As the economy improves, boat sales will begin to grow, industry leaders predict
Regaining an equilibrium is not an exciting concept — unless you’re an industry that has weathered a 60 percent sales decline in many of its segments during the last five years.
None of the 18 contributors to our Forecast 2012 survey of industry leaders has bold expectations for the year ahead. “Cautious optimism” may be the most overworked phrase in the industry lexicon, but it sums up in two words the prevailing sentiment.
Most expect a gradual advance to a “new normal” — although no one quite knows what that will be. “We can no longer measure success against 2006 or 2007 — 2010 is the new benchmark,” says NMMA president Thom Dammrich.
The industry leaders agree to a remarkable extent on two key points: that the worst appears to be over and that boating is alive and, if not well, at least not dying — kept afloat by a committed core group that won’t quit the water under any circumstances.
There’s also agreement that the road to recovery lies in expanding that core. “The solution,” says Dammrich, “is … the same for each of us — getting more people participating in boating.”
Totally dependent on discretionary spending, the boat business was disproportionately affected by the new consumer frugality.
“This was the hardest economic adjustment period I’ve weathered in my lifetime,” says industry statistician Aarn Rosen, whose monthly sales figures charted the decline. But he is optimistic. “Segment declines are abating,” he says, and “many of the marine market segments found a floor in 2011.”
Interim executive director, National Marine Electronics Association
I feel there is reason for some optimism in the marine electronics industry for 2012. There is growing evidence that shows modest but real improvement in the U.S. economy while other world economies still struggle. It is hard for most people to see it in their everyday lives, but I think the U.S. economy is heading in the right direction.
As of December, the unemployment numbers are heading the right way — downward for the first time in two years. Most companies have taken measures to reduce costs during the uncertainties of the last three years, adapting to low consumer confidence and demand. This created a negative effect on discretionary spending, which is critical to the marine industry. NMEA members overall have had better results in 2011 than in 2009-10. In 2011 there continued to be many new and innovative marine electronics products introduced and, with Americans being gadget-crazy, this has kept the marine electronics sector faring better than the rest of the marine industry. Some people may disagree with this because certain sectors and regions are still having a hard time. We know of several NMEA members who have responded to the softness in the recreational market by capturing new business in the commercial marine sector, which has been more buoyant.
I think that overall the U.S. economy and mood of consumers will improve in 2012, led by the continuing product innovation and appeal of marine electronics and the acquisition of skills by industry members to adapt to market changes. These attributes will be the hallmarks of successful companies in 2012.
Vice president, Dominion Marine Media
Our business is global, so it’s hard not to think about Europe as press time for this annual issue arrives. A year ago we thought that Europe’s economy would slowly recover from the crisis. It started the year ahead of its 2010 pace, but over the summer has gone wobbly. The numbers reported by our brokerage members show that many of the gains in the first half of the year were wiped out during the summer.
Even though the economic outlook is uncertain at best, and we expect a tough year in boat sales ahead, some exhibitors at European shows this fall have had success. We’ve looked for the pattern, but nothing points in a precise direction. In general, larger used boats are moving well, but the rest of the market remains confused and hard to analyze.
The U.S. economy seems to be somewhat better off, but reports in this magazine and our YachtWorld.com Market Index make it clear that through most of 2011, boat sales have been lower. Our brokerage members report that the bigger the boat, the better the sales, compared to 2010, especially among superyachts, and that trend seems likely to continue into 2012. Pricing of brokerage boats for most of the market is generally stable, but fewer buyers of smaller and middle-size boats are trading their current boats.
Our outlook for 2012 toward the online arena in which we operate is something different. Searching and researching one’s next boat online has become a given; now the question is how boat sellers can get the potential buyer’s attention and effectively move him down the sales funnel.
We believe that the increasingly mobile and social Internet has already begun rewarding smart brokers, dealers and builders who are investing in new ways to market and reach customers. We’re working to assist them through creating additional, more flexible consumer access points to their inventories on our websites and their extensions.
But there’s another side to the success equation for 2012 that’s not just technological. Those dealers and brokers who work harder to use the new tools at their disposal engage more effectively with their customers. Our job is to develop new products and initiatives that make it easier for them by, for example, offering mobile access to lead and inventory management tools.
There will be sales in this industry in 2012. The number of leads that came through our sites was higher earlier in the year, compared to 2010; they fell this fall, especially for smaller boats, but recently leads for larger boats have climbed again above 2010 levels. This may not be a lasting trend, but it’s proof that the appeal of escaping land in a boat is enduring. That’s a healthy trend we expect will last.
Chief operating officer, Navico Americas
2012 is another difficult year to provide an outlook for the marine industry. In general, the U.S. economy and business climate appears to be getting a little better. Unemployment is down, but still high, consumer confidence continues to be low, and the upcoming election may cause uncertainty in policy direction and regulations that affect both the marine industry and consumers’ disposable wealth.
However, on a very positive note the American marine industry has stabilized. At Navico, we see most of our customers holding on with new lower inventory levels so that they are poised to run profitably in this new economy. Boatbuilders and their suppliers have adapted their operations to a more “build-to-order” model rather than building their inventory prior to the season and blowing it out on special buys.
Make no mistake: Many companies have folded under the pressures of the “new” economy, but the manufacturers and dealers that remain are stronger because they made the tough business decisions to stay lean. Companies investing in innovation and support stand to gain with their customers, even in a tough business and economic environment.
As I look at our B&G, Lowrance and Simrad Yachting forecast for 2012 and beyond, I am reminded of a statement made in IBI about three years ago, ‘Flat is the new up,’ and I ask myself, ‘Is this still the case for the next year or two?’ I don’t think anyone really knows, but I am certain that it does not make sense to take a wait-and-see approach to find out. The industry is slowly improving, and it is probable that more stressed and inefficient companies will not make it. At Navico, we see that our ability to grow is founded in the development of exciting and “in-demand” products and services in multiple channels and territories. There is opportunity amongst this uncertainty.
Based on discussions with channel partners and predictive modeling derived from order levels during the last couple of months from top resellers and distributors, I believe 2012 marine electronics sales levels will be similar to 2011. However, our customers do remind us of the uncertainty of the election year. Our discussions with boatbuilders indicate continued steady growth with no surge of double digits. The growth is small and does not approach pre-2008 levels.
Overall for Navico, we see a bright future. We have a long-term product and sales growth plan and have experienced strong, positive consumer response. In 2012, Navico’s vision will achieve full speed as our Lowrance, Simrad and B&G brands hit on all cylinders with full product portfolios. Regardless of the industry and economic challenges the marine industry will face, Navico is primed to maximize our presence and work with our channel partners to provide the best products and services possible for boaters.
President, National Marine Manufacturers Association
This is the time of year when people are asked to make predictions for the coming year. I have been asked to share my outlook on what lies ahead for the industry, and while I can’t predict the future, as we embark on the new year I’ve found myself feeling cautiously optimistic about 2012.
But before we look too far forward it may be helpful to reflect on where we are (and have been) in 2011. Most notably, it appears retail sales will net about 5 percent above 2010, signaling the first time in five years that we have seen retail sales growth. Finally! (And I think that deserves an exclamation point.) We should not forget that even during the recessionary period recreational boating remained big business, contributing $30 billion annually to the U.S. economy and more than 300,000 American jobs.
In 2012, it’s likely we’ll see slow growth, should economic indicators continue improving. Through the third quarter, wholesale shipments of new powerboats were up 13 percent and corresponding dollars were up 22 percent, and ITR Economics’ Forecast of New Boat Shipments predicts new boat shipments will be up 6.5 percent in 2012 and continued, but slower growth, through 2015. Healthy consumer confidence, employment and a stronger housing market are crucial to an industry rebound.
That said — and here’s my best attempt at a pep talk — we must change if we want to grow. You likely have heard the saying, ‘If you think you can or you think you can’t, you’re right.’ It’s all about attitude. We can no longer measure success against 2006 or 2007 — 2010 is the new benchmark. Every sector of our industry is challenged by the same problem. And the solution to the problem is also the same for each of us — getting more people participating in boating.
Only 15 percent of North American households currently own a boat —- meaning there’s a large segment of the population yet to tap. Discover Boating’s new Welcome to the Water campaign creates awareness to grow boating participation. But Welcome to the Water is much more than an advertising campaign. We are working to create a movement — a movement to get people on the water. However, we will only succeed if everyone in the industry joins and promotes the movement to welcome more people to the water.
To get the ball rolling, NMMA hosted an Industry Growth Summit in December that brought together all facets of the industry to create a shared vision of a successful industry in 2012. Summit participants developed joint action plans to move the industry toward that vision of success. At the root of this meeting was the firm belief that working together provides us the best chance at seeing real change.
To put our industry in the best position to flourish we must work together to grow participation — namely, welcoming more minorities and youth to the water. It is also critical that we put a strong focus on the customer, offer innovative and superior products and provide excellent boating experiences.
I encourage you to be part of the Welcome to the Water movement. Together we can create a better future for recreational boating. Start by checking out GrowBoating.org to see what Discover Boating and Welcome to the Water materials and resources are available to all industry stakeholders to help welcome more people to the water. More information and next steps will be out in coming weeks from the Industry Growth Summit. We can make this change together.
Executive director, South Carolina Marine Association
My outlook for the next year is that the recreational marine industry will remain in a holding pattern. We saw some minor progress earlier in 2011, but the continued economic uncertainty has adversely impacted our businesses in South Carolina. Sales are down across the board.
The uncertainty is definitely felt by our customers, who are cutting back on any expense they think is unnecessary, no matter how much they like it. The South Carolina Governor’s Cup billfish tournaments have decreased in participation, as have other tournaments. Some sport fishermen have sold their boats, while three to four others will band together to fish on one boat to spread and share the expense. Transient yachtsmen may still travel, but they seem to be spending less time at marinas. And long-term dockage is down as marina managers watch longtime customers depart or downsize to smaller boats. Dry-stack storage is fast gaining on traditional in-water slips.
The cutbacks also affect both local and national membership associations that maintain vigils on legislative and regulatory matters for both individual boaters and marine businesses. It’s hard to convince folks to pay dues when they are worried about meeting payroll or wondering if they can even afford to keep their boat. Associations are losing membership and not meeting expected attendance numbers at conferences, no matter how valuable the content may be, as members cut travel expenses and hotels and conference centers raise their prices.
I think, unless a major economic rebound magically occurs, that no significant change will occur until after the 2012 elections. So my New Year’s wish is that all our marine businesses that have managed to hang on so far will continue to maintain their positions and be able to look for improvement by the end of 2012.
President, Marine Retailers Association of the Americas
Outlook articles used to be much easier to write when the economy seemed to always be growing. It’s tough now to even remember how long ago those days were.
In this new economy, where it’s tough to even know what’s around the next corner, indicators are difficult, at best, to interpret. Consider: We had NBA fans in a serious state of dismay over the fact that a bunch of overpaid players found themselves in a labor crisis; yet there seemed to be far fewer people voicing any similar discontent when the congressional supercommittee failed to reduce our national deficit. Or consider: The Dow Jones Industrial Average fell nearly 1,000 points from the time news of the pending supercommittee failure began to set in until it became a reality just before Thanksgiving; yet consumers responded by setting spending records on Black Friday, and the DJIA had climbed some 800 points just four business days later.
Clearly, it’s tough to predict not only what’s going on with the economy, but also what’s going on in the mind of the consumer.
Today’s marine dealers find themselves in a unique position. Some 35 to 40 percent of their competitors have disappeared. And while industrywide boat sales are down as well, the boat business among surviving dealers seems to have leveled off on average. Dealers have become smarter, more efficient and more diverse, and they’re perhaps stronger than they’ve ever been.
But with numerous predictions that the economy will sour in the near term, 2012 will not be the year to ramp up business investments. This will be a year of capitalizing on opportunities as they come up, something today’s dealers have become keen at doing. It will be a year of sticking close to your business partners and strengthening those relationships even further. It is shaping up to be a year where consumers will continue paying down their debts and it would be wise for our businesses to continue down that path as well.
Will there be a few pockets of opportunity? Sure. A few markets or dealers that outperform the rest? Absolutely. But the truth is that the gathering of industry leaders in Chicago in mid-December wasn’t designed to determine which of the many growth opportunities we should pursue; no, they gathered to identify actions we should take to fend off continuing declines in boat sales — to find growth, anywhere it may be hiding.
That will be the key to success in 2012 for individual businesses as well.
President, Dometic Marine
The pleasure boat industry got off to a strong start in 2011 in most regions and, although we have seen a slowdown in the second half, the year has been good overall for Dometic Marine.
In the first six months we were seeing double-digit growth in the majority of marine segments, compared with the previous year, with strong business in all major regions worldwide. By midyear, both the aftermarket and OEM business segments were providing good results. But the downturn in Europe started to impact sales, particularly in southern Europe, most notably France and Italy. The U.S. has continued to be resilient, and U.S. OEMs are still showing growth over last year for the fourth quarter of 2011.
Looking ahead, 2012 is going to present new challenges with the debt crisis in Europe, which is an important segment of our business. We are seeing some strengthening of the U.S. market, which indicates a favorable year, although double-digit growth would be an unreasonable expectation.
In Europe the market is certainly at risk, particularly the southern European countries. We expect some of Europe to do better than others, but overall our projections are flat. Asia-Pacific, including Australia, is an area where we don’t yet know what to expect, but again it is unlikely that the pleasure boat industry will see any growth for 2012.
Our strategy to overcome the challenges ahead includes the continual development of innovative, problem-solving solutions that answer the needs of the market. Since growth opportunities in the pleasure boat industry are somewhat limited, we are targeting the commercial marine sector — for example, workboats, where Dometic has very little market share.
We have also identified the emerging markets of India, Eastern Europe, South America and China as areas for expansion.
We continue to push hard in the aftermarket, and in Europe we believe that we can gain market share in the system retrofit market. In support of this, we have implemented product training across our sales companies, distributor and dealer network to ensure our staff have the right skills to do the job.
Chairman and CEO, Brunswick Corp.
The recreational boating industry has, in the main, managed through the economic headwinds affecting the industry in an admirable manner. The industry is positioned to achieve strong sales and earnings growth as economic conditions improve. However, as we approach the advent of 2012 it increasingly appears that prudent planning should be for slow economic growth.
In 2011, a slow economic growth period, the industry experienced solid growth in aluminum (fishing and pontoon) markets, flat-to-slight growth in outboard fiberglass and small fiberglass sterndrive markets and continued decline in larger fiberglass sterndrive and inboard markets.
Unless economic conditions improve, it is likely that marine markets will behave in 2012 much as they did in 2011. As a result, 2012 will require patience and discipline to ensure that the industry does not undermine the great work that has been accomplished to position the industry for the future.
President and CEO, The Hinckley Company
As we look to 2012 as our next waypoint, the last four years are now entries in the log. No one in our industry was spared from the decline in spending on everything from new and used boats to yacht club memberships to yacht charters. Fortunately, boaters are a passionate and hearty bunch, and it takes more than a few quarters of 6-foot rollers in the markets to shake the commitment to such an important part of life — our time on the water.
Today I sit at the helm of Hinckley, grateful for the commitment of our yacht owners, service customers and talented employees. Without their steadfast dedication, strength and confidence we couldn’t have navigated such difficult times.
So I look to this new year with great hope as long as we as an industry remain committed to service excellence and product innovation. Service first. What is paramount is that boaters enjoy their ownership experience — the exhilaration of racing out to catch stripers at first light or the comfort of the sunset picnic with friends and family in Edgartown (Mass.). As boatbuilders or component manufacturers or service-yard and marina operators, we must work together to deliver an extraordinary experience to every boater through service excellence. Our products have all become faster, lighter, more efficient and safer. It is incumbent upon every one of us to ensure that the quality of our service keeps pace. The ultimate goal? Providing a hassle-free experience to every owner so that their time on the water is pure enjoyment.
Beyond service, success in 2012 will require continuous product innovation. We all know that the adage “new sells” is a golden rule in our industry. In Hinckley’s case, I attribute 100 percent of our recent success in new-boat sales to the introduction of three new models — the new Picnic Boat MKIII, the Talaria 48 and the Talaria 34. Looking ahead, we will continue to drive innovation in every element of our product, from propulsion and control systems to hull and deck construction. Yacht buyers have proven that as an industry we will all be rewarded for investing in innovation. This year will be an important year for us to renew our commitment to this investment. We are all certain to benefit.
President and CEO, Recreational Boating & Fishing Foundation
At RBFF, it’s our job to increase boating and fishing participation — to create new customers for everyone in the industry. And despite the still-struggling economy, research shows us more and more people are getting out on the water boating.
In the National Marine Manufacturers Association’s 2010 Recreational Boating Statistical Abstract, it is reported that 75 million people (32.4 percent) participated in recreational boating — the highest proportion of participation in recreational boating since 1999, when 33.4 percent of adults were boating participants. I think this trend will continue in the coming year, as people are yearning for the simpler things in life, like spending quality time with family and friends.
Trend reports show that people will be seeking out more and more local goods and services and that they want a deeper connection to the things they use and do. People are looking for clues on how to make their lives better. It’s quality, not quantity that matters. And the boating lifestyle fits right into that.
But consumer expectations for personalization have increased exponentially. In order to maintain current customers and attract new business, we all need to focus on developing relationships by personalizing our products, services and interactions.
The other challenge is convenience. With the popularity of smart phones and tablets, figuring out what to do next is as quick and easy as a swipe and tap. We need to make sure we’re making our products, services and interactions available in formats that are quick and easy for customers to access.
The bottom line is that people are still boating. They may be trying to save money in the down economy by doing their own repairs or waiting to upgrade equipment, but they’re still boating. And it’s more important now than ever to stay connected with them to help cultivate new customers, educate and apprise them of special deals or discounts so when they are ready to buy a new boat, motor or accessory they have your business in mind.
Commit to better communication and innovation in 2012. The future of boating is bright.
At Boat Owners Association of the United States (BoatUS), we are cautiously optimistic about 2012. Our total number of BoatUS members, at just over half a million boat owners, has remained flat for the last two years and we expect the same for 2012. We believe that maintaining this number during these tough times is a very positive sign.
Other factors supporting our forecast are the continued sales growth of BoatUS Unlimited on-the-water towing and the increasing total number of requests for towing assistance, indicating that current boaters are actively enjoying their boats.
For several reasons, in 2012 we expect to have more members purchase on-the-water towing: The new BoatUS Towing app for smart phones is very popular, we’re increasing Internet marketing and we now have more than 300 ports in our TowBoatUS and Vessel Assist towing fleet coast to coast — three times the size of our closest competitor. In this economy, more boat owners are recognizing the value of having a towing plan (particularly if their maintenance budgets have shrunk) and our towing services provide inexpensive “peace of mind” for a range of activities.
Additionally, the number of on-the-water towing assistance and soft ungrounding cases handled by our towing fleet has increased 3 percent over 2010, to 65,000 requests for assistance in 2011. For 2012 we are projecting a continued upward trend to 67,000 requests for on-the-water assistance.
There may also be some anecdotal information that supports our optimistic view: We have reports from the field that youth participation in fishing is up, especially with tournaments. And while lender standards have changed since the prerecession era, more channels for loan funding are opening up.
There continues to be a range of challenges for all of our recreation-based businesses. Limited free time, the price of fuel, an aging population and additional hassle factors, including a wide range of proposed new regulations, all add up to discourage both new and current participants. As an industry, we must continue to recognize these factors and do what we can, collectively and individually, to address those that can be changed.
While we recognize new-boat sales are low, used boats continue to move and there is a large core of boaters dedicated to the lifestyle who remain active on the water. Since our business is connected to boaters in both new and used vessels, as long as folks continue to use their boats we are on the right track for 2012.
Managing partner, Legendary Marine
I believe 2012 will be similar to 2011 in that there will be continuing challenges with the economy on a local, national and global basis. We are dealing with an apprehensive market that lacks confidence in the economy because of the ongoing onslaught of negative news in the press, coupled with the continual threat of employment insecurity and stock market instability.
That being said, there are a finite number of buyers for our industry’s products; there are buyers out there. Our area of opportunity lies in market share growth, both within and outside our own industry. Collectively, as an industry and as a dealership, we must do a better job of promoting the boating lifestyle. We must capture the customer and convince him that boating delivers a better investment for his family than do other recreational pastimes. To win the customer, we must continue to enhance his experience throughout the sales, delivery and ongoing service process. We must make boating as hassle-free as possible. Another major area of opportunity for growth is the ability to provide retail financing more readily, which has been problematic during the last 24 months. We’re seeing a somewhat more relaxed review from lenders and improved approval ratios. Certainly, financing availability for our retail customers will help spur sales.
On the sales front, in our market we have witnessed a shifting trend in 2011 toward the purchase of smaller, less expensive boats, specifically under $60,000 retail and under 25 feet in length. Existing customers who want to stay in boating have been downsizing, while others entering the market are doing so cautiously and starting smaller. We expect this to continue in 2012.
On the higher end of the market, it was unpopular for business owners or executives to show up with an expensive new boat or yacht while their employees were facing layoffs and/or salary reductions. While this may not be as much of an issue today, the buyers with the disposable income remain sensitive to perceptions and have been slower to consummate the sale. We anticipate pent-up demand among these ranks and expect to see some of these more affluent customers resurface and purchase in 2012.
National marine sales manager, Statistical Surveys Inc.
As the dust settles on the 2011 calendar year, my thoughts move into the future and the outlook for 2012. Many issues will be the same. Europe will still be resolving its economic dilemmas. The U.S. government will continue to struggle with high unemployment and health care issues. The domestic political climate will remain polarized over a plethora of budgetary issues. This will leave financial uncertainty as the new norm.
During the last five years many segments of the boatbuilding industry have experienced up to a 60 percent decline in retail sales volume. This was the hardest economic adjustment period I’ve weathered in my lifetime, but I remain optimistic. Segment declines are abating; many of the marine market segments found a floor in 2011. Nationally, aluminum fishing boats, aluminum pontoons, 41- to 62-foot fiberglass inboard/outboard and inboard propulsion (yachts) and sailboats have shown moderate growth for the year to date. The marine market in 2012 has a new equilibrium. My mantra: Focus on what you have, not what you had.
Moving forward, differentiating between marginal customers and qualified buyers will be even more important than it has been in the past. Identifying the needs of your full-service customers and minimizing stocking errors will be paramount to making money in the years ahead.
The companies that prevailed during the contraction focused on their solid base of customers within their area of influence. They trimmed the waste from their product offerings and studied open markets to identify new opportunities. Focusing on innovation and value worked well for many in 2011, and it will continue to work well in 2012, regardless of the level of uncertainty that exists in the marketplace.
I anticipate retail volume to be similar to 2011 in the new year, with some regions performing better than others due to industry and employment mix. Inventory, between new and used product, will be aligned better in all areas moving forward, and the opportunity for healthier, less volatile margins should return for the survivors, both dealers and OEMs.
President, National Marine Distributors Association
As the president of the National Marine Distributors Association I have been asked to give an outlook for 2012 from the distributor’s point of view. Based on our recent survey it appears that almost all of our distributor members across the U.S. and Canada are expecting business to improve for our customers and ourselves in 2012. We will have to work hard and smart to achieve an increase in sales; if we wait for customers to call or walk through the door I am sure we will be rewarded with flat performance.
From my point of view, if we are to improve our sales and that of our customers, focusing on the areas noted below we can achieve not only increased sales, but increased service.
New products: New products are an important component for sales growth for dealers, chandleries, boatyards and all other retail marine channels. New products give us items to promote. They are a conversation opener, create customer enthusiasm and create new sales.
As those of us in the industry know, new accessories for boats have been scarce during the last few years, and understandably so. But as seen at IBEX in October, marine manufacturers are now producing and promoting many new, exciting products. I saw products at the 2011 IBEX show that will help generate excitement, and I feel IBEX is a must-attend for anyone in our industry who wants to be competitive.
Promotions: Promoting products and services to our dealers, boatyards, chandleries, boat maintenance providers and other channels is so important today. Our most successful retailers look to distribution for product and promotion ideas. Our vendors are willing to provide us with tools and, in some cases, financial help to promote their products. Distribution has become more active in helping marine dealers with product promotions. The consumer is used to sophisticated marketing in other areas of their lives, and I believe distribution is ready and willing to help retailers compete for the consumer’s time and money.
Just-in-time inventory: Many of our retail channels have become reluctant to “stock up.” More inventory generally equals more sales, but who can blame the small retailer for their reluctance to stock their shelves? Our customer base, now more than ever, is relying on distribution to have the part they need when they need it. Our customers expect to have said parts or goods delivered the same day or the next day. The consumer is driving the demand for just-in-time service because they are getting this everywhere else. In order to take care of our customers, our member distributors have been spending lots of time and money on their infrastructure to increase the just-in-time delivery model.
My conclusion for the outlook in 2012 for the NMDA and its member distributors, manufacturers and manufacturers’ reps is rosy. We are aware of the benefits of new products, promotions and just-in-time delivery and have worked on each of these segments to help our customers increase business. The NMDA is solid, our membership is growing, we have wonderful members and our customer base in 2012 is tougher, stronger and more innovative than ever.
President, Yamaha Marine Group
As we all know, our current economic state seems to be at a standstill. Nothing indicates a terrible economy, but nothing clearly defines a great economy, either. It’s the recreational statistics that point to future growth opportunities within the marine industry, and it is those stats we need to use to plan for a successful 2012.
A recent study from Outdoorindustry.org reports that 50 percent of Americans ages 6 years or older currently participate in outdoor recreation. What’s more, the average American participates in outdoor activities 54 days a year, and 82 percent of Americans plan to spend even more time outdoors than they currently do. An even more encouraging sign for our industry is that there are 48 million Americans ages 6 years and older who participate in freshwater, saltwater and fly fishing. Finally, in 2010 overall boating participation reached 75 million and the number of registered boats in 2010 held stable at 12 million, according to the National Marine Manufacturers Association.
Add to this the success of the service business in recent months. Generally, dealers report that their service business is up, and our marine rigging and parts business is up correspondingly. People are clearly still boating.
This indicates that there is still a large market for boats in this country and an opportunity for growth during the next few years. The question then becomes: How do we capitalize on the immediate market opportunity before us? The answer to that question lies in our ability to meet the wants and needs of the marine customers.
What we believe customers will want in 2012 is value. The word “value” will no longer just be associated with price in the customer’s mind. Instead, “value” will take on many meanings, including dependability, quality, high-end, multifunctional and reliable.
We believe customers will also find value in a multifunctional boat, one that can deliver a great fishing, entertaining and water-sports experience. These customers will want a boat with aesthetics that fit their own personalities. They will also look for boats that deliver lower operating costs.
Overall, the market indicators and demographic trends emerging in the marine industry are building a solid foundation for growth in the next few years. And the best news is that reports tell us the marine community is comprised of an active population that plans to become even more active.
As I look toward the next year, I am increasingly optimistic. Those who continue to anticipate customers’ needs and are ready to meet those needs when demand increases will be in a great position to capitalize on what could be a positive 2012.
President, National Marine Bankers Association
It would appear that we will enter 2012 with very little economic momentum, but barring any unforeseen circumstances like those that plagued us in the second half of 2011 we may be poised to regain positive trends during the last half of 2012. I believe there is some pent-up demand from the boat-buying public, so that when some good economic news comes along, consumer confidence will spur additional purchases. If fear that the economy will worsen forces the consumer to delay the purchase of boats or other luxury items, any recovery would stall, creating a self-fulfilling prophecy.
There is some good news for 2012. Marine lenders have a very strong appetite to book quality boat loans and have reduced interest rate products to some of the lowest offered since 2004. Collateral values are close to seeing a market bottom, and prices may start to rise somewhat in latter 2012. That being said, coupled with low dealer inventory, I believe a door of opportunity will be opened for new-boat manufacture and sales.
Banks are experiencing lower marine loan delinquency, down 25 percent from 2009 to 2010. Last year, lenders instituted a slight loosening of the rigid down payment requirements of 2009-10. New regional lenders are also now entering the marketplace.
A significant challenge to the marine lending community will be implementing changes to internal policies and procedures as a result of the Dodd-Frank Act. Most of the regulations are not yet written, but we know that some financial products may be eliminated. One such product is “liveaboard financing” for those individuals who use the vessel as their primary residence. Regulations have included a boat in the definition of “dwelling,” which means that lenders need to abide by all mortgage lending statutes. Additional loan documentation, such as good-faith estimates, HUD-1 disclosures, currently uncommon to the consumer lending arena, may discourage lenders from providing this product going forward. In addition, consumers will likely bear additional costs to obtain a loan.
Although we have many economic and governmental headwinds in front of us, I am a firm believer that our industry will once again grow and flourish. The last three years have made us all more creative, more productive, better decision makers and have set us up so that when the economy improves we will be ready to hit the ground running.
Bruce Van Wagoner
Managing director of marine, GE Capital Commercial Distribution Finance
At the beginning of this year we predicted a few things: that the economy would continue to be choppy, that manufacturers would begin producing again to align inventory levels with consumer demand and that retail sales activity, in general, would improve over 2010. As we close out fiscal year 2011, I think we’ve seen that.
To date on the wholesale shipment side we are tracking to low-double-digit unit growth in most segments, and from an aggregate retail unit perspective we are seeing low-single-digit growth, which is aligned with the low side of our 2011 forecasted range.
Globally, the inventory overhang has cleared and, as a result, the manufacturing side of the equation remained positive and investment in businesses remained strong. Corporate earnings continue to be strong and cash reserves have been built back up in the U.S. We have seen these same results throughout most segments in the marine space.
Now that we are through the worst of the cycle, most of the signs we look to from an industry forecasting perspective appear to be trending favorably. In many instances the rate of change may be slower than we would like, so “favorable” is a relative term, but a positive change certainly speaks to a healthier industry.
Earlier in the year we noted that the economy and consumer confidence needed to continue to move in a positive direction in order to see meaningful corrections in retail demand. It’s the consumer who holds the key. To truly experience robust growth as an industry, retail sales must rise at a greater rate. Retail sales are ultimately the engine that drives the industry.
Retail activity for any “discretionary purchase” items has been a challenging road: First, confidence remains low and unemployment is higher than what we like to see. Also, real estate values have not rebounded, reducing the ability of many consumers to extend themselves. While the economy has continued to slowly grow, consumer confidence remains spotty. It will be interesting to see how the macro economy and confidence respond through the upcoming election year. We should see some early signs in the first quarter.
Recent retail sales reports across the consumer sector are encouraging. They show a bit of pent-up demand on the consumer side; in addition, there is plenty of funding availability for the inventory side of the business. Dealers will need to work with manufacturers and their retail finance partners to reinforce the virtues and lifestyle of boating to bring new customers to the industry. I am encouraged by the progress the industry has made. I think that in 2012 we will continue to again slowly build on the growth of this year.
Efrem “Skip” Zimbalist III
Chairman and CEO, Active Interest Media
There is reason to believe that value will continue to be the most important consideration in 2012 for buyers of all size boats. Most consumers in today’s marketplace are watching costs, even if they are spending tens of millions of dollars on a yacht. This suggests that sellers who deliver on the value promise will gain market share.
Looking ahead, there are several reasons to be cautiously optimistic. With the general public’s careful return to spending and with inventories of used product now clearing out, it is reasonable to expect a strengthening of demand in sectors such as the mid-size new-boat market. Those who can afford boats are tired of waiting and are anxious to pull the trigger on a purchase.
In the superyacht sector, brokerage sales continue to be strong, notwithstanding subject to pressure on pricing. In the new-build superyacht market, sales activity is expected from South America, the Middle East, Asia and Russia. All signs point to continued economic uncertainty in Europe next year, affecting sales of boats of all sizes and making exports very important for European builders.
A noteworthy positive trend is marina construction all over the world, with particularly strong activity in the Caribbean, Brazil, China and Eastern Europe. These new marinas enable more people to enjoy their boats and travel to destinations close to their home ports.
No one can predict with certainty what’s going to happen in the coming year, but given any reason for hope that the economy is improving and given the availability of popular boats at prices that more people can afford it would be reasonable to expect that the boating industry is poised to see low-single-digit growth in 2012.
Some things never change. Love of the boating lifestyle is strong as ever. People from all walks of life everywhere in the world always have aspired to own boats, whether for leisure or commercial purposes. In light of the current market environment, the imperative for all segments of the marine industry in 2012 and beyond should be to keep costs under control and offer attractively priced boats that drive sales.
This article originally appeared in the January 2012 issue.