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2018 Forecast: Consistent growth will mirror existing conditions

Forward momentum is likely to continue as the boating industry gets ready to navigate a seventh consecutive year of growth.

From a macro standpoint, market success remains on the horizon. 

The industry has the wind at its back and is being propelled favorably by rising real estate sales, a strong stock market and an improving economy.

According to data from Statistical Surveys, Inc. through September 2017, year-over-year sales growth ranged from 4 to 6 percent. At the same time in 2016, sales increased 5 to 6 percent.

“This year is really going to mirror 2017,” said Ryan Kloppe, director of sales at SSI. “Potentially, we are looking at 4 to 6 percent growth. The same segments are going to continue to produce.”

Data from Info-Link Technologies paints a similar picture, but more mid-range. 

According to Peter Houseworth, Info-Link’s director of client services, 2017 began with a fairly consistent growth pattern, but Hurricane Harvey and Hurricane Irma had a negative effect.

“Those storms tapped the brakes a little bit,” Houseworth said. “We’re still running in the 5 percent range for the year, so by and large, we’re in the same ballpark.”

Houseworth said there was a slight moderation in pontoons, which were running at 8 percent in June and just above 7 percent in October. Saltwater fish also declined. “Those two segments have been supporting the industry from a volume standpoint,” Houseworth said. “What happened in Florida basically cut the growth rate in half for the year.”

BoatUS estimates indicate more than 63,000 recreational boats were damaged or destroyed as a result of Hurricane Harvey and Hurricane Irma, with a combined dollar damage estimate of $655 million for boats only.

Breaking down the 2017 season storms, Hurricane Irma damaged or destroyed 50,000 vessels with approximately $500 million in recreational boat damage. About 13,500 boats were damaged or lost costing $155 million in boat damage as the result of Hurricane Harvey.

In a post-hurricane follow-up, BoatUS Public Affairs Vice President Scott Croft said he received encouraging news from boaters regarding replacement of losses.

Source: Boating Industry survey, December 2017

“Everybody said they were going to buy another boat,” Croft reported. “There wasn’t anybody who said, ‘That’s it.’”

Boating Industry readers expressed overall optimism in our December industry forecast survey. 

Eighty-one percent of survey respondents said their 2017 revenue was up from 2016, with 55 percent of all survey respondents saying revenue was up 10 percent or higher.

Clouds could form over the industry only if a major economic downturn or another negative event, such as weather, suddenly appears, Kloppe said.

“I don’t think interest rates will be able to go up too much. I think they will slowly inch up throughout the year, and that probably won’t have an impact on the recreational boating industry,” he said. “Barring a major economic collapse, or a black swan event like terrorism or war, it looks good for 2018.”

Segment by segment

In 2017, four different market segments – aluminum fish, pontoon, outboard fiberglass boats, and PWC – had over 50,000 units sold, Kloppe said, adding SSI’s forecast includes PWCs topping 60,000 units. 

“That trend will continue,” he said. “In 2017, there was some growth in ski, wake, and the jet boat segments, but you are talking minimum units when compared with the 50,000-unit categories.”

Unit sales in the sterndrive segment will continue to decline, down 4 to 5 percent for the year, Kloppe added.

The sterndrive market is still challenged, and has been for a long time, Houseworth said. It will continue to exist, but be smaller. 

Source: Boating Industry survey, December 2017

“Ten or 12 years ago, the sterndrive market was 50,000 to 60,000 units a year. Now, it’s 10,000 to 11,000 units,” he said. “If you look at many of the dyed-in-the-wool sterndrive boat manufacturers, they are all offering outboard models.”

Kloppe was slightly more optimistic when taking a deeper dive into sterndrive segment data. “In 2017, the 20- to 25-foot category was actually up 4.75 percent, and boats 31 feet and larger were up 2 percent. There is some light there, but overall, it is trending down.”

SSI reports aluminum fishing boat sales growth approaching 4 percent in 2017, and pontoons at 6 to 7 percent. Saltwater fishing boats from 13 to 50 feet tallied sales near 30,000 units; that figure represents 2 percent sales growth. Sterndrive sales were down 3.5 percent, deck boats up 3.5 percent, bass boats 4 percent and ski boats around 6 percent. Jet boats are expected to have 5.5 percent growth.

In its 2017 reporting, SSI upgraded runabouts to include boats 16 to 40 feet in length. 

“We’ll probably have to expand this segment again,” Kloppe said, reporting growth of over 27 percent. “People are making more models available.”

Regarding propulsion, outboards continue to drive growth. “Fiberglass boats with outboards are hovering around 4 percent,” Kloppe said. ““We’ve had six consecutive years of growth,” Kloppe said. “There’s zero reason to believe 2018 won’t become a seventh year.” 

Houseworth said the pace of technological change within the boating industry continues to accelerate. 

“Boat sizes are increasing, and you are getting more and more power for less money. As things develop, it’s more plug and play,” he said.

Source: Boating Industry survey, December 2017

Outboards are still doing well, Houseworth said, adding the market has moderated a little bit.

In 2016, outboards were up almost 8 percent, and in 2017, growth was slightly more than 4 percent. 

Out of the Top 10 boating states, nine had growth in 2017, Kloppe reported. California had double-digit growth for the past two years. Boating activity has picked up after a series of droughts, he said.

“If the economy keeps humming, people are going to have more money in their pockets,” Kloppe said. “It’s likely tax reform will help the recreational boating industry.”

Overall economic conditions were a top concern for Boating Industry readers in this year’s industry forecast survey, with 72 percent of respondents reporting that issue as “very important” to their overall business success in 2018. 

Consumer confidence was very important to 58 percent of respondents, followed by weather (41 percent), tax reform (39 percent), and government regulations (33 percent).

Cautious optimism

“We expect 2017 to finish up at about 6 percent, with about 260,000 new powerboats sold,” said Thom Dammrich, president of NMMA. “Our outlook for 2018 is for another 5 percent to 6 percent increase in unit sales.”

From a legislative standpoint, the year ended with a flourish of pro-industry news coming out of Washington.

While no legislation of the magnitude of the Tax Cuts and Jobs Act is ever perfect, the final package includes a number of provisions that can be considered victories for marine manufacturers and the recreational boating industry, Dammrich said.

“I think the reduction in the corporate tax rate and the reduction in the pass-through rate will unleash even more innovation within the boating industry,” Dammrich said. Boat builders told NMMA that the R&D tax credit was extremely important to retain, as was preservation of the second home interest deduction for boats and no new luxury tax on boat sales.

Source: Boating Industry survey, December 2017

“I think in terms of the overall economy, the tax cut, at least until 2025, will put more money into consumers’ pockets. That will be good for boating,” Dammrich said. Deductibility of floorplan financing was a touch-and-go issue during Congress’ discussion of the Tax Cuts and Jobs Act, he added. 

“In the House, there was a lot of talk about limiting deductibility,” he said. “We went to Congress and said that would be devastating for our dealers. We were able to convince them collectively to allow it.”

Unlocking the potential of Discover Boating will revolve around education of manufacturers and dealers to help make them better 21st Century marketers, Dammrich added.

“I think that we are going to continue to see growth and popularity of boat clubs and boat sharing,” he said. “It’s good for the industry. This year, we are going to see positive actions out of Washington D.C. not only on the Modern Fish Act, but we may see some action on the Renewable Fuel Standard. We have an Administration that’s very open to giving recreation a much higher priority on federal lands and waters.”

In mid-December, the U.S. House of Representatives Committee on Natural Resources approved H.R. 200, a bill sponsored by Congressman Don Young (R-Alaska) that amends the 1976 Magnuson-Stevens Fishery Conservation and Management Act to provide flexibility for fishery managers and stability for fishermen. 

A coalition of organizations representing the saltwater recreational fishing and boating community, including, NMMA, endorsed H.R. 200 and highlighted the importance of incorporating saltwater recreational fishing management provisions into the nation’s primary law governing federal fisheries management.

Recreational fishing and boating industry executives also signed a letter to the U.S. House Committee on Natural Resources on Dec. 11, in support of the Modern Fish Act and its inclusion in the final reauthorization of the Magnuson-Stevens Act. 

“We expect 2018 to be a really good year for boat sales and boating,” Dammrich said. “Frankly, with the tax reform that’s been signed, I think we are feeling really good about 2019 and even 2020.”

Continuing challenges

Workforce remains the No. 1 issue for dealers and others throughout the industry. Half of those who participated in Boating Industry’s December survey responded they were “very concerned” regarding their employment needs.

“It’s a huge factor,” Kloppe said. “How do we get people out of other industries into our industry?”

An aging boating population, and the absence of younger, first-time boat buyers are associated concerns, Houseworth added. “Marketing to existing boaters is what’s driven the current recovery,” he said. “The average age of the first-time boat buyer is 45. We aren’t seeing younger boat buyers showing up. “

And, the boating industry still has to figure out how it can get younger people involved in boating as a recreational lifestyle.

“We can’t rely on the notion that at some point, millennials are go to flip over and start buying boats. The industry would be ill-advised to hang its hat on that,” Houseworth said. He added that he will continue to work with Dammrich and Grow Boating President Carl Blackwell to get younger people involved in boating.

Millennials have embraced the “sharing economy” and inspired new services that provide access to products and experiences without direct ownership. The boating industry must cater to the needs its base and help key segments and demographics remain in boating as long as possible, Houseworth said.

“We have some time, but clearly the clock is ticking,” he concluded. “We need to recognize boating may be consumed differently as a recreational product offering.”

People are not defined by age anymore. There’s huge number of female head of households who are 45 to 60 years old, and they have resources, Houseworth said. “They grew up in boating households. We need to complete their migration to boating.”   

 

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