bean thinks the midsize cruiser segment will remain slow, so he will continue to be wary of placing orders for that size range. “To me it’s a segment that still has a lot of risk attached to it,” he says.
Malone says the growth in the real estate and job markets won’t immediately translate to boat sales. “Every time I see the housing market get really hot it actually takes away from the boat business,” Malone says. “The money’s being spent on homes. But once people get their nest all in order they’ll go out and get a boat. Boat sales lag 20 months or so behind the housing market.”
The boating industry is what Bean calls a “trailing indicator” of the overall economy. Autos and housing are two early indicators, and both have been strong in Houston and Dallas. Rentals are at 98 percent occupancy, which has been an issue for those moving into the state for jobs.
And tens of thousands are moving into Texas seeking work. ExxonMobil Corp.’s new 385-acre corporate campus north of Houston is expected to spark commercial and residential development in the surrounding areas. The complex — in an area known as The Woodlands — will be ExxonMobil’s largest, with 10,000 employees. Many economic experts expect that development to have a domino effect, prompting other energy companies to locate their headquarters in the area. Chevron has said it will transfer 400 jobs from California to the region.
“I’ve read that if you look at the new headquarters and ancillary support, that in total Exxon will bring more than 100,000 people into Houston,” Bean says, speculating that the city with 6 million people will handle the rapid growth.
“That growth also creates a need for groceries and gasoline and boats and everything else. I think that trend is predicted to continue for a while,” Malone says. “If we have improvement in the drought situation, we’ll see steady improvement immediately.”
Bean says the benefits are already being felt in his business. “When I see someone who’s never been in boating buy a new boat, that’s a big indicator,” he says. “When we buy boats, we’re addicts, but when new people are buying boats who’ve never had boats before, that’s telling, and we’re starting to see a lot more of that. A lot of new boaters are coming in wanting to wakeboard and surf, whereas before the past couple years it was all boaters replacing their boats, trying to keep in boating and keep it affordable.”
Rinker also thinks he’ll keep growing. “We’re in north Houston, and a lot of the oil companies already base their headquarters there. They’re coming in and building new buildings and bringing in people from other parts of the country. We joke about the economy, but at the end of the day we all say how blessed we are that we’re based here. There have been issues with floods, with hurricanes, with droughts, but overall our market area here has been good. We are growing every year.”
This article originally appeared in the September 2013 issue.