Housing market continues to drive industry woes

MIAMI – The most recent boat registration data suggests that 2007 might be slightly worse than earlier data may have led the industry to believe, according to Info-Link, which has updated its Bellwether Report through June.

“Unfortunately, the moving averages with June included have painted a slightly worse picture in terms of the outlook for 2007,” said Jesse Wells, Info-Link director of sales and marketing.

The Bellwether Report can be viewed at: www.info-link.com/bellwetherreport.asp.

Looking forward, looking back

While that news comes as no surprise to the industry, some suggest it’s just another reason to focus on the future.

“Everyone wants the sale today,” commented Thom Dammrich, president of the National Marine Manufacturers Association, in an interview Friday. “And I understand that. But I think we also need to focus on tomorrow’s sales. Grow Boating is getting more people interested in boating. But they have a learning curve and it will take 1-3 years for many of these newly interested to make a purchase. While looking for sales today, we also need to be cultivating relationships with those newly interested that will result in sales next year or the year after.”

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Dammrich said that while high gas prices and fluctuating consumer confidence are factors, “our biggest problem right now is housing related.”

“First, there is nearly $1 trillion of variable rate mortgages and home equity lines repricing from 3.25 percent five years ago to 6.5 percent or more today,” he explained. “That absorbs a lot of discretionary income. Second, most Americans have most of their savings or net worth in their homes. Home values are down so people don’t feel as wealthy. Until this week that has been partially offset by the rise in the stock market for those who are in the stock market. But, the action in the stock market this week will create some additional jitters. Housing prices in Seattle last year were up over 9 percent and boat sales in the Northwest are still pretty strong. The opposite is true in Florida and most of the rest of the U.S. — housing is slumping and so are boat sales.”

With that said, Dammrich believes recent estimates that boat retail dollar sales may end up down as much as 12 percent at the end of the year and unit sales may have declined about 15 percent are likely a worst case scenario. He added that historical trends suggest a rebound is coming soon.

“This is a cyclical industry. We are in one of our regular down cycles. If history holds, and there is no assurance it will, we should see an upturn in 2008 and for sure in 2009,” he stated.

When asked whether Grow Boating is mitigating the downturn, Dammrich said there is no way to tell and issued a reminder that the initiative is a long-term effort.

“Grow Boating is working. All of our research shows clearly that it is. But, it will take some time (1-3 years or more) before we see increase in interest turn into increased sales,” he said. “Grow Boating is not going to eliminate the cycles in our industry. Our goal in growing boating is to insure future cycles have higher highs and higher lows than previous cycles. I am confident we will get there and we will really see the benefits in 2008 or 2009.”

The here and now

In the meantime, Info-Link suggests the industry invest in its businesses to boost sales now and into the future.

“In times like these, we always like to remind our customers of the other side of our business, direct mail services,” said Wells. “In an ultra competitive selling environment, it helps to try new things.”

Dammrich also believes a soft boat sales environment is a good time for businesses to invest in improvement. He shared the following advice: “Those who invest in downturns usually prosper when the industry returns to growth. This is a good time to work on training staff, improving processes, driving out waste. Dealers should be working to get Marine Industry Dealership Certification. It will help them to be better dealers and more successful and profitable dealers when robust sales return.”

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