The  Grandparent Economy - Trade Only Today

The  Grandparent Economy

Statistics say boat owners are aging, but are boat users actually getting younger?
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Participation at younger ages has become a motivator for new buyers.

Participation at younger ages has become a motivator for new buyers.

Grandparents today don’t typically resemble the white-haired, bespectacled version of the past. Most are baby boomers, with some remaining members of the “greatest generation.” They are healthy and active, and they still hold the majority of the nation’s wealth.

But unlike their predecessors, they are using their wealth to have fun and as a tool to bring the extended family together — and for some, that means buying a boat.

For the boating industry, that family time could mean there’s more youth involvement than statistics reflect. The average age of boat owners has risen steadily and is now 56, according to Jack Ellis with Info-Link, which tracks registration data of new and used boats. But the owner and the users aren’t always the same.

Take, for example, personal watercraft.

“PWCs are an odd thing because you have this mishmash,” Ellis says. “I think buyers versus the users of PWCs are different people. The kids and grandkids are using the PWCs. Certainly if I had the means to do so, what a fun granddad I would be if I had a pontoon, a couple PWCs and a lake house.”

Even from a social standpoint, the interaction between today’s grandparents and grandchildren is very different than it was 20 or 30 years ago, Ellis says. “My parents did everything with us as kids, but as grandparents they did their own thing,” he recalls. “But in this generation, they’re more involved with their kids and grandkids.”

The fact that people are living longer, healthier lives has caused seismic shifts in demographics and social trends. The lingering effects of the Great Recession also have influenced generational spending, marriage trends and childbirth.

“Society is in a state of transition as the life cycle continues to extend,” according to researchers YiLi Chien and Paul Morris of the Federal Reserve Bank of St. Louis. “People have been living longer and retiring later, and with that has come a multitude of other demographic shifts.”

Digging into those shifts can show the boating industry in new light.

Extended families are now making group decisions about the boat types they will buy.

Extended families are now making group decisions about the boat types they will buy.

A family affair

“If you take a look around the country’s lake and waterfront development, it’s prime real estate,” says Bryan Seti, general manager of Yamaha’s Watercraft group. “The boomers have more wealth than their salaries reflect, and they’re buying that property with the idea in mind that the whole family will come to the house and share time together.”

That idea means data about aging boat owners doesn’t correspond with the age of boat users.

“The age that you see of who’s buying the boat is not necessarily reflective of who’s actually using the boat,” Seti says. “I think it’s very easy to see that on the water. There is more participation at a young age, and that’s the trigger for people to buy.”

Eric Smith sees more generations sharing the buying decision at the Colorado Boat Center.

“We’re definitely seeing the whole extended family being part of the boat purchase,” Smith says. “Grandchildren are helping with the buying decision. We’ve seen a huge influx of sales of performance pontoons, and they’re high-end, spendy boats. It’s something where they can get the entire family on the boat, and it still allows the family to do all the activities they want to do.”

Millennials are starting to have kids, and while many are holding off on major purchases, the grandparents want to facilitate family fun.

“That older generation, they’re providing the place, providing the activities and bringing the tribe together,” Smith says. “The generation that is buying for the whole family, they’re not buying an entry-level $30,000 boat. They’re buying the $80,000 to $150,000 boats with all the amenities and all the bells and whistles, where they can be comfortable but everyone can play. They’ve got the income to do it.”

Smith , who is 41, says he often hears grandparents saying things like, “I know I can’t take it with me, but I want to see everybody enjoy my fruits while I’m still here.”

Watching the inheritance get spent

Many people in their 30s and 40s who have children are enjoying big gifts from their parents: expensive vacations abroad, a few weeks at a lake house with the boats, or summer camps. An AARP survey released in April found that 47 percent of people 45 and older planned to take a multigenerational family trip within a year. The three top motivators were bringing the family together (83 percent), building memories (69 percent) and having quality time with grandkids (50 percent), according to The New York Times.

Grandparents in America are spending $100 billion a year on entertainment, and $52 billion is being spent on grandchildren, according to Recreational Boating & Fishing Foundation president Frank Peterson.

In the 2015 book “The Grandparent Economy,” author Lori K. Bitter says more than half of grandparents have provided financial assistance to their adult children, ranging from emergency help after a job loss to help with tuition or a down payment on a home.

“Baby boomers have different parenting relationships with their millennial children than the previous generation,” Bitter told The Fiscal Times. “Boomers have always been more engaged and more involved with their children’s lives. That style of parenting led to much more of a return-to-the-nest mentality.”

The World War II generation thought about legacy in terms of assets they would pass on, Bitter says. The boomers’ idea of legacy is more about creating experiences with the extended family and living in the now.

“For them, it’s more about time and giving the gift of time now while they’re here rather than leaving them something later in life,” Bitter says.

Feeling forever young, healthy and wealthy

Boating not only allows grandparents to bring the family together, but also helps them to feel young, Seti says.

“A big part of boating is parents sharing with their kids, and the fact that everyone can participate in the day of boating, as opposed to just watching kids play sports and sitting in the bleachers,” he says. “People in their 50s, 60s and 70s are much more active now. You see all generations of people paddleboarding or fishing. Boating’s a big part of feeling young.”

Tapping into that quest for youth fits with the global market for anti-aging products, juice cleanses and yoga studios. According to the Global Wellness Institute, a nonprofit research firm, the global wellness market grew 10.6 percent to $3.72 trillion from 2013 to 2015 — and it’s reaching more than boomers.

A recent headline in The Boston Globe read: “The new insult: calling someone middle aged. Even — or especially — if they are.”

“You overhear a twentysomething colleague referring to you as ‘middle aged’ — and the part of you that thought your cool sneakers were fooling people dies,” the author writes.

“Forty isn’t even middle-aged anymore,” Pamela Druckerman, author of “There Are No Grown-Ups: A Midlife Coming-of-Age Story,” said on a WBUR story called: “What It Means to be Middle Aged.”

Billions of dollars have been poured into scientific studies that counter or reverse aging in human cells. A 2016 study on an exceptionally fit group of octogenarian athletes has identified that “superb fitness” keeps older people younger at a cellular level than their average peers.

Even boomers who are aching to become grandparents ask for nicknames other than grandma and grandpa. “It has such baggage with it,” Lin Wellford, co-author of “The New Grandparents Name Book,” told The Boston Globe.

No matter what nicknames they choose, boomers can expect to live longer and retire later than prior generations, according to Accenture.

Those trends will affect who can afford to buy boats, and when.

While what’s dubbed the “great transfer” of wealth from the World War II generation to the baby boomers is still taking place, a second and even larger transfer from boomers to their heirs is starting now and will continue for 30 to 40 years, according to Accenture.

While the great transfer will see more than $12 trillion shift, the greater wealth transfer is estimated at $30 trillion in financial and non-financial assets in America. At its peak between 2031 and 2045, the transfer is expected to see 10 percent of total wealth in the United States changing hands every five years.

“More than 75 million millennials born between 1981 and 1997 are ready to take over an estimated $30 trillion in wealth from baby boomers,” says Christopher Ma, director of the George Investments Institute at Stetson University in DeLand, Fla., in the report.

That’s reinforced by AARP statistics, which show that people older than 50 hold 80 percent of America’s household wealth.

The Accenture report points out that boomers turning 65 now can expect to live another 18 years on average and will retire later than prior generations. And their attitudes toward aging are different from previous generations. Affluent boomers expect to remain healthy, travel and continue working, meaning their heirs will be older when they receive the transferred assets. Boomers will continue to be the wealthiest generation in the United States until at least 2030.

“Depending on the needs of their children and grandchildren, boomers may make gifts of assets while they are alive to enjoy and influence how they are used,” the report says.

Boat dealer on recent millennial and Gen X buyers: “They did their research, knew what they wanted, and were ridiculously smart about the product.”

Boat dealer on recent millennial and Gen X buyers: “They did their research, knew what they wanted, and were ridiculously smart about the product.”

Generation X

While Gen Xers and millennials are struggling as a result of the Great Recession, boomers fared the best — another overarching trend that is likely influencing which family members are buying boats now.

In 2013, Gen Xers (born from about 1961 to 1981) had higher debt than pretty much everyone: The Pew Charitable Trusts’ Survey of American Family Finances showed that nine in 10 Gen Xers reported holding debt, the highest proportion of any group including millennials. Gen Xers were already behind previous cohorts before the economic downturn. In 2007, the typical Gen Xer had fewer financial assets than baby boomers held at the same age.

The timing of the recession was also particularly challenging for Gen Xers, many of whom purchased homes during the housing bubble. While all groups experienced wealth losses in the recession, Gen X took the hardest hit. From 2007 to 2010, Gen Xers lost nearly half of their wealth, an average of about $33,000. A report by the Urban Institute said GenX wealth fell by 47 percent. (The slight difference in percentages can be attributed to the fact that each group measures each generation slightly differently.)

Those hits linger. Today, Generation X has the most credit-card debt, according to Experian. Some of the financial assets from the great transfer will find their way to Generation Xers, who are expected to experience the highest increase in share of national wealth through 2030, growing from less than 14 percent of total net wealth in 2015 to nearly 31 percent by 2030, according to Accenture. Student debt may remain, but most Gen Xers should see incomes and savings rise.

“In fact, firms that haven’t yet woken up to Generation X’s potential may be too late to the party,” the Accenture report states. “As of 2015, about 37 percent of Gen Xers report having more than $100,000 in investable assets. And, Gen Xers are the largest investors in residential property by value.”

Smith says the Generation X buyers he sees at Colorado Boat Center are making more modest purchases than the previous generation.

“They’re definitely not overextending on boats,” Smith says. “I am seeing a more responsible customer. I do believe the Gen Xers, the millennials and the next generation, they saw the frustration that went on 10 years ago, and they’re being pretty responsible to not get themselves into that.”

The biggest challenge with this group is that boating is up against the family’s available time between sports, activities and, often, two careers, Smith says.

“That’s why the families are following the grandparents who bought the boat, and they can go use it a few times a year,” Smith says.

Millennials

Millennials have more college debt than Gen Xers. This group holds an average of $162,000 of assets relative to Gen X’s average of $198,000, and average student loan levels surged from $4,200 for Gen X to $14,700 for millennials, according to the St. Louis Fed.

“They’ve been going to school longer and delaying life events,” Chien wrote in the St. Louis Fed report. “However, they have shown a higher propensity to save for retirement and to avoid credit card debt.”

Grandparents in America are spending $52 billion each year on their grandchildren.

Grandparents in America are spending $52 billion each year on their grandchildren.

That makes sense for a generation that is seen as highly resourceful and careful about investment, and many view highly specific, advanced degrees as a long-term investment.

“We’ve got interns right now, it’s amazing what they’re studying, they’re so specific,” Seti says. “They’re focused specifically on purchasing or warehouse management. We didn’t have college like that. It was all general. You would get a degree in business. Now it’s so targeted in what they want to do. In some cases they’re more knowledgeable than employees that we have already.”

This generation doesn’t deserve the stigma that is typical when a new generation hits the workforce, Seti says.

“This new generation has a point of view, they have opinions, and they are not just participating in boating,” says Seti. “They’ve got a voice about what they want to do and how they want to do it, and they can make a lasting impression on boating as an industry.”

Smith says he has seen a recent uptick in millennial boat buyers.

“Probably a month ago, we had a string of younger buyers,” Smith says. “As I’m doing all the title work, I’m seeing late ’80s birthdays, and even some ’90s birthdays. It was refreshing. Each of them have families, they knew what they wanted, they researched their stuff — they were ridiculously smart about the product — and they had also researched us, which was really kind of cool.”

They made entry-level purchases like the Gen Xers, says Smith.

“This year at boat shows in particular, there was a much younger crowd shopping,” agrees Seti. “Initially they’re browsing and then they’re going into the purchasing phase. We’re seeing what we believe is a result of this lake house mentality.”

More than one-third of Americans have delayed a major life decision in the last year because of finances, a drop from the 51 percent who did so in 2015, according to a survey by the American Institute of Certified Public Accountants. That means millennial boat buyers may be late bloomers when compared to their parents.

“We’ve been saying that millennials are going to do what generations before them did: They’re going to get married, buy a house, have kids and buy a boat,” says Thom Dammrich, president of the National Marine Manufacturers Association. “But they’re reaching these life stages seven years later than generations before them did. What this is saying to me is, this seven-year black hole may be coming to an end.”

Delaying, or forgoing?

Assuming that future generations will follow in the footsteps of their elders might be a mistake, according to people who watch the birth rate in America. It hit a 30-year low in 2017.

“The numbers are pretty striking,” Janet Adamy, who covers demographics for The Wall Street Journal, told WBUR. “We did a chart going back a hundred years. The 2017 birth rate: 60 babies per 1,000 women per year. That’s about half of what it was in the 1960s. So it’s a pretty dramatic drop.”

The drop is partially attributable to “lasting economic scars,” Adamy says. “For a lot of these people, it’s millennials who have put off having children,” she adds. “They are still digging themselves out of student loan debt. It’s become harder to buy a house. They look at the cost of childcare, which is increasing beyond the rate of inflation. And they may have a good job and a good income now, but they haven’t dug themselves out of that hole that they found themselves in after the recession.”

The figures suggest that a number of women who put off having babies after the recession are forgoing parenthood altogether, Adamy writes.

Kenneth M. Johnson, senior demographer at the University of New Hampshire, estimates 4.8 million fewer babies were born after the recession than would have been born had fertility rates stayed steady.

The economy isn’t the only factor contributing to the decline, researchers say. There’s also an increase in the number of women attending college, women who don’t want to interrupt their careers to have children.

“People are coming out with a lot of debt,” Jennie Brand, professor of sociology and statistics at UCLA who has studied the impact of education on fertility, told the newspaper. That gives them an incentive to keep working. “It’s another thing they have to grapple with before they might think about starting a family,”. said Brand.

That could eventually translate into boat purchases for those who have more disposable income later in life, but that accumulation of wealth is not expected anytime in the near future for this group — with the exception of those who stand to inherit from boomer parents.

Younger families have been turning to boat clubs to avoid ownership and maintenance costs.

Younger families have been turning to boat clubs to avoid ownership and maintenance costs.

With technology comes expense

Marine industry spokespeople often say there is a boat for every budget, but the numbers tell a somewhat different story that may also be affecting purchases by younger generations.

New powerboat sales increased 5 percent in 2017, to 262,000 units, the highest level the boating industry has seen in 10 years — but still a distance from the industry high in 2005, when 386,200 powerboats were sold, according to NMMA data. The association estimates there were 142 million Americans, including children under age 18, who went boating at least once in 2016. In 2014 and prior, the NMMA estimated that 88 million adult Americans went boating.

Total marine expenditures on new boats, engines, trailers, accessories and services, however, were at an all-time high last year at $39 billion, up 7 percent over 2016.

Outboard engine retail sales were up 6.3 percent last year, reaching a post-recession high of 270,300 units, and average outboard engine horsepower increased 36.5 percent since 2010 — translating into more dollars. The average retail price of an outboard engine was up 6.9 percent to $9,586 in 2017, and average horsepower reached an all-time high of 116.1 horsepower.

Sales of pricey boats equipped with three or four 100-plus horsepower engines have prompted many manufacturers to build bigger boats with more technology and amenities. While some small fiberglass boats can be purchased at entry-level prices — the Bayliner Element E16 starts at $14,999 and the Chaparral 19 H2O at $29,895 — a 40-foot center console is closer to $500,000 before it’s optioned.

That kind of money pays for technology such as electronics with fish finders and speakers; one Boston Whaler at an expo in Captiva, Florida, had 2,000 amps and 22 speakers. The investment also includes integrated systems such as joysticks, auto trim, digital switching and virtual anchoring. Such features are designed to attract new boaters by making boathandling and navigation easier, but often price the vessel out of reach for millennials and Gen Xers.

The average age of boat buyers has risen steadily and is now 56.  But the average user could be much younger.

The average age of boat buyers has risen steadily and is now 56. But the average user could be much younger.

The sharing economy

There is some evidence to suggest that millennials and Gen Xers who can’t afford to buy are one of the forces driving the rise of boat clubs and rentals in the United States.

Freedom Boat Club’s average member is in his early 40s, but different geographic markets vary, says president John Giglio. In Florida, several members have aged out of boat ownership but still want time on the water, so that demographic skews older. More cosmopolitan markets including Boston trend younger, with “people who have more money than time.”

Membership requires $4,900 to $6,900 up-front depending on promotions — similar to a down payment — and then a monthly payment of $369 in Boston, similar to a payment on a purchased boat.

“In terms of monthly payments, it’s comparable,” Giglio says. “But overall cost is much less because of winterization, storage, upkeep and maintenance.”

The club makes boating a fixed cost without the variables of ownership, he says.

“When you look at our parents’ generation, ownership was status,” Giglio says. “You had a nice house with a pond, and had a boat vacation property somewhere. The overall mind-set has shifted dramatically. People don’t need to own stuff anymore. There’s this thinking that the big trend with millennials is that they don’t want to buy things. Actually, Generation X is more involved in the sharing economy than millennials, but there are more of them that are in a position to buy.”

Some customers fluctuate between ownership and membership. One left ownership when he started his career and family, Giglio says.

“Right now, he is not a boat buyer, but he is a club member,” Giglio says. “So what does that do? Not only does it fulfill what he wants to do with his leisure activity time at this time of life, but it’s also going to expose his kids at a very young age to boating. If he waits, they’ll miss that opportunity. The more people we get out on the water, the more people they bring with them, and we’re bringing the industry in at a younger age. The industry may miss a couple sales, but they get many more in 20 years. I’m not thinking short term.”

Another Freedom client asked to end her membership after 10 years.

“We have enjoyed the time with this group but have switched up our lifestyle to focus on camping and purchasing our own boat,” wrote Annette Gustin, who had a 21-foot Continental when her son was 2. But the young family couldn’t afford to keep the boat and eventually sold it.

“When my son entered high school, my husband was feeling like he shortly would be losing both our kids to college,” says Gustin. “He wanted an activity that we could do as a family and have fun so we joined Freedom Boat Club.”

Now the kids are in their 20s, so Gustin and her husband have purchased a pre-owned, 29-foot Luhrs. If she and her husband ever get tired of ownership, Gustin says, they will be happy to return to Freedom Boat Club’s membership model.

Seti says Yamaha Watercraft embraces this type of thinking among current, and future, buyers.

“A lot of marinas have PWC rentals, so the sharing economy has always been part and parcel of what we do,” Seti says. “It’s going to curtail sales a little now, but in the long term, it’s going to get people committed to wanting their own products.”

This article originally appeared in the July 2018 issue.

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