The question put before the four panelists in Miami was this: Can recreational boating become more affordable? Their answer was yes, it probably can, but a couple of them raised other issues: demographic and lifestyle changes that also are challenging boating’s growth.
The panel — Brunswick Corp. chairman and CEO Dustan E. McCoy; Sun Trust senior vice president Don Parkhurst; boat dealer Fred Pace, a partner in Legendary Marine; and Freedom Boat Club CEO John Giglio — spoke for a cross-section of the industry at the annual meeting of Boating Writers International at the Miami International Boat Show.
McCoy says boating can and must become more affordable, and Brunswick — the owner of 11 U.S. boatbuilders — is working hard to accomplish that.
“We need to have every new model cost less than the model it replaces,” he says. “Over five or 10 years, that will have a real impact.”
Brunswick companies are 70 percent along the road to reaching that goal, McCoy says. A company survey of 15,000 people in major marine markets worldwide showed that 90 percent think boating is great, he says, but the cost troubles them.
“The cost versus the benefit in boating is out of whack,” he says.
The fact that more used boats were sold in 2012 than in 2007 confirms that finding, in McCoy’s opinion. New-boat sales remain at just 60 percent of prerecession levels.
“That begins to line up in my mind with the conclusion that our stuff is too expensive,” he says. “The consumer sees more benefit in buying used.”
McCoy says making boats more affordable requires better engineering, better sourcing, better manufacturing processes and innovation.
“From our perspective, this news is good,” he says, “but it’s sobering.” The good news is that people like to boat and affordability is a solvable problem.
Lenders probably won’t be able to do much to lower the cost of boating during the next few years, says Sun Trust’s Parkhurst. The standard 10-, 15- and 20-year lending terms can’t be extended much more than that; rates are at historic lows and are likely to rise in the next few years as the Federal Reserve backs off its support of artificially low interest rates; credit terms have eased and are about where they should be from the standpoint of sound lending practices; and money is available to creditworthy buyers, he says.
It’s not just affordability. Demographics also are stunting boating’s growth, Parkhurst says. A recent Sun Trust study found that as baby boomers retire, they are selling boats and either leaving boating or buying much smaller vessels.
“There’s a huge demographic going on here” that is shrinking the boating market, he says. “Now that they’re retiring, we’re not going to have that wind in our sails.”
What’s hot now? Center console outboards, pontoons, midsize diesel trawlers and Down Easters, Parkhurst says. In general, consumers are looking for boats that are “less expensive to operate and buy, he says. “People are looking for value over cost.”
Boaters are holding on to their boats longer, especially if they have an upside-down loan, one legacy of a recession that has left many boaters with a vessel whose market value is considerably less than what they owe their lender for the boat.
“That is going to take a long time to resolve,” he says.
Parkhurst confirmed McCoy’s observation about used boats. “Seventy-five of our business is used boats,” he says, adding that more boaters are repowering old hulls.
Lastly, the recession ruined the credit of a lot of potential boat buyers, he says. The “black marks” will remain on their credit report for seven years, he says. If they filed for bankruptcy or a lender foreclosed on their boat, that action stays on their record for nine years.
“I truly believe it’s the economy and demographics that are holding back boating,” he says. “People are hurting. The middle class is having trouble affording boating.”
McCoy says NMMA studies have found that although the average age of boat buyers is increasing, the average age of people who boat is decreasing, suggesting that the people who are boating are getting younger, and as they advance in their career and as the cost of boats go down, they eventually will be able to afford one.
“How many years is it going to take to turn this around if we have to trim [boat] costs and if the interest rate is going up?” moderator and BWI member Mike Sciulla asks.
“If anyone is looking for it to go back to the way it was in ’06 pre-recession, it’s not going to happen,” Parkhurst says. “The 5 percent growth rate is going to be our new world.”
Time? Not enough of it. That’s the biggest obstacle to boating for millennials, the generation born between the early 1980s and early 2000s, says Fred Pace, managing partner of Legendary Marine, an award-winning dealership that sells 11 brands at four locations in the Florida Panhandle and Alabama Gulf Coast. Legendary was named dealer of the year in 2012 and 2013 and recently won a national marketing award.
“The biggest holdback for that millennial generation is time,” Pace says. “We’ve just not seen them come into the market. We’re competing within our families with soccer, band practice. … If that continues, we’re going to struggle because we’re competing with that.”
Pace says his dealerships deliver added value — boater education, hands-on clinics, guest speakers, destination events and fun attractions (he hosted a James Bond Day, bringing in an ersatz Bond by helicopter to race through nearby waters for a boat “stolen” from the marina) — to “keep the customers we have.”
“We’re committed to raising the bar,” he says.
Are there alternatives to boat ownership? John Giglio, CEO of the Freedom Boat Club, a members-only club with 78 franchises that rents boats, says he gets millennials and baby boomers in the club.
“We make it extremely easy for people to get into the market,” he says. “There’s not a big capital outlay and you don’t have to get a loan.”
Giglio says the industry did not look favorably on rental boat clubs 10 years ago because they were considered competition, but he says rental clubs give novices a taste of boating and focus on training and education to keep them in boating.
“Seven of 10 new boaters are getting out of the sport,” he says. “They have a bad experience. We want to get people on the water and have a pleasant experience.”
Giglio says Freedom’s revenue has increased 25 percent annually during the past 10 years. The company bought 150 new boats in 2013 and now has 800 in its fleet. It has 3,000 members.
“We retain 90 percent of our membership base,” he says. “We get younger people. We get older people. People want to get out on the water.”
He says that in one survey Freedom did of 764 of its members, 63 percent say they were looking to buy a boat in 12 months and 59 percent say they were new to boating.
“We’re getting new boaters engaged in the sport, and we keep people in the sport who might not have stayed if they had to own a boat,” he says.
This article originally appeared in the April 2014 issue.