Choppy Waters and Rough Roads Behind Us?
REGION – Northern Michigan residents have weathered a turbulent few years, thanks to declining home values, increasing unemployment and, for a time, skyrocketing gas prices. It surprised no one when sales for boats, RVs, motorcycles and ATVs sank in tandem with the tough economy. How has the North's local recreational vehicle market fared? What's selling – or not – now? And most importantly, with gas prices hovering below the $3 per gallon mark, and economists saying the worst is over, is recovery visible on this market's horizon?
Interlochen's Long Lake Marina turned to diversification to plug its economic holes. Sales manager Doug Clemens says when 2008 hit, the dealer's traditional way of doing business ended. "Our sales volume and growth dropped, but overhead stayed the same. The only way to reduce was to cut employees." Then the business tried a new approach: It expanded its summer lines, added winter sports vehicles and entered the ATV market. Was the risky effort a success? Without a doubt; Long Lake Marina was able to re-hire all of its laid-off employees and add two more new employees.
Clemens says proven winners like pontoon boats still rule the sales floor, but the newly added Yamaha WaveRunners are moving fast. Winter sales of their Arctic Cat line and spring sales of Quads and Prowlers, which Clemens describes as "Golf carts on steroids" are expected to increase overall sales by a third.
Christine Davis, VP of Dewitt Marine in Bellaire agrees with Clemens's view regarding pontoon boats. "They're a floating living room – versatile in that they can tow skiers and wake-boarders or just cruise the family around the lake." She admits, though, business has been down. "Last year was a really tough year – 50 percent down, overall." Nevertheless, she has seen signs of smooth water ahead. After a move to establish themselves online and on television, her business has come back, almost matching where they were before the fall-off. "People are maybe saying, 'Let's have something to show for our money, instead of giving it to the government or losing it in the market.'"
Clemens agrees. "There's been a lot of pent-up demand. Now people are purchasing the boat they wanted three years ago."
The push to "Buy Michigan" may also deserve some of the credit. Industry rumor has it that Glastron, a Minnesota-based boat company, is likely moving to Cadillac this summer. As a Glastron dealer, Clemens is well aware of the hit fiberglass boats have taken. With Glastron moving in, Clemens hopes to see sales rise. "These will be boats made by your brother, your father, your best friend," he says. "People do try to buy products made within their own state."
For Eric Fischer, sales manager at Classic Motor Sports in Traverse City, American-made Harley-Davidson is a proven asset. He says sales are up 50 percent from last year – this despite the lock banks have put on loans. According to Fischer, "Clients previously approved with no money down were suddenly denied credit. Six months ago, banks starting making loans again, but gone were the 'No-No-No' loans – the no down payment, the no payments for a year kind of loans. Now everybody makes a payment – and usually up front."
Classic Motor Sports boasts one of the few markets that boomed in the last couple years. The gas crunch showed motorcycles to be a cheaper way to get around town, and changes in Michigan law that allowed local governments to open road shoulders to ORVs spurred his ATV business by leaps and bound. One factor, however, remains insurmountable: Northern Michigan weather. Fischer says last year's cold wet spring "dampened the soil and dampened the experience." Nevertheless, 2010 has provided good riding conditions so far, and Fischer says he's hoping for an even better summer.
RV sales are, undoubtedly, the bellwether for the industry. Several factors – discretionary income, gas prices, financing, stock market fluctuations and weather – play a part in how these homes away from home fare. Jeff Belanger of TC RV says they're emerging from "An 18-month hibernation period" and that, although the RV market is cyclical, no one could have forecasted 2008. "Before 9/11 most of our clients were retirees," he says. "After that tragic event, family became important. Air travel was intrusive and complicated, and families came in droves, buying the 'family-plan' units." Then, he says, the market collapsed, financing dried up, and so did the sales. Now? Deals are back and so are the families, says Belanger.
Sixty days ago, based on encouraging signs from Spring 2010 RV shows, TC RV bought new inventory, and their clearance sale almost sold out. Although business is not back to what it was before the economic collapse, Belanger says, "It sure exceeds our expectations."
What's selling? Buyers are mostly opting for smaller towables – less expensive, cost-efficient units, says Belanger. The big units – those gas-guzzling behemoths generally associated with retirees – are dead in the water, resulting in the bankruptcy of Fleetwood and Monaco, two of the industry's biggest brands.
An economist speaking at the 2010 American Boating Congress (ABC) told participants that the recession ended in June 2009, and the momentum of the U.S. economy was on the upswing. However, he cautioned buyers not to confuse recovery with recovered. Translation? We have a long way yet to go. Experience tells us a new consumer will emerge from the recession rubble, and if recreation vehicle sales are any indication, it's safe to say that today's consumer will be more frugal than those who came before. BN