A View from Here

Bill's Sisson's weekly Trade Only blog

The rising cost of boating

Mechanic Erik Klockars and I had a conversation the other day about the cost of boating while we winterized my boat and fiddled with a bunch of little things that needed tweaking and fixing. It’s a topic Erik and I like to kick around, even if we usually wind up agreeing to disagree.

“People don’t understand that the cheapest part of owning a boat is buying the boat,” Klockars declared. I asked if he’d seen the price of new boats lately, but when Klockars gets on a roll there’s no stopping him.

“It’s the hidden costs that are killing people,” he said. He rattled off a list we’re all familiar with: slip or dry-stack fees, winter storage for boats over a certain size, winterization, insurance, registration and the litany of routine maintenance costs associated with paint, zincs, oil, filters and so on.

“And that’s without even using the boat,” Klockars said.

The cost of winterizing a 40-foot twin-diesel boat and all of its systems — generators, refrigeration, washer, hot water heater, AC, icemaker — is easily more than $1,000, he said. Depending on the engine model, the iron breeze alone can take 27 quarts of oil.

“When you get a $300 bill in the marine industry, people bend over and kiss the ground,” he said.

Klockars continued: “I have no problem with the cost of a boat. When I started in this business in the ’70s, if you had to ask how much the boat cost it was a sign you shouldn’t be in boating. It’s getting back that way again.”

And that’s a good thing?

Erik is a helluva mechanic, but you wouldn’t put him on a committee to grow boating. However, his perspective on the cost of ownership is worth noting. It’s clearly a factor in retaining current boaters in the fold. And owners have to believe they are getting fair value for the costs, Klockars emphasized.

In his “2014 Industry Outlook” story in the upcoming January issue of Trade Only, Don Parkhurst of SunTrust Bank says he’s seeing some aging clients sell their boats and pay off their loans with no intention of buying another boat. For baby boomers with ample means, retirement equates to more time to enjoy boating, writes Parkhurst, senior vice president, marine & RV finance group manager. For those not as well-heeled, he continues, it means giving up their boats. (Overall, Parkhurst is hopeful that 2014 will at long last bring a “modest” pickup in growth.)

Russo Marine president and CEO Larry Russo also addresses cost in his “Outlook” story. “The price of new boats has more than doubled since 2000, and available credit remains very restrictive,” he writes. “This is not a recipe for growth and success.”

It’s mostly aging boomers with high net worth who are buying the high-priced premium boat brands, Russo says. The buying part of that trend is not sustainable, given there’s nothing we can do to stop the aging.

Russo said Gen Xers are now at the so-called “purchase-consideration age,” but they are hamstrung by a host of financial constraints: student-loan debt, mortgages, a slow-wage-growth environment and so forth. Most are not in a position to buy a new boat, he said.

Solution? “Smart people in the design, engineering and manufacturing sectors in our industry need to figure out how to reduce the cost of boats to make them more affordable to the next generation of buyers,” Russo writes.

Bingo.

Next week we’ll have more on the cost of boating from Jim Coburn of Coburn & Associates, who is chairman of the Recreational Boating Leadership Council’s affordability committee.

Comments

8 comments on “The rising cost of boating

  1. Wilson Wright

    So it is not so much the initial cost, albiet high, but the maintenance and operation that is costing more and more. Applying that to the classics, it still means you still can’t afford one while you are on food stamps.

    I look forward to next week’s observations.

  2. tom

    We need to keep money in our customers pockets and not worry about sustaining all the little business’s within the marine industry. Those with out the knowledge base (customer service) and those with out enough volume (affordable and fair pricing) just need to go away. A business has to be good at both. Unfortunately too many manufacturer’s use things such as MAP pricing that fully supports these guys. The market needs to float and not be manipulated by insiders.

  3. Henry

    The sad truth is that the recent downturn in the economy forced many boat owners and small businesses out of boating. This is compounded by the credit squeeze and the marine industries poor customer service approaches. For too many boaters, the see West Marine as their boating source for parts and supplies, which means they are paying very high markup and making their maintenance even higher than it needs to be. MAP pricing allows local companies compete with internet pricing BUT it also restricts the market place. If you visit too many boat yards and marinas and there is not a reliable, stable and young workforce.

  4. tom

    Henry, sad but true. The early stages of MAP were brought on by West Marine; they still pressure mfg to have map policy but they have eased back. Local companies really need to focus on face to face and hands on customer service; that’s what they have that the internet does not. I think if mfg wants to have input in helping the industry and the sport they should look more at who sells their product to the end user. One mfg we have requires that you answer a somewhat lengthy questionnaire regarding product knowledge before you can sell their product (not available at West by the way or on very few web sites). There are a few mfg who do not allow their wholesalers to drop ship their products (by by to the garage web sites). I think the industry just really needs to do some soul searching and not spend so much time trying to preserve things the way they were or the way they are now.

  5. Bill

    Sisson quotes Larry Russo on buyers’ financial constraints and we all need to understand this. It isn’t just boats that have grown more expensive, it’s everything a family needs to buy. Real estate taxes, clothing and food are up virtually everywhere as is the cost of cars. Have one or two kids that are going to college some day? That new (or used) boat may look tempting but not if you have to sock away $80,000 or $100,000 in tuition money per kid and even then the offspring will probably have to accumulate some debt before graduation.

    Those real life expenses are the real competition that the boating industry faces.

  6. Joe Lewis

    In certain sectors of the business I beleive the industry has affectively addressed the cost of boat ownership and maintence. I’d submit maintence costs of today’s outboard and stern drive boats are less thanks to the introduction of fuel injection as one example. Remember the days of high fuel consumption, fouled plugs, carb jobs and expensive power head replacements caused by failed oil delivery systems? Stern drives have become far more dependable and reliable with many only requiring maintence service at 100 hour intervals. I do agree the cost of higher quality more dependable products has resulted in higher new boat and motor prices.
    Insurance is another area of ownership cost that most consumers find very reasonable. When compared to their auto policies most are pleasantly surprised and pleased.
    In my mind affordability and value are joined at the hip. People are becoming more experience driven and it’s playing a larger role in their preception of value. Here’s where we have a real opportunity. We have the advange of delivering experiences that are fun, exciting, multi generational and literally delivers a life time of great memories. If we continue to focus on improving the quality of the ownership experience consumers perception of our value will increase.
    Don’t get me wrong, cost is a factor but it’s not the only factor. I’m blessed to live in an area where I need only drive 28 miles to witness how this perception of value is played out hundreds of thousands of times each day at Walt Disney World. Anyone who’s been there will tell you it’s not an inexpensive proposition yet their business has never been better. People appreciate the value of the experience and millions figure out how they can afford it every year.
    As we continue this affordability conversation it’s important remember cost is only one factor in the value equation.

  7. CaptA

    Bill is RIGHT ON THE MONEY! Gen Xers will not purchase boats the way the baby boom generation purchased boats. They have so much debt, the disposable income is barely existant, and their overall financial security just does not exist. If the industry is going to sell boats, they need to make the overall cost of ownership come WAY down. The only way I see this occurring is by fractional ownership.

  8. A/C

    The real truth of the matter is middle class Americans who have been back bone of marine product buyers are today being forced out of boating. I appreciate William Sisson and Erik Klockars candid remarks. Over the years boating has been jokingly referred to as a rich man sport. Today it is now more of reality than a joking remark.
    The REAL truth about boating affordability and long term value will never be fully addressed during the sales presentation. Marine sales people focus on the glitz and glamor of what boating offers. All prospective boat buyers should put a pencil to paper and do a Ownership Cost Evaluation, factoring in all related fixed expenses and estimated operational cost over the projected period of ownership. I’m sure the end result would be “boating does not fit within our budget”. Lets consider other recreational options.
    Been there done that and now I can celebrate the 2 best days of owning a boat………the day I bought it and the day I sold it!

    c

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