Boat clubs defy the recession

Enjoying year-over-year revenue increases, boat clubs are aggressively, yet carefully, looking to expand throughout the United States.

On the surface, Montey Kitchen’s decision to sell his staffing agency in Tennessee, move to Dallas and start Big D Boat Club seems like an emotional one.

“It’s a lot easier selling fun than staffing,” he says.

But a boat club investment may make business sense, too. Boat clubs have not seen the same dramatic sales declines from which other marine business sectors have suffered since 2008. In fact, many club owners are outgrowing their locations, leaving them with tough decisions regarding expansion, rather than cutbacks.

In its second year of business, Kitchen’s two-location boat club doubled its membership from 100 in year one. With the start-up discounts offered to year-one members discontinued in year two, Big D Boat Club exceeded 2010’s total revenues by mid-June, Kitchen says.

And Big D is not the only boat clubhat is growing.

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Freedom Boat Club has 60 franchised locations across the United States. Founded in 1989, Freedom has seen year-over-year revenue increases of approximately 20 percent in recent years. The growth has fueled its drive to add locations across the United States. In the last year, Freedom has opened more than 15 locations, says Bob Daley, CEO of Freedom Boat Club.

Carefree Boat Club has also been on a growth track. With 21 licensed locations, it has grown its membership by about 15 percent annually.

Filling the gap

So, where are all these customers coming from? As other marine businesses work tirelessly to keep traffic flowing into their stores, it is a question worth answering.

Approximately 75 percent of Carefree’s members have never owned a boat, says Frank Fahringer, business development manager at Carefree.

Freedom Boat Club members wave as they leave port.

“A typical member of our club is somebody who wants to go boating 10 to 12 times a year, but is not familiar with boating,” he explains. “They come to our club and want to learn it.”

In the Washington, D.C., area, Carefree members sign a five-year commitment to the boat club, says Michael Strotz, director of development for four locations. At the end of their term, about 50 percent renew. However, of the members that do not renew, only 5 percent go on to buy their own boat, Strotz estimates.

This is no coincidence, according to Kitchen. He says there is a subset of the boating population who cannot justify the costs that go along with owning. For those who plan on boating eight to 10 times a year, a boat club is a great option. On the other hand, Kitchen says boat clubs are not the best option for avid users.

“I am not afraid to tell somebody to go own a boat,” Kitchen says. “If they are a hardcore boater, they are going to be best served by owning.”

Of the people who previously owned a boat, Strotz says they typically sell their boat because they no longer have the time or want the financial obligation. However, he adds, the recession has not resulted in a large increase in prior owners.

Since 2003, Freedom Boat Club has aggressively aded franchised locations to its 11 sites; which opened in 1989.

Steele Whowell, co-owner of Gordy’s Lakefront Marine, added a boat club at his Fontana, Wis.-based dealership to fill the gap Kitchen referenced as his target market – those who boat too much to rent, yet too little to own. In its second season, Gordy’s boat club has doubled its membership to 20 people. The club’s customer base has pulled people from both its rental operations and those that have left boat ownership, yet didn’t want to leave boating altogether, Whowell says.

Coast-to-coast expansion

Members of Carefree’s boat clubs were affected by the recession, Fahringer says; however, like many boat clubs, few ended their membership as a result.
Remaining strong throughout the last three years, boat clubs, both large and small, have aggressively looked to expand their brand.

Currently Carefree’s locations are scattered along the East Coast with a few locations in Texas. This is expected to change in the next five years, as Fahringer says the boat club plans to add at least 40 locations. First, the club looks to fill out the rest of the East Coast by targeting northeastern cities where Fahringer says many bodies of water are located close to cities. This offers the stable nautical lifestyle necessary for a successful boat club, he says.

There is only so much room east of the Appalachians, so both Carefree and Freedom have aggressive goals to move west. However, the western United States does not feature the same density of cities near water, forcing both Carefree and Freedom to carefully assess each location as they head west.

As the owner of a smaller boat club, Kitchen cannot afford to take the same risks. In its expansion, Big D Boat Club will continue to stay on water near larger cities because Kitchen believes a boat club doesn’t offer the same value when members have to drive long distances to enjoy boating. “Most of the people that are going to drive that far are going to rent a boat for the day,” he says. “The majority of our folks will use our boats as soon as they slide out of work.”

Big D’s growth has come from young professionals in the Dallas-Fort Worth area, where Kitchen focuses the majority of his marketing, he says. With two locations outside the city, Kitchen plans to open his third Dallas-Fort Worth location next year and is looking at marina options for a fourth location in the same area.

Boaters wait for their vessel to arrive.

“We are advertising to people in the city that typically do not get boating ads, but these people are looking for an outlet to get out of the city,” he says.

Bonding with marinas

Unlike dealers, boat club owners typically do not have control over their facility; they are at the mercy of the marina where they operate. A healthy business relationship between the club operator and marina manager is essential.

 

During the recession, marinas have had more open slips, which has translated into an open-armed welcoming of boat club operators, Daley says. However, it hasn’t always been this way, and as boaters return to the water, Daley hopes his relations with marinas remain strong.

“[Before the recession], marinas would give us 30 days to leave because they were creating dockominiums,” he says. “And, in the end, they were begging and pleading with us to come back.”

Freedom Boat Club members rearing to go for a trip.

 

The boat club-marina relationship has the potential to be extremely profitable for both because boats are often going out multiple times per day, increasing revenue for the marina through both refreshment sales and gas.

 

“Our slips are like slips on steroids,” says Kitchen, whose Big D Boat Club doubled one marina’s summer gas revenue.

 

But choosing the right marina is vital. For either party to make money, the marina needs to create an attractive environment for the club’s members, who expect marinas to more closely resemble a resort than a boatyard, Fahringer says.

“We are offering a club environment, so the worst thing to see is a bunch of boats sitting out of the water getting worked on,” he adds.

Looking forward

While the boat club trend has been gaining momentum for years, the growth it has experienced shows no signs of ebbing any time soon.

Club members dine before disembarking.

As the marine industry progresses toward a recovery, boat club memberships will likely increase in conjunction with boat sales. For Daley, more new boats on the water is a welcome sight because healthy marine dealers, whom he describes as the face of the industry, are beneficial for everyone in the boating business, including the alternative to boat ownership he offers.

“Once the industry is recovered, you will have dealers that sell boats and sell them well, and you will have boat clubs that do memberships well,” he says. “And as more people become interested in boats, more will buy and more will enter boat clubs.”

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